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  • Overview

    Q: I am about to have a 2-storey extension built, designed by an architect. My contractor has sent me a letter saying the construction will take five months and has attached a specification divided into separate headings with a price against each and an overall total. Is this sufficient?

    A: You should ensure that the specification is properly detailed, with each section properly broken down with descriptions of all the various elements showing what materials are being used and what the quantity of each is and where applicable its unit price. Be as specific as possible (e.g. the make/colour of kitchen tiles, paint, flooring, door furniture etc.). Then there is less (hopefully no) room for argument over what is or is not included, and consequently whether or not something is an extra you have to pay for.

    You need a formal written contract which, among other things: sets out agreed start/finish dates; attaches the agreed specification to show the scope of works and the price; allows the contractor extra time to finish if you have to make changes to the project (which they are not the cause of); allows for changes to the works or materials; obliges the contractor to have and maintain proper insurance cover; sets out the circumstances under which the contract can be terminated. This is by no means an exhaustive list.

    This will benefit both you and the contractor as each will know where they stand legally if a dispute occurs, but will lessen the chances of one arising in the first place. There are suitable standard form contracts for this which just need tailoring to the project specifics without reinventing the wheel.

    Q: I am about to have the whole house renovated and will move out into rented accommodation while the works are done, with everything placed into storage. What happens if the contractor does not finish by the agreed date?

    A: Make sure your contract provides for what happens if there is a delay. If it is because you have made any changes (which the contractor is not responsible for), or if something is beyond either’s control, then the contract should allow the contractor a reasonable extension of time to complete. You have to take the risk in that case.

    If however the delay is the contractor’s fault (which includes any delay caused by any sub-contractor or supplier they use) then the contract should provide that you be compensated for the period of delay. Usually this is achieved by payment of what are known as ‘liquidated damages’ – these are expressed as a specific sum to be paid on a daily or weekly basis.

    This sum should be a measure of the loss that will be incurred – in your case a good starting point for calculating the applicable level will be the extra rent and storage charges you incur. If no specific rate is included you can still recover damages but you will have to prove you actually suffered the loss and how much; with ‘liquidated damages’ you only have to prove that the delay is the contractor’s fault. The benefit to the contractor is that they know the maximum they will have to pay in those circumstances.  Another benefit to you is that with a proper contract in place, you can offset those damages against payments due to the contractor, helping cash flow at a pressure point in the build.

    If you would like to discuss the issues detailed above, please contact Chris Whittington on 01322 623706 or chris.whittington@ts-p.co.uk. Alternatively please visit our construction page www.ts-p.co.uk/construction

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