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Construction Sub-Contract UK: Lump Sum Payment Guide

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Written by Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
If you run a main contracting business in the UK, or you take on work as a trade sub-contractor, the written sub-contract sitting between you is the single most important document on the job. It decides what gets built, for how much, by when, and who carries the risk when something goes wrong. This guide looks specifically at sub-contracts that use lump sum payment on completion, a structure where the sub-contractor agrees a fixed price for a defined scope of work and gets paid once the work is finished and accepted. I'll walk you through how these arrangements work in practice, the clauses that tend to cause arguments on site, and the statutory protections that apply under the Housing Grants, Construction and Regeneration Act 1996. Getting the paperwork right before the first tool comes out of the van saves a remarkable amount of grief later.

What this document is

A construction sub-contract is the agreement a main contractor puts in place with another trade or specialist firm to carry out a defined portion of a building project. The main contractor remains on the hook to the client under the head contract, and the sub-contract passes appropriate obligations down the chain.

These arrangements are used across the full spectrum of UK construction, from a single trade helping out on a domestic extension through to specialist packages on multi-storey commercial schemes. Typical sub-contractors include groundworkers, electricians, plumbers, roofers, plasterers, bricklayers, glaziers, and mechanical and electrical contractors.

A lump sum payment on completion variant fixes the price upfront for an agreed scope and defers payment until the work is finished and signed off. That pricing model shifts programme risk onto the sub-contractor and budget certainty onto the main contractor, which is why the scope definition and acceptance criteria matter so much. Note that statutory payment rules under the Construction Act override purely commercial payment terms for most construction work.

How to use this document

  1. Define the scope of works precisely. Write down exactly what the sub-contractor is taking on, including materials, workmanship standards, specifications, drawings referenced, exclusions, and anything the main contractor will provide. Vague scope is the single biggest source of disputes on lump sum jobs, so spell out what is in and what is out.
  2. Agree the price, programme, and acceptance criteria. Fix the lump sum figure in writing, set a clear start date and target completion date, and describe what 'complete' actually looks like. Include how variations will be priced and instructed, since almost every job picks up changes once work is underway on site.
  3. Address payment terms and the Construction Act. Even on a lump sum on completion basis, the Housing Grants, Construction and Regeneration Act 1996 generally requires adequate payment mechanisms, the right to interim payments where the programme exceeds 45 days, and a statutory right to refer disputes to adjudication. Make sure your payment and notice provisions comply.
  4. Cover insurance, health and safety, and CDM duties. Confirm who holds public liability and employer's liability cover, at what levels, and who carries CDM duties under the Construction (Design and Management) Regulations 2015. Site access, welfare, PPE, and reporting lines should all be written down rather than left to site chat.
  5. Set out defects, retention, and dispute resolution. Decide whether any retention is held back, the length of any defects liability or rectification period, and how disputes will be handled. Adjudication under the Construction Act is available as of right, but you can also build in mediation or escalation steps before anyone issues proceedings.

Common questions

If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £89.

Common questions

Q Is a lump sum sub-contract right for every job?
Not always. Lump sum on completion works best where the scope is well defined, the drawings are settled, and site conditions are known. On jobs with lots of unknowns, fluctuating materials prices, or evolving design, a measured or cost-plus approach often fits better. If the scope is likely to change significantly after work starts, building in a clear variations procedure is essential regardless of the pricing model you use.
Q Does the Construction Act apply to my sub-contract?
The Housing Grants, Construction and Regeneration Act 1996, as amended, applies to most construction contracts in the UK covering building, civil engineering, and related work. There are exclusions, including certain residential occupier contracts and some process engineering. Where it applies, statutory rights around payment notices, the right to suspend for non-payment, and the right to adjudicate cannot be contracted out of, even if your written terms try to.
Q Can the main contractor withhold payment if the work is defective?
Potentially, but only through the proper statutory process. Under the Construction Act, withholding payment generally requires a valid pay less notice served within the contractual or default timescales. Simply refusing to pay without notice is a common and costly mistake. The safer route is to document defects clearly, issue the correct notices on time, and give the sub-contractor a chance to remedy the work where appropriate.
Q Who carries the risk if costs rise during the job?
On a lump sum sub-contract, the sub-contractor generally carries the risk of cost overruns within the agreed scope. If materials become more expensive, labour takes longer, or weather slows things down, the price stays the same unless the contract allows for adjustment. That is why a tight scope, a sensible contingency in the price, and a workable variations clause are so important for the sub-contractor.
Q What counts as 'completion' for triggering payment?
Completion is whatever the contract says it is, which is why the definition matters. It typically means the work is finished in line with the specification, any snagging items are dealt with or agreed, and the main contractor has signed off or issued a completion certificate. Without a clear definition, arguments about whether payment is due are almost guaranteed when the final invoice lands.
Q Can disputes be referred to adjudication?
Yes, for most construction contracts in the UK. Adjudication under the Construction Act gives either party the right to refer a dispute to an independent adjudicator who must reach a decision within 28 days, extendable by agreement. The decision is binding until overturned by court, arbitration, or settlement. It is quicker and usually cheaper than court, which is why it dominates construction dispute resolution in the UK.
Q Do I need written terms, or will a handshake do?
A verbal agreement can in principle form a binding construction contract, but relying on one is a poor idea. Written terms avoid disputes about what was agreed on scope, price, timing, and payment. They also make it much easier to enforce your rights, whether through adjudication or the courts. For any meaningful job, get the terms down in writing and signed before work starts.
If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £89.

Sources

This guide is based on primary UK law and official guidance.

Brad Askew, Solicitor (non-practising)

Written & reviewed by

Brad Askew Solicitor (non-practising)

Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.

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Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.