time, but will not receive any additional payment, so that the risk of delay is shared between the parties. Variations The mechanism for dealing with variations to the works will depend on why the variation is required in the first place: – Client variations: Under most standard form contracts, the client has the right to instruct variations to the works, for which the contractor is entitled to additional time and money. The contractor may also be entitled to raise reasonable objections to material changes, where, for example, they would conflict with necessary consents, or increase the cost of the works beyond a predetermined threshold –– Contractor variations: Except in the case of value engineering proposals, where the contractor may be entitled to share in any consequent cost savings for the project, the contractor will not be entitled to additional time or money for variations which it originates (due, for example, to the need to correct the consequences of an error), and will be liable for any delays and additional costs caused by them Subcontractors Unless otherwise agreed, the contractor is liable for the whole of the works, whether or not all or part of the works is subcontracted. The main contract may set out specific terms that must be included in the subcontracts – for example, a requirement to maintain adequate professional indemnity or product liability insurance, and a copyright licence to enable the client to use documents related to the works.
Carefully drafted payment provisions within subcontracts, as well as in the building contract, are central to maintaining good relationships within the supply chain, and ensuring the success of construction projects generally. Most standard forms have an accompanying
sub-contract form, whose terms are consistent with the main contract.
Main contracts for large or complex projects often specify approved subcontractors to be used, or require client approval to be obtained
before works are subcontracted. The client’s relationship with the subcontractors is conducted via the
contractor (eg client will not be able to pay a subcontractor directly in circumstances where the contractor has become insolvent, as this is contrary to insolvency law). Depending on the nature and size of the project, subcontractors may be required to provide collateral warranties, or third party rights, in favour of the client and certain third parties, such as purchasers or tenants of a development. Bonds Examples of the most common forms of surety bonds used in the context of construction contracts are: – Performance bond: this requires proof of a breach by the contractor and of resulting loss to the beneficiary, if a call is to be successful. In some versions, known as adjudication bonds, an adjudicator’s award is specified as a condition for a successful call. Liability under a performance bond is normally limited to a percentage of the contract price
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