Construction contract terms in plain English

In an NEC contract under Option A or C, the list of activities, each with a price, that makes up your price. Under Option A you are paid for each activity once it is complete: see NEC main options.

A fast way to have a construction dispute decided by an independent adjudicator, usually within 28 days of the referral. The decision binds both sides unless the dispute is later settled by agreement, arbitration or court: see how adjudication works.

A form of insolvency in which an administrator takes control of a company that cannot pay its debts. See what to do when your main contractor goes into administration.

Any way of settling a dispute without going to court, such as negotiation, mediation, adjudication or arbitration. See Construction disputes: your options as a subcontractor.

A private hearing before an arbitrator, whose award is final and binding. It applies only if your contract provides for it or both sides agree: see arbitration.

The date in an NEC contract on which the amount due to you is assessed, usually monthly. The payment dates run from it, not from your application: see the NEC4 payment timeline.

A subcontract whose terms mirror the main contract, passing its obligations down to you. It can bind you to terms you have never seen: see What does a back-to-back contract mean for a subcontractor?

The date your price is fixed at, from which any price adjustment is measured. See Put a base date and a validity period on every quotation.

A document that lists the work item by item, with quantities, for pricing. Your rates in it are often the starting point for valuing a variation.

The part of a JCT building contract that the contractor designs. If your package includes design, some of that design risk passes to you: see which JCT subcontract you have been sent.

A separate contract in which you promise a third party, such as a funder or a tenant, that you have met your subcontract duties. It lets that party claim against you directly: see What is a collateral warranty?

In an NEC contract, an event that gives you more money, more time or both. It must usually be notified within 8 weeks or the right is lost: see What is a compensation event under NEC4?

A clause that makes a final certificate or final account conclusive once a set time passes without a challenge. See Can a final certificate make a low final account binding?

The Housing Grants, Construction and Regeneration Act 1996, which gives you rights to a payment timetable, payment notices, suspension and adjudication. See The Construction Act explained for subcontractors.

A deduction your main contractor makes from your account for costs it says you caused, such as cleaning or putting right defects. See What is a contra-charge or back-charge in construction?

What your main contractor says it cost to finish your work after terminating your subcontract, which it usually tries to recover from you. See Do I have to pay their cost to complete?

A regular comparison of what a job has cost with what it has earned, usually monthly. It shows early where a job is losing money.

A way of valuing work by the labour, plant and materials it took, at agreed rates. It is paid where your subcontract allows it and the sheets were signed at the time: see What are dayworks in construction?

A notice from your main contractor saying you are in breach and must put it right, often the first step towards termination. See what to do about a default notice.

The notice you can send when your main contractor misses its Payment Notice, stating the sum you consider due. See What is a default Payment Notice?

The period after practical completion when you must put right defects that appear, called the rectification period in JCT. The rest of your retention usually comes back at its end: see What is a defects liability period?

In an NEC contract, the cost of the resources you actually use, as the contract's list of cost components allows. See What does Defined Cost mean under NEC4?

A subcontractor the main contractor chooses and employs itself, as most subcontractors are. The client does not choose you, though the contract may give a list of names to choose from.

In an NEC contract, a notice either side gives as soon as it sees something that could raise the cost or delay the job. See What is an NEC early warning notice?

Bringing a contractor in at the design stage, before the price is fixed. It is often done under a pre-construction services agreement.

More time to finish your work, for a delay your subcontract says is not your risk. It protects you from delay damages for that period: see What is an extension of time?.

A voluntary UK code under which businesses commit to paying their suppliers fairly and on time. It replaced the Prompt Payment Code.

In an NEC contract, the percentage added to Defined Cost to cover your overheads and profit. See What does the Fee mean under NEC4?

The agreed total value of your work at the end of the job, including every variation and claim. See What is a final account in construction?

The last day your main contractor can pay a sum without being late. Your rights to suspend work and to late payment interest run from it: see How long does a main contractor have to pay a subcontractor?

A price that does not change when labour or material costs rise, unless your subcontract says it does. See Can I claim for price rises on a fixed-price subcontract?

Terms that adjust your price for rises and falls in costs after your base date. They apply only if your subcontract includes them: see how fluctuations work under a JCT subcontract.

An agreement that settles every claim on a job for an agreed sum. Once it is signed, you usually cannot reopen anything it covers: see Should I sign a full and final settlement of my final account?

A price the contractor agrees will not be exceeded, whatever the job costs, except for agreed changes.

The cost of running your business, such as offices and staff, that a delay can leave unrecovered. See How are head office overheads claimed?.

A payment on account during the job, usually monthly, for the work done so far. It is not the final value of the work: see how a JCT interim payment is valued.

The Joint Contracts Tribunal, which publishes a family of standard building contracts and subcontracts widely used in the UK. See JCT contracts explained for subcontractors.

A letter asking you to start work before the subcontract is signed, often with a cap on what you will be paid. See Is a letter of intent legally binding?

A sum fixed in the contract for each day or week the work finishes late, also called LADs. It is deducted without proof of the actual loss: see What are liquidated damages?

The money you lose when the job is delayed or disrupted by events your contract puts at the other side's risk. See how JCT clause 4.20 deals with loss and expense.

A meeting where an independent mediator helps both sides reach their own settlement. The mediator decides nothing: see mediation.

A family of contracts published by the Institution of Civil Engineers, first called the New Engineering Contract. The current edition is NEC4: see NEC contracts explained for subcontractors.

A subcontractor the client chooses and the main contractor must use. JCT contracts now name or list subcontractors instead of nominating them.

The notice that starts an adjudication, telling the other side what the dispute is and what you want. The referral notice must follow within 7 days: see the steps of an adjudication.

The sum in a valid Payment Notice, or in the notice that stands in its place. It must be paid unless a valid Pay Less Notice arrives in time: see What is the notified sum?

The amount added to the cost of work to cover running your business and a profit, usually as a percentage. It is part of pricing a variation or a claim.

Taking work out of your subcontract by instruction. Taking work away to give to someone else is often not allowed: see whether omitted work can go to others.

When the client takes over part of the works early, with the main contractor's agreement. On a JCT contract, that part is treated as practically complete: see partial possession and sections.

The notice your main contractor must send if it plans to pay you less than the notified sum. See What is a Pay Less Notice?

A clause making your payment depend on your main contractor being paid. It does not work under the Construction Act, unless someone up the chain is insolvent: see Are pay when paid clauses enforceable?

Your claim for payment for a cycle, stating the sum you consider due and how you worked it out. See What makes a payment application valid?

The notice your main contractor must send after each due date, stating the sum it considers due and how it worked that out. See What is a Payment Notice?

A contract that pays a contractor for design, pricing and planning work before the main contract is agreed.

The point at which the works are finished for practical purposes, often shortened to PC. It usually brings back the first part of your retention and stops delay damages: see What practical completion means for your money.

The Pre-Action Protocol for Construction and Engineering Disputes sets the steps the courts expect before a claim is issued. They are a letter of claim, a response and a meeting: see what to do when a letter of claim arrives.

The costs of running the site that do not belong to one item of work, such as supervision, welfare, access and site plant. Often called prelims: see how to build them up for a delay claim.

The extra time a job spends on site because of delay, and the cost of that time. See what goes in a prolongation claim.

The money side of a claim: how much is owed, rather than whether it is owed. See What is quantum in a delay and disruption claim?

A reasonable sum for work done where no price was agreed, or no contract applies. See What is quantum meruit?

Your full case in an adjudication, with the evidence, sent to the adjudicator within 7 days of the notice of adjudication. See adjudication.

In a JCT contract, an event that can give you more time, such as a variation. It gives time only, and money comes through a Relevant Matter: see What are the Relevant Events in a JCT subcontract?.

In a JCT contract, an event on the employer's side that can give the contractor loss and expense. See What is a Relevant Matter under JCT?

A percentage held back from each payment as security for defects, released in parts at completion and after the defects period. See What is retention in construction?

A bond from a bank or insurer given in place of cash retention, so you are paid in full. The party it protects can call on it if defects are not put right.

An early, rough estimate of cost, given before the design is developed enough to price properly.

A list of rates for types of work, without firm quantities, used to price and value work as it is measured.

The default rules that fill the gaps where a construction contract does not meet the Construction Act. See The Scheme for Construction Contracts explained.

A table that sets out disputed items one to a row, with each side's position and figure side by side. See how to set a dispute out item by item.

A contract split into sections, each with its own completion date and its own delay damages. See partial possession and sections.

Deducting money one party says it is owed from money it owes the other. See Can they set off contra-charges against my final account?

An adjudication that asks only whether the notified sum was paid, not what the work is worth. See What is a smash and grab adjudication?

Your right to stop work when the notified sum is not paid by the final date, after 7 days' written notice. See Can I suspend work for non-payment?

Your offer to do the work for a price, on the terms in the enquiry. It can usually be withdrawn until it is accepted: see Can I withdraw my quote if prices rise before it is accepted?

Ending a contract before the work is finished, under a clause in it or for a serious breach. See Can my main contractor terminate my subcontract?

A clause that ends your right to claim if you miss a notice deadline. See What is a time bar in a subcontract?

An adjudication about what the work was actually worth, rather than what a notice said. See What is a true value adjudication?

A change to the work in your subcontract that your main contractor instructs, such as extra, changed or omitted work. See What is a variation order, and what counts as a variation?

Extra conditions added to an NEC contract under Option Z, often where risk moves to you. See NEC secondary options and Z clauses.