Do You Have A Construction Contract?

• Published date: 27 June 2023
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Energy and Natural Resources, Contracts and Commercial Law, Oil, Gas & Electricity, Construction & Planning
• Law Firm: Herrington Carmichael
• Author: Harriet Greener

The introduction of the Housing Grants, Construction and Regeneration Act 1996 ('Construction Act') brought about fundamental change in the construction industry and was aimed at addressing unfair payment practices, which was contributing to widespread insolvencies in the sector.

The Construction Act imposes statutory implied terms into all construction contracts including payment terms and a right to adjudicate.

But what is a construction contract?

What constitutes a construction contract may surprise many, as there are numerous contracts which may not be an obvious construction contract but will be classed as one.

The definition of a construction contract is contained in section 104 of the Construction Act and states that a construction contract is "an agreement with a person for any of the following:

• The carrying out of construction operations
• Arranging for the carrying out of construction operations by others, and
• Providing labour, or the labour of others, to carry out construction operations".

Whilst this may appear to be an easy application, this definition can also include architectural, design or surveying work. It also applies to contracts involving engineering, decoration, and landscaping works.

The Construction Act goes further to define what "construction operations" (as set out in section 104 above) are. Section 105 of the Construction Act provides a rather wide definition of "construction operations" which includes:

1. The construction, alteration, repair, maintenance and demolition of buildings and structures.

This is not limited to buildings but also includes works which form part of the land such as walls, roads, power lines, phone masts, runways, docks, harbours, industrial plants, land drainage and coastal protection.

2. Internal works such as the fit out, installation of heating, mechanical and electrical systems, fire protection, security, and communications systems.

The definition of a construction contract under the Construction Act even goes so far as to include cleaning (in the context of construction), decoration, painting, excavation works and site clearance.

It is worth noting that there are some contracts which are expressly excluded, such as:

1. Those which include drilling for or extraction of oil/gas extraction of minerals, some works where the purpose is to assist in nuclear processing, power generation, water effluent and the production/processing or storage of chemicals, pharmaceuticals oil, gas, steel or food...