A Building Contract is a legally binding agreement between an employer (the person commissioning the works) and a contractor (the builder or construction company) for the carrying out of construction, refurbishment, or civil engineering works in England and Wales. It sets out the scope of the works to be performed, the price to be paid, the programme for completing the works, each party's obligations and rights, and the remedies available if things go wrong.

Building contracts in England and Wales are primarily governed by the common law of contract, supplemented by a significant body of construction-specific legislation. 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. Most construction projects — from a single residential extension to a major commercial development — will be caught by the Act's provisions.

Other legislation affecting building contracts in England and Wales includes the Construction (Design and Management) Regulations 2015 (CDM 2015), which impose health and safety management duties on clients, designers, and contractors; the Building Safety Act 2022, which introduced new building safety obligations particularly for higher-risk buildings; the Defective Premises Act 1972, under which a contractor who does work in connection with a dwelling owes a duty to the eventual owner to ensure the work is done in a workmanlike or professional manner; and the Health and Safety at Work etc. Act 1974.

Standard form building contracts — such as the JCT (Joint Contracts Tribunal) suite and the NEC Engineering and Construction Contract — are widely used in England and Wales. Our UK Building Contract template provides a balanced, legally compliant framework that incorporates the key statutory requirements and covers the essential provisions needed for straightforward construction projects, including residential extensions, commercial refurbishments, and new build projects of modest scale.

A Building Contract is necessary for virtually any construction project of substance. It is strongly advisable — and in many cases essential — to have a written building contract in place before any works begin on site, regardless of the scale of the project.

You should use a Building Contract when commissioning: a new residential house or development; a single or double-storey extension to an existing house or commercial property; a loft conversion or basement conversion; a commercial fit-out or refurbishment; demolition and rebuild works; structural alterations to an existing building; civil engineering works such as groundworks, drainage, or roads; or any other building project where the contract sum is significant.

A written building contract is particularly important because: it establishes the scope of works agreed, preventing disputes about what is and is not included in the price; it sets a clear programme, giving the employer a remedy in liquidated damages if the contractor is late; it allocates the risk of unexpected site conditions, design changes, and force majeure events between the parties; it specifies the quality standards expected (materials of satisfactory quality, workmanship with reasonable care and skill); it protects both parties if the other becomes insolvent during the project; and it provides a clear dispute resolution mechanism — particularly the statutory right to adjudication under the HGCRA 1996, which is often quicker and cheaper than litigation.

Without a written contract, the terms of the agreement between employer and contractor will be determined by reference to any written quotations, emails, and oral discussions — a situation that inevitably leads to uncertainty and dispute. The courts of England and Wales will imply terms into a construction contract where necessary, but this is an expensive and uncertain process compared to having clear written terms from the outset.

A well-drafted Building Contract for use in England and Wales must include several key provisions that together provide a clear, enforceable framework for the construction project.

The scope of works clause is fundamental: it should describe the works to be carried out with sufficient particularity to prevent disputes about what is included in the contract price. It is best practice to attach a detailed specification and any drawings to the contract. The works description should also make clear which statutory consents and approvals (planning permission, Building Regulations) are included in the contractor's scope.

The payment provisions are the most legally regulated aspect of a building contract under the HGCRA 1996. The contract must specify an adequate mechanism for determining the sums due, when they become due, and the final date for payment. It must also specify the procedure for Payment Notices (which the employer must issue within a specified number of days of each payment due date) and Pay Less Notices (which the employer must issue before the final date for payment if it intends to pay less than the notified sum). Failure to issue a valid Pay Less Notice means the employer must pay the full sum in the Payment Notice, regardless of any dispute.

The liquidated damages clause allocates the risk of delay to the contractor. It should specify a rate expressed per week or per day that represents a genuine pre-estimate of the employer's losses in the event of delay. The contract must also contain an extension of time mechanism giving the contractor relief from liquidated damages where delay is caused by employer risk events.

The defects liability period (typically 6 or 12 months after practical completion) obliges the contractor to return and remedy any defects that appear during this period at its own cost. This is distinct from the contractor's ongoing liability for latent defects under the Limitation Act 1980 and the Defective Premises Act 1972.

The adjudication clause must comply with section 108 of the HGCRA 1996, granting either party the right to refer any dispute to adjudication at any time. The contract should specify a nominating body (such as the RICS or CIArb) in case the parties cannot agree on an adjudicator. The adjudicator's decision is binding unless and until revised by arbitration or litigation.