Building and Construction Contracts – What you should look out for!

 

It is important for builders, contractors and individuals to have the correct building contract in place when they are building a new property or renovating an existing property.  This is critical in ensuring that everyone is informed of their rights and obligations during the construction process.  Before signing a construction contract, you should seek legal advice as to your rights and obligations under the contract.

Here are some key features you should look out for in a building and construction contract.

1. Written contract

Whilst it is not a requirement that all construction contracts be in writing, it will be extremely beneficial to have a written agreement particularly in the event of a dispute. When a written contract is in place, the terms are carefully and clearly defined, as well as each party’s expectations, rights and obligations.

In contrast, the terms of an oral agreement or contract are defined by the parties’ discussions or negotiation correspondence.  In the event a dispute were to arise, it is likely that the parties will not agree on what was actually negotiated or remember the initial agreement.  Such disagreements or selective memory will almost always increase the costs of litigation.

2. Party’s performance of the contract

It is important that a construction contract or agreement provides a clear plan of the project and how the parties will continue to carry out the construction work to ensure the project runs efficiently.  If a party’s performance is not clear, it can lead to serious issues particularly where each party has an assumption about their performance under the agreement.

Further, time frames should also be included in the contract. The contract or agreement should provide clauses that deal with events such as delays and the procedure surrounding how the parties are to deal with the delay(s).

 3. Payment

Not only should the total contract price be included in the construction contract or agreement but also how and when payment should be made.  Generally, construction contracts will include a fixed price lump sum where the cost of the work is fixed, although the costs of some elements may be varied.  However, there are various types of construction contracts.

It is important that the contract includes a payment schedule, listing dates for when payments are required be made by one party.  This is to ensure that all parties’ obligations are clearly expressed.   This also prevents the likelihood of parties forgetting particular dates and payments. The contract or agreement should also include provisions setting out the procedure of extending the payment schedule in particular circumstances, such as a delay on the project.

4. Termination

It is necessary for a termination clause to be included in a construction contract or agreement.  This clause should detail the situations where each party can terminate the contract and discontinue their obligations under the contract.

It is important to seek legal advice before entering into a construction contract or before preparing your own construction contract.  Please contact one of our friendly staff at Bambrick Legal today if you require assistance with preparation of a construction contract or advice on your current contract or agreement.

 

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