Contract or Proposal

[RK_MBD]

Hello All,

We are starting with rear extension in few days and have agreed on price based on a detailed scope of works, drawings and offer letter from builder which includes material list etc.

May I know if it is usual to sign a formal contract (such as JCT or FMB) before start of works or acceptance of proposal with payment schedule is generally enough.

 

[Notch7]

Both are acceptable.

I've seen JCT contracts go wrong and end up in court, so while they offer some protection, they don't totally prevent problems.


Builders quotations often aren't detailed enough, too many grey areas that end up in disagreements.

Do your due diligence is my advice, talk to previous customers and ask them how the project went.


Be aware that there will be variations on cost, because there will be unknowns and there will be design changes. Disputes over extras are the most common reason for arguments.

For example: foundations, if the building inspector says go deeper, you will have to pay more. Get an agreement with the builder when he will tell you if there will be extra foundation costs and when he will tell how much. I used to say to my customers "the building inspector is coming on "x" day, if we have to go down to 1.8m deep it will cost about £x and I will tell you on that day".

Get a detailed agreement on when stage payments are due. Builders are notorious for having cash flow issues, so don't be pursuaded to pay too much too early, but at the same time be fair and pay promptly when you are happy - don't withhold a stage payment because something trivial hasn't been done.

 

[^woody^]

Basically,
Agree the trigger for the payment stages - dates or completion of work.
Agree a daywork rate - to be used as a basis to value any extra work
Never pay more than the actual work completed or materials delivered - eg don't pay 75% of the quote if only 50% work is complete.
Likewise, ensure you have sufficient amount to pay towards the end of the job to encourage the builder to stay and finish or correct any quality issues.
Use the plans or specification as your basis for checking what should be done - ie what you are paying for. Any deviation needs your approval first.

That's it really.

You only tend to use a formal contract for large or large value jobs, or awkward ones. But you can agree any terms you like and make your own contact, verbal or in writing.

A lot comes down to trust though, and risk.

 

[blup]

......and build in a retention of say 5% to be held for 12 months after completion to cover the inevitable minor defects etc. If he refuses at least you have asked.

Blup

 

[^woody^]

5% is way too much for an extension, and a small builder. Even large jobs are only 2.5%

 

[blup]

In today's bull market a builder is likely to add all or some of the retention to the contract price so mention it after the quote has come in.

Blup

 

[^woody^]

In today's bull market a builder is likely to add all or some of the retention to the contract price so mention it after the quote has come in.

Blup

But if it's not in the quote, the customer can't add it.

Otherwise the quote is not valid and will need revising, in which case, your 5% either gets added or will be added as extras once the builder has started.

So the customer pays 5% more, and the builder does not have to return as he's already quid in.

 

[^woody^]

Don't upset the builder

www.ladbible.com/news/uk-builder-demolishes-home-while-family-are-on-holiday-over-unpaid-bill-20210608

 

[blup]

But if it's not in the quote, the customer can't add it.

Otherwise the quote is not valid and will need revising, in which case, your 5% either gets added or will be added as extras once the builder has started.

So the customer pays 5% more, and the builder does not have to return as he's already quid in.

It's not an addition, it's part of the price, there is just an agreed delay in a small part of it being paid. In today's market builders can afford to pick and choose their work.

I have only received estimates - not quotations - from builders and tradesman unless for a small clearly defined job.

Blup

 

[^woody^]

It's not an addition, it's part of the price, there is just an agreed delay in a small part of it being paid. In today's market builders can afford to pick and choose their work.

I have only received estimates - not quotations - from builders and tradesman unless for a small clearly defined job.

Blup

No. The builder has quoted based on being paid the full amount on completion. Taking a deduction from that for 12 months means he incurs costs not accounted for when the quote was built up, not just the deducted amount. So the quote is invalid.

 

[blup]

No. The builder has quoted based on being paid the full amount on completion. Taking a deduction from that for 12 months means he incurs costs not accounted for when the quote was built up, not just the deducted amount. So the quote is invalid.

He incurs a loss of interest at most which can be provided for.

Blup

 

[^woody^]

He incurs a loss of interest at most which can be provided for.

Blup

He incurs his time, his insurance premiums and other ancillary business costs, not just the interest. And if he is using credit in any way, and cant repay due to not getting the money from the client then he incurs further loss.

Plus the risk of a poxy client (who would be the type to set this up in the first place) nit-picking and not paying him his dues after 12 months.

 

[blup]

He incurs his time, his insurance premiums and other ancillary business costs, not just the interest. And if he is using credit in any way, and cant repay due to not getting the money from the client then he incurs further loss.

Plus the risk of a poxy client (who would be the type to set this up in the first place) nit-picking and not paying him his dues after 12 months.

All of which, and more, are incurred if the client sues for breach of contract for defects which arise during the 12 months.

Blup

 

[^woody^]

All of which, and more, are incurred if the client sues for breach of contract for defects which arise during the 12 months.

Blup

You're now describing a 'what if and maybe' situation, where as the actual costs of trying add a retention which the builder has not accounted for are real

I'm not sure whether you understand contracts and costs.

 

[blup]

The costing is fundamental to working out the price of the job, yes, but ultimately it is given as an estimate on one sheet of paper, not a quotation with many hundreds of pages of contract/tender documents. If the builder wants the job he will have the discretion to accept a retention at the given price, and many opportunities to make it up on extras and provisions. Unlikely now ,while it is feast, but famine may lurk around the corner.

Blup