Occasionally, due to time constraints or for other reasons, builders may be tempted to enter into a construction agreement with a cursory review of its provisions and a limited understanding of the essential terms. To steer clear of the need for conciliation, adjudication or litigation, it is important to have a well-drafted building agreement in place and to understand the respective parties’ rights and responsibilities under that agreement.
Following are some common contractual issues that can lead to a construction dispute.
Assuming that a contract incorporating ‘standard conditions’ is fair and reasonable for your undertaking may lead to potential issues. Many standard contracts are amended by the party preparing them and incorporating ‘general conditions and standards’ into a contract by reference or otherwise, does not make it immune to the need for a full review.
Like any other contract, standard form contracts may contain ambiguous clauses or clauses that are unsuitable for certain circumstances or a particular project. To avoid disputes, parties need to understand the full force of their obligations under an agreement.
Completion dates and extension of time clauses
A building contract will generally set out a regime to claim for an extension of time required to complete a job, and the events that will justify such a claim, such as poor weather, trade, and material shortages. A contractor is usually required to give written notice of a potential delay and claim for an extension of time in accordance with the provisions in the contract. These clauses are frequently misunderstood or not strictly followed by a subcontractor, resulting in the refusal of claims by a head contractor or principal, or disputes encountered down the track.
Similarly, the formal process for requesting and having authorised a variation to the scope of works must be followed. Formal processes may be ignored during the usual rush and chaos surrounding a construction site. Skipping the formalities however to properly negotiate and document a variation can result in a principal or other contractor refusing to pay for the variations and the need for a party to pursue a quantum meruit claim through a tribunal or court.
Contracts entered at the procurement stage should set out how disputes are dealt with, and good contract management includes implementing systems and processes to deal with notice requirements to promote efficiency, help minimise delays and avoid disputes.
Being on the ‘same page’ from the beginning of a building project is a good start for all building professionals. This means taking time to read over and understand contractual provisions and obtaining professional advice when necessary.
Effective Legal Solutions can assist with all areas of construction law including the preparation of building contracts and development agreements, providing advice and assistance with negotiating terms and conditions, and representing you should a contractual issue turn into a building dispute.