In order to survive the cut-throat construction game, one trick of the trade is to build a contract which keeps you covered for a variety of issues. The current climate in Australia’s construction industry is like a pressure cooker – with increased demand, rising prices and supply chain issues plaguing the sector.
As a result, the complications being brought to bear on builders often centres on fixed-price contracts and timing pressures. So, when it comes to estimating costs and creating a contract, there are a wide range of factors which need to be carefully considered and put in place to avoid potential disputes down the line.
A construction contract is a legally binding agreement which is generally required by law for any construction works to take place.
Construction contracts are used to ensure all parties are aware of their obligations and act to reduce the possibility of disputes which may arise during a project. A well-considered contract should clearly outline the key commercial and legal terms of your arrangement, including factors such as:
The legalities and risks of the construction industry are complex and unpredictable. As a builder or contractor, you might have priced the job, factored in margins and even included a contingency in your contract, but if prices go through the roof due to market flux, you are still contractually required to perform at the designated rate. This can blow out project budgets to a point where it ends up putting builders in the red.
If this happens, builders are going to be asking whether or not they can get out of the contract or what can be included in the wording to give them the ability to have those sums float. You need to ensure your prices float where possible, which is done by making them a Provisional Sum, as well as providing a reasonable estimate of costs. If you make a representation of prices, you need to have a proper basis for making it, otherwise there’s a risk of deceptive conduct.
On the flip side, homeowners could also be impacted by construction industry price rises. You could be a property owner and have contracted someone to build your house when prices increase astronomically and they can no longer afford to complete the job, despite the fact you have an enforceable contract.
Should you be diplomatic and accept that if you hold this person to the deal, they are going to lose money and might not be able to finish the build? The odds here are that, as the homeowner, you are going to be left with an unfinished house, wondering whether or not you can make an insurance claim and what that will look like.
In addition to floating prices, builders should also be aware of timing pressures created by expected completion dates. It’s entirely plausible that projects won’t get completed on time through no fault of the builder. This can include things such as severe weather and supply chain issues.
When it comes to the date for practical completion, there are certain mechanisms in a contract for that date to be pushed out, but contracts need to be correctly worded to give builders the ability to do this. At Twomey Dispute Lawyers, we provide top-tier advice for construction disputes and can help resolve issues over construction projects or contracts.
If you’re looking for a little guidance, Twomey Dispute Lawyers takes great pride in being able to seamlessly navigate the complex legal landscape of the Australian construction industry in order to help create fool-proof contracts for our clients.
Whether you’re a builder, contractor, construction company, or a homeowner, we are more than happy to help you achieve the best possible result for your next building project and ensure, no matter what unexpected problems might arise, that you’re contractually covered and have complete peace of mind.
Call us for a confidential chat on 1300 286 578 or email us at info@tdllaw.com.au
