What statutory rights does the HGCRA 1996 give to contractors in England and Wales?

The Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996), as amended by the Local Democracy, Economic Development and Construction Act 2009, gives contractors in England and Wales three fundamental statutory rights. First, the right to receive payment: the Act requires every construction contract to include an adequate mechanism for determining what payments become due and when, the final date for payment, and the obligation to issue Payment Notices within a specified period. Second, the right to suspend: under section 112, a contractor who has not been paid by the final date for payment (and has not received a valid Pay Less Notice) may, after 7 days' written notice, suspend performance of any or all contractual obligations. The period of suspension does not count towards the contractor's contractual time obligations and the contractor is entitled to its reasonable costs of suspension and resumption. Third, the right to adjudicate: under section 108, either party to a construction contract has the right to refer any dispute to adjudication at any time. An adjudicator must be appointed within 7 days and reach a decision within 28 days of the referral. The decision is binding immediately, even if later challenged by arbitration or court proceedings. If a construction contract does not comply with these provisions, the Scheme for Construction Contracts (England and Wales) Regulations 1998 is implied by statute to fill the gaps.

What is the Construction Industry Scheme (CIS) and how does it affect payments under a construction contract?

The Construction Industry Scheme (CIS) is a HMRC tax scheme that applies to payments made by contractors (within the CIS definition) to subcontractors for construction work. Under the scheme, contractors are required to deduct CIS tax from payments to subcontractors who are not registered as gross payment status holders. The CIS deduction rate is 20% for registered subcontractors and 30% for unregistered ones. A construction contract between two CIS-registered businesses should address how CIS applies to the contract sum — specifically, whether the stated price is inclusive of or exclusive of CIS deductions, and what documentation (including monthly CIS statements) the paying party must provide. CIS deductions are not a tax on the subcontractor's profit — they are advance payments of income tax and National Insurance that the subcontractor can offset against their final tax liability. Contractors who fail to operate CIS correctly can face penalties from HMRC. The CIS regime applies to construction operations as defined in section 74 of the Finance Act 2004, which is broadly similar to the HGCRA 1996 definition of construction operations.

How are liquidated damages set and enforced under English construction law?

Liquidated damages (LDs) are a pre-agreed sum payable by the contractor for each day or week of culpable delay in achieving practical completion. Under the principles confirmed by the Supreme Court in Cavendish Square Holding BV v Makdessi [2015] UKSC 67, liquidated damages provisions are enforceable if they represent a genuine pre-estimate of loss or are commercially justifiable as protecting a legitimate interest — they need not be a precise arithmetical calculation and will not be struck down merely because they exceed the actual loss. To set an appropriate LD rate, the employer should document the losses it reasonably anticipates from delay — for example, lost rental income, additional financing costs, costs of alternative accommodation, or business interruption — and set the rate at or below that level. To enforce LDs, the employer must have issued a written notice of intention to deduct, and the contractor must be in culpable (i.e., contractor-risk) delay — LDs are not payable for delay caused by the employer, by instructed variations, or by events for which an extension of time has been granted. A clause providing for LDs that are wholly out of proportion to any conceivable legitimate interest remains potentially challengeable as a penalty under English law.

What is the difference between assignment and subcontracting in a UK construction contract?

Assignment and subcontracting are conceptually distinct under English contract law, although both involve a third party in the performance of the contract. Assignment is the transfer of contractual rights (such as the right to receive payment) from one party to another. The assignment of contractual obligations (burdens) requires a novation — the substitution of a new contract between the original parties and the new party. Most construction contracts prohibit assignment of the benefit or burden of the contract without consent, because the identity of the contracting party matters (the employer is contracting for the specific contractor's skill and experience; the contractor has priced the project on the basis of the employer's covenant strength). Subcontracting is the engagement of a third party (a subcontractor) to perform part of the works that the contractor has agreed to carry out. Unlike assignment, subcontracting does not transfer contractual liability — the contractor remains liable to the employer for the subcontractor's performance as if it had done the work itself. Most construction contracts permit subcontracting of nominated trades (mechanical and electrical, specialist groundworks, etc.) with the employer's consent, while prohibiting wholesale subcontracting of the entire works.

What is practical completion and why does it matter in a UK construction contract?

Practical completion is the point at which the works are sufficiently complete for the employer to take possession and use them for their intended purpose, even if minor outstanding items (a 'snagging list') remain. The legal test for practical completion in England and Wales — confirmed in Mears Civil and Construction Ltd v Samuel Williams (Dagenham Dock) Ltd [2024] EWHC 347 (TCC) and earlier decisions — is whether the works are complete for all practical purposes, with only trivial or de minimis items outstanding. Practical completion has significant legal consequences under a construction contract: liquidated damages for delay stop accruing; the defects liability period begins; one-half of the retention fund is typically released; the contractor's obligation to insure the works transfers to the employer; and the limitation period for bringing a breach of contract claim begins to run. For higher-risk buildings under the Building Safety Act 2022, completion of the construction phase is also a regulatory gateway point requiring the Building Safety Regulator's approval before the building can be occupied. Disputed practical completion is one of the most common causes of litigation in the Technology and Construction Court.

General Construction Contract (UK)

Q: What does the Building Safety Act 2022 require from contractors on construction projects?

The Building Safety Act 2022, enacted following the Grenfell Tower tragedy, introduced the most significant reform of building safety law in England and Wales for a generation. For construction contractors, the Act's most important provisions include: the extension of the limitation period under the Defective Premises Act 1972 from 6 to 15 years (applied retrospectively for claims not already time-barred), significantly increasing the window during which a contractor may be liable for defective work in connection with dwellings; new dutyholder roles during design and construction (principally for higher-risk buildings — broadly, residential buildings over 18 metres or 7 storeys); the Building Safety Regulator (operated by the Health and Safety Executive), which oversees the new regulatory regime; mandatory gateway approvals at the planning, pre-construction, and post-construction stages for higher-risk buildings; a 'golden thread' information management obligation requiring dutyrholders to create, store, and maintain accurate information about the design and construction of higher-risk buildings throughout their life. For residential construction projects, the Act also introduced the new homes ombudsman scheme and extended the DPA 1972 regime to cover refurbishment work.

General Construction Contract (England & Wales)

GENERAL CONSTRUCTION CONTRACT

(England and Wales)

This General Construction Contract (the “Contract”) is entered into on [Contract Date] by and between:

(1) [Employer Name], with its registered address at [Employer Address], [Employer City], [Employer Postcode], email: [Employer Email] (the “Employer”); and

(2) [Contractor Name], with its registered address at [Contractor Address], [Contractor City], [Contractor Postcode], email: [Contractor Email] (the “Contractor”).

The Employer and the Contractor are referred to collectively as the “Parties” and individually as a “Party”.

BACKGROUND

A. The Employer wishes to procure construction works known as “[Project Name]” at the site situated at [Site Address], [Site City], [Site Postcode] (the “Site”).

B. The Contractor has the necessary skills, experience, and resources to carry out the Works and has agreed to do so on the terms set out in this Contract.

C. The Parties intend this Contract to comply with the Housing Grants, Construction and Regeneration Act 1996 (as amended by the Local Democracy, Economic Development and Construction Act 2009), the Construction (Design and Management) Regulations 2015, the Building Safety Act 2022, and the Defective Premises Act 1972.

NOW THEREFORE, in consideration of the mutual obligations and covenants set out in this Contract, and other good and valuable consideration, the Parties agree as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 In this Contract, unless the context otherwise requires:

“Contract Documents”: this Contract together with all drawings, specifications, schedules, bills of quantities, and any other documents expressly incorporated by reference.
“Contract Sum”: the sum stated in clause 4.1, as adjusted in accordance with this Contract.
“Date for Completion”: the date stated in clause 6.2 by which Practical Completion must be achieved.
“Defects Liability Period”: the period specified in clause 7.1 commencing on Practical Completion.
“Practical Completion”: the state of the Works whereby they are sufficiently complete to be used and occupied for their intended purpose, notwithstanding minor outstanding items that do not affect use or enjoyment.
“Site”: the land and premises where the Works are to be executed, as described in clause 2.
“Variation”: any addition to, omission from, or change in the quality, quantity, or sequence of the Works instructed by the Employer in writing.
“Works”: the construction works described in clause 3.

1.2 References to statutes include any statutory modifications or re-enactments. The singular includes the plural and vice versa. Headings are for convenience only and do not affect interpretation.

2. THE SITE

2.1 The Works shall be carried out at the Site located at [Site Address], [Site City], [Site Postcode], England and Wales.

2.2 The Employer shall give the Contractor possession of the Site on the Commencement Date and shall maintain uninterrupted possession throughout the duration of the Works, save for any temporary exclusions reasonably required for safety.

2.3 The Contractor shall take all reasonable steps to secure the Site and shall comply with all site security obligations imposed by law or by the terms of any planning permission or licence.

3. THE WORKS

3.1 The Contractor shall carry out and complete the following construction works (the “Works”) in a good and workmanlike manner, using materials of satisfactory quality fit for their purpose, and in compliance with all applicable laws and regulations:

[Works Description]

3.2 The Contractor shall comply with all applicable Building Regulations made under the Building Act 1984 (including the Building Regulations 2010, SI 2010/2214), and shall obtain or assist in obtaining all necessary approvals, notices, and consents, unless otherwise agreed in writing.

3.3 The Works shall comply with the Defective Premises Act 1972. The Contractor warrants that work in connection with any dwelling will be done in a workmanlike or, as the case may be, professional manner, with proper materials, and so as to be fit for habitation when completed.

3.4 The Contractor shall carry out the Works in accordance with the Building Safety Act 2022 and shall comply with all applicable dutyholder obligations, golden thread requirements, and (where applicable) gateway approval processes for higher-risk buildings as defined by that Act.

3.5 The Contractor shall take all reasonable precautions to minimise nuisance, damage, and disruption to neighbouring properties and shall comply with all conditions attached to any planning permission relating to the Works.

4. CONTRACT SUM AND PAYMENT

4.1 In consideration of the Contractor carrying out and completing the Works, the Employer shall pay the Contract Sum of £[Contract Sum], [Vat Status], subject to adjustments for Variations and other matters permitted by this Contract.

4.2 Interim payments shall be made in accordance with the following schedule: [Payment Schedule].

4.3 Payment Notice (HGCRA 1996, s.110A): The Employer (or, if the contract so provides, the Contractor) shall issue a Payment Notice not later than [Payment Notice Days] days after each payment due date, specifying the notified sum and the basis of calculation.

4.4 Final Date for Payment: The final date for payment of each instalment shall be [Final Payment Days] days after the relevant payment due date.

4.5 Pay Less Notice (HGCRA 1996, s.111): If the Employer intends to pay less than the notified sum, it shall issue a Pay Less Notice not later than the prescribed period before the final date for payment, specifying the sum it considers due and the grounds for payment of a lesser sum. In the absence of a valid Pay Less Notice, the Employer must pay the full notified sum by the final date for payment.

4.6 Right to Suspend (HGCRA 1996, s.112): If the Employer fails to pay the notified sum (or any lesser sum specified in a valid Pay Less Notice) by the final date for payment, the Contractor may, after giving not less than 7 days’ written notice, suspend performance of any or all of its obligations under the Contract. The Contractor shall be entitled to a reasonable extension of time and to its costs of suspension and resumption.

4.7 Late Payment Interest: Interest on any overdue amounts shall accrue at a rate of 8% per annum above the Bank of England base rate pursuant to the Late Payment of Commercial Debts (Interest) Act 1998.

5. PROGRAMME AND PRACTICAL COMPLETION

5.1 The Contractor shall commence the Works on Site on [Commencement Date] and shall proceed with the Works regularly and diligently thereafter in accordance with the agreed programme.

5.2 The Contractor shall achieve Practical Completion of the Works by [Completion Date] (the “Date for Completion”), subject to any extension of time granted under clause 6.3.

5.3 Extensions of Time: If Practical Completion is or is likely to be delayed by any Employer risk event (including Employer-caused delay, Variations, exceptionally adverse weather conditions, delay by statutory undertakers, or force majeure), the Contractor shall give written notice to the Employer as soon as practicable. The Employer shall, within a reasonable time, grant a fair and reasonable extension of time in writing. Extensions of time shall be the Contractor’s sole remedy for delay; the Contractor shall not be entitled to loss and expense or additional payment for delay unless the delay is caused by the Employer.

5.4 Upon Practical Completion, the Employer shall issue a written Practical Completion Certificate. Practical Completion triggers the commencement of the Defects Liability Period, the release of one-half of any Retention, and the cessation of the accrual of liquidated damages.

6. DEFECTS LIABILITY

6.1 The Defects Liability Period is [Defects Liability Period].

6.2 During the Defects Liability Period, the Employer shall notify the Contractor in writing of any defects, shrinkages, or other faults in the Works that are due to a breach of this Contract or to materials or workmanship not in accordance with the Contract Documents.

6.3 The Contractor shall make good all notified defects at its own cost within a reasonable time following notification, and in any event within 30 days. If the Contractor fails to make good a notified defect within this period, the Employer may engage others to remedy the defect and recover the reasonable cost from the Contractor.

6.4 The expiry of the Defects Liability Period does not extinguish the Contractor’s liability for latent defects. The Contractor’s liability in contract for latent defects continues for 6 years from Practical Completion (or 12 years if this Contract is executed as a deed) pursuant to the Limitation Act 1980. The Contractor’s liability under the Defective Premises Act 1972 may arise at any time and the Act’s limitation period was extended to 15 years (retrospectively, for claims not already time-barred) by the Building Safety Act 2022.

7. VARIATIONS

7.1 The Employer may at any time before Practical Completion instruct Variations to the Works by written instruction. No Variation shall vitiate or invalidate this Contract.

7.2 Where practicable, the Parties shall agree the cost and time impact of a Variation before it is carried out. Where prior agreement is not practicable, Variations shall be valued on a fair and reasonable basis, having regard to the rates and prices in any bills of quantities or schedule of rates forming part of the Contract Documents, or otherwise at fair market rates.

7.3 The Contract Sum shall be adjusted to reflect the agreed value of Variations, whether additions or omissions, and any agreed extension of time.

8. CONTRACTOR’S INSURANCE

8.1 The Contractor shall, before commencing the Works and throughout their duration, take out and maintain with an insurer authorised in the United Kingdom the following policies:

Public Liability Insurance: not less than £[Public Liability Amount] per occurrence or series of occurrences arising from one event;
Employers’ Liability Insurance: as required by the Employers’ Liability (Compulsory Insurance) Act 1969, with a minimum limit of £5,000,000 per occurrence;
Contractors’ All Risks Insurance: covering the full reinstatement value of the Works, materials and plant on Site against all risks of physical loss or damage.

8.2 The Contractor shall produce evidence of each insurance policy and proof of current premium payment on request and at the Employer’s reasonable intervals during the Works.

9. TERMINATION

9.1 Either Party may terminate this Contract forthwith by written notice if the other Party: (a) commits a material breach of this Contract that is irremediable; (b) commits a material breach capable of remedy and fails to remedy it within 14 days of written notice requiring it to do so; or (c) becomes insolvent, enters administration, receivership, or liquidation (otherwise than for solvent reconstruction).

9.2 The Employer may also terminate this Contract for convenience upon 28 days’ written notice. Upon termination for convenience, the Contractor shall be entitled to payment for all Works properly executed to the termination date plus reasonable direct demobilisation costs and loss of profit on the uncompleted Works, assessed on a fair and reasonable basis.

9.3 Upon termination by the Employer for Contractor default, the Employer may engage others to complete the Works and may recover from the Contractor the reasonable additional cost of completion.

10. DISPUTE RESOLUTION

10.1 Right to Adjudicate (HGCRA 1996, s.108): Either Party has the right to refer any dispute arising under or in connection with this Contract to adjudication at any time. The adjudicator shall be agreed by the Parties, or in default of agreement, nominated by [Adjudication Body].

10.2 The adjudicator shall reach a decision within 28 days of the date of referral (extendable by 14 days with the referring party’s consent, or longer with both Parties’ consent). The adjudicator’s decision shall be binding on the Parties and shall be complied with immediately, pending final determination.

10.3 Any dispute not resolved by adjudication shall be submitted to and finally resolved by the courts of England and Wales. The Parties submit to the exclusive jurisdiction of the courts of England and Wales.

11. GENERAL PROVISIONS

11.1 Entire Agreement: This Contract constitutes the entire agreement between the Parties in relation to the Works and supersedes all prior negotiations, representations, warranties, and agreements relating to the same subject matter.

11.2 Amendments: No amendment or modification of this Contract shall be effective unless made in writing and signed by authorised representatives of both Parties.

11.3 Assignment and Subcontracting: Neither Party may assign or transfer this Contract or any rights or obligations under it without the prior written consent of the other Party. The Contractor may subcontract parts of the Works with the Employer’s prior written consent (not to be unreasonably withheld), but shall remain responsible for the acts and omissions of all subcontractors.

11.4 Notices: All notices under this Contract shall be in writing and delivered by hand, first-class post, or email (with delivery confirmation) to the addresses or email addresses specified in this Contract.

11.5 Severability: If any provision of this Contract is held to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.

11.6 Third Party Rights: Nothing in this Contract confers any right on any third party to enforce any term of this Contract under the Contracts (Rights of Third Parties) Act 1999, except as expressly stated.

11.7 Governing Law: This Contract and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it shall be governed by and construed in accordance with the law of England and Wales.

IN WITNESS WHEREOF the Parties have executed this General Construction Contract as of the date first written above.

SIGNED for and on behalf of the EMPLOYER

Name: [Employer Name]

Address: [Employer Address], [Employer City], [Employer Postcode]

SIGNED for and on behalf of the CONTRACTOR

Name: [Contractor Name]

Address: [Contractor Address], [Contractor City], [Contractor Postcode]

Employer

[Employer Name]

Signature

Date: ________________

Contractor

[Contractor Name]

Signature

Date: ________________

Maintained by Vladislav Sergienko, Founder·Template last modified: 2026-06-23·Report an error

What Is a General Construction Contract (UK)?

A General Construction Contract in the United Kingdom sets the scope of works, price, programme, and payment terms for the building or installation project, with its requirements set by the Construction and Regeneration Act 1996.

Construction contracts in England and Wales are subject to a distinctive and extensive body of legislation that distinguishes them from ordinary commercial contracts. The most important statute is the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996), as amended by the Local Democracy, Economic Development and Construction Act 2009. The HGCRA 1996 implies mandatory payment and adjudication rights into any construction contract as defined by the Act, regardless of what the parties' written contract says. Key requirements include: a mechanism for determining what payments are due and when (including Payment Notices and Pay Less Notices); a right for the contractor to suspend work after 7 days' written notice if an undisputed payment is not made; and the right for either party to refer any dispute to adjudication at any time and receive a decision within 28 days.

The Construction (Design and Management) Regulations 2015 (CDM 2015) impose health and safety management obligations on all parties involved in a construction project — including the client, principal designer, principal contractor, designers, and contractors. For projects involving more than one contractor, the client must appoint a Principal Designer and a Principal Contractor in writing before the construction phase begins. Failure to comply with CDM 2015 can expose all parties to enforcement action by the Health and Safety Executive.

The Building Safety Act 2022 introduced thorough reforms to building safety regulation, particularly for higher-risk buildings (broadly, residential buildings over 18 metres or 7 storeys). The Act extended the limitation period under the Defective Premises Act 1972 from 6 to 15 years, introduced new dutyholder roles with golden thread information obligations, and created mandatory regulatory gateways at key stages of the design and construction process. All construction contracts for projects in England and Wales should now address Building Safety Act 2022 compliance obligations.

The standard forms of construction contract widely used in England and Wales — in particular the JCT (Joint Contracts Tribunal) suite, the NEC Engineering and Construction Contract, and the FIDIC suite for international projects — all incorporate these statutory requirements. Our General Construction Contract template provides a thorough, legally compliant framework suitable for commercial and residential construction projects, incorporating the mandatory payment and adjudication provisions required by the HGCRA 1996, CDM 2015 obligations, and Building Safety Act 2022 compliance duties.

When Do You Need a General Construction Contract (UK)?

A General Construction Contract is needed whenever a significant construction project is being commissioned in England and Wales. This template is particularly suited to the following circumstances.

Commercial construction projects: When a developer, property company, or business entity is procuring the construction or fit-out of commercial premises, including offices, warehouses, retail units, hospitality venues, or industrial buildings. A detailed written contract is essential to manage the risks associated with large-scale construction, including cost overruns, programme delays, defective work, and insolvency of the contractor.

Residential development projects: When a developer is commissioning the construction of new residential dwellings — whether a single house or a multi-unit development — the contract must comply with the HGCRA 1996, the Defective Premises Act 1972, and (for higher-risk buildings) the Building Safety Act 2022. The extended limitation periods under the 2022 Act make a carefully drafted contract with appropriate insurance provisions essential.

Mixed-use developments: When a project involves a combination of residential and commercial uses, the contract must address the different regulatory requirements applying to each part, including building regulations, planning conditions, and the Building Safety Act 2022 regime for any residential element over 18 metres.

Design-and-build projects: When the contractor is responsible for both the design and construction of the works, the contract must address professional indemnity insurance, design liability, fitness for purpose obligations, and the interaction between the contractor's design obligations and the employer's employer's requirements.

Refurbishment and fit-out projects: When an existing building is being significantly altered, extended, or fitted out for a new use, a general construction contract governs the relationship between the building owner and the main contractor, setting out the works to be carried out, the price, the programme, and the parties' respective obligations.

Projects with multiple subcontractors: CDM 2015 requires a Principal Contractor to be appointed wherever there is more than one contractor on site. The general construction contract between the employer and main contractor should therefore include provisions addressing the appointment and duties of the main contractor as Principal Contractor.

What to Include in Your General Construction Contract (UK)

A well-drafted General Construction Contract for use in England and Wales must address a series of key provisions that together provide a legally compliant and commercially balanced framework for the project.

HGCRA 1996-Compliant Payment Provisions: The contract must specify the mechanism for determining what payments are due and when — typically monthly interim valuations — the date by which the Payment Notice must be issued, and the final date for payment. It must also provide for the issue of a Pay Less Notice if the employer intends to pay less than the notified sum. The right to suspend work for non-payment and the entitlement to interest on late payments must be expressly included or will be implied by the HGCRA 1996.

Liquidated Damages: The contract should specify the rate of liquidated damages payable by the contractor for each week of culpable delay in achieving practical completion. The rate must represent a genuine pre-estimate of the employer's likely losses. The contract must also provide an extension of time mechanism that gives the contractor relief from liquidated damages where delay is caused by employer risk events, to preserve the employer's right to deduct liquidated damages.

Retention Fund: Retention is a widely used security mechanism in commercial construction. The contract should specify the retention percentage, the conditions for release at practical completion and at the end of the defects liability period, and whether the retention is to be held in a separate trust account (increasingly required by industry guidance following contractor insolvencies).

Defects Liability Period: The contract should specify the duration of the defects liability period (typically 12 months for commercial projects), the procedure for notifying defects, and the contractor's obligation to make good within a reasonable time. The contract should also address liability for latent defects under the Limitation Act 1980 and the extended limitation periods under the Building Safety Act 2022.

Insurance Requirements: The contractor should be required to maintain adequate public liability insurance, employers' liability insurance, and contractors' all risks insurance throughout the project. Where the contractor has design responsibility, professional indemnity insurance should also be required, maintained for a period of 6 or 12 years (depending on whether the contract is executed as a deed) after practical completion.

Adjudication and Governing Law: The contract must comply with section 108 of the HGCRA 1996 by giving either party the right to refer any dispute to adjudication at any time. The nominating body for the adjudicator should be specified. The governing law and jurisdiction should be stated as England and Wales.

Additional compliance elements for a General Construction Contract (UK) used in United Kingdom include: Under the Companies Act 2006, Companies House maintains the register of UK companies. Section 386 of the Companies Act 2006 sets accounting record obligations. The Competition and Markets Authority (CMA) enforces the Consumer Rights Act 2015. The Financial Conduct Authority (FCA) regulates financial services under the Financial Services and Markets Act 2000. The High Court of Justice has jurisdiction under the Senior Courts Act 1981. Forms-legal.com provides this template as a starting point for United Kingdom-compliant documentation.

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@misc{formslegal-construction-contract-uk,
  author       = {{Forms Legal}},
  title        = {General Construction Contract (UK) (United Kingdom)},
  year         = {2026},
  howpublished = {\url{https://forms-legal.com/uk/business/contracts/construction-contract-uk}},
  note         = {Free legal document template. Based on Companies Act 2006}
}

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Frequently Asked Questions

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