This week we’ve asked Paul Rojas from one of Brisbane’s biggest legal firms specialising in the construction industry Rostron Carlyle Rojas Lawyers, to show us where builders go wrong in contracts, and how you can avoid making the same mistakes.
1. Payment
The main source of disputes in construction usually revolves around payment.
The main source of disputes in construction usually revolves around payment. Frequently, builders carry out preliminary work before finalising a formal agreement, or proceed with the next phase of work pursuant to the contract without receiving payment for the previous stage. It is important for builders to resist the urge to perform works outside the scope of works agreed to pursuant to the agreement or issue progress claims for incomplete works. This is to ensure they have a contractual basis upon which they can claim for unpaid invoices in the event they do not receive payment. It is critical that you understand the terms of your build contract so that you do not waive your entitlements under the agreements or breach the applicable law.
2. Staying in the parameters of your scope of works
Many disputes arise out of miscommunication or a misunderstanding … about the actual scope of works
In practice, we have seen many disputes arise out of miscommunication or a misunderstanding between the builder and the owner about the actual scope of works agreed to. It is crucial for builders, when entering into build contracts, to ensure they understand exactly the scope of works they are to perform, and more importantly that the owner is in agreement about what that scope entails.
3. Unauthorised Variations
Variations should be kept to a minimum
One of the most common causes of disputes arise over unauthorised variations. Ideally, variations should be kept to a minimum, however, we understand that in the constructions industry they are at times, inevitable. Therefore, it is critical that all variations are properly documented pursuant to the contract. Typically, this involves providing the owner with the variation in writing and receiving confirmation of agreement in writing. It is much easier to argue that a variation has been authorised, when you have the authorisation in writing, as opposed to verbal confirmation.
4. Extension of Time (EOT) Claims
Watch out for weather delays, site access issues, late approvals or permits or supply chain disruptions
EOT is a contractual provision that provides the builder with an entitlement to extend the duration of a project when unforeseen delays arise. An EOT typically relieves the builder from liquidated damages if the original date of completion is not met. EOT usually arise from weather delays, site access issues, late approvals or permits or supply chain disruptions. An EOT for practical completion should be completed and lodged pursuant to the terms in your contract.
5. Cost Escalation
Cost escalation clauses are specifically designed to accommodate builders … where things happen completely outside their control.
Lastly, we see many disputes arise out of circumstances where the price of supplies/materials inflate and suddenly you aren’t able to complete the build in accordance with price agreed to in the contract. This is a common occurrence and a dispute can be avoided by ensuring that you have a solid cost escalation clause in your contract. Cost escalation clauses are specifically designed to accommodate builders in circumstances where things happen completely outside their control.
From a legal perspective, we recommend that all new builders:
ensure you understand the terms of your contract, this includes your entitlements and what is legally required of you; and
keep detailed records of all communication – if a dispute should arise, it will be significantly easier for you to make your argument if you have evidence to rely on.
