Construction contract due diligence is the structured review of the legal, commercial and operational terms of a proposed building project. It identifies obligations, cost exposure, approval requirements and dispute risks before the contract is signed. Harper James is a UK full-service commercial law firm advising businesses on the laws of England and Wales, including construction matters.
The review should begin by confirming the project parties, their legal identities and authority to contract. Check the employer, contractor, consultants and key subcontractors, together with insurance arrangements, parent company guarantees, performance bonds and collateral warranties. The contract should also identify the works clearly through drawings, specifications, schedules and any contractor’s proposals. Inconsistencies between these documents need to be resolved before execution.
The pricing mechanism requires close attention. A lump-sum contract, measure-and-value contract, cost-plus arrangement and target-cost contract allocate financial risk differently. Review provisions covering payment applications, payment notices, pay less notices, retention, valuation of variations and final account procedures. The contract should also state how changes to the design or scope are instructed, valued and recorded.
The programme should be tested against the completion date, sectional completion requirements, access dates and delay provisions. Examine extension-of-time rules, liquidated damages, relevant events, acceleration and the consequences of employer or contractor delay. Review defects liability, rectification periods, testing and commissioning requirements, as well as the process for taking over the works.
Due diligence should cover design responsibility, intellectual property in design documents, health and safety duties, site conditions, ground risk, utilities and planning or building control requirements. Insurance provisions should match the risks allocated by the contract, including public liability, employers’ liability, professional indemnity and, where relevant, contractors’ all risks cover.
Finally, check suspension, termination, insolvency, adjudication, mediation, arbitration and court proceedings. Confirm the governing law and jurisdiction, notice requirements, record-keeping duties and document precedence. A practical review ends with a schedule of negotiated amendments, outstanding information and actions allocated to named project participants. This creates a clear record of the risks accepted and the protections required before signature.