The Importance of Contract Review
As a homeowner about to embark on a building project, you will soon realise that construction contracts are always worded in such technical language that is unfamiliar to non-tradespeople at best, and incomprehensible and confusing, at worst.
In such cases, it’s very easy for unfair stipulations to be sneaked in, with you being none the wiser.
There is therefore a need to thoroughly review and understand the contract before you sign. You may opt to engage a construction lawyer for the purpose. Or, you may review it on your own, which is pretty easy to do as long as you know what to watch out for.
Types of Construction Contracts in Victoria
Construction contracts in Victoria may either be standard form, or drawn up by the builder from scratch
Standard Form Contracts
Standard form contracts are those prepared and issued by the government or by industry associations.
These would be:
1. Australian Standards (AS) suite of contracts, like the AS4000-1997
2. Australian Building Industry Contract (ABIC) suite of contracts
3. Master Builders issued contracts
Customized Contracts
Sometimes, builders prefer to draft contracts from scratch and customize them in
accordance with their clients’ specific needs. There’s a greater need to review these types of contracts. On the other hand, there is more wiggle room to propose amendments to them, as opposed to standard forms.
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Contract Review Tips
1. Look for the Essential Terms
Essential terms are the provisions that go into the heart of the contract. They embody the very core of the agreement of the parties. If the essential terms are absent, the contract is invalid.
Standard form contracts are inherently valid, and always contain essential terms.
On the other hand, if the construction contract is customized, you need to make sure the essential terms are present, otherwise, the contract won’t be valid at all.
The following are examples of essential terms:
- scope of works
- price
- articulation of terms
2. Check for Important Clauses
Apart from the essential terms, your contract needs to contain the following clauses:
- Termination Clause
- Variation Clause
- Payment Clause
- Dispute Resolution Clause
3. Learn Tradie Jargon
And by that, we mean with regard to the payment scheme. One of the most important provisions in your contract involves the payment schedule/payment scheme. You should familiarise yourself with the different payment schemes and what they’re called in the industry, so you’ll know exactly what your payment rights and obligations are. Some of the commonly-used terms include:
- lump sum
- measurements
- cost plus
- contractual quantum meruit
- variations
- loss and/or expense
- target cost
- schedule of rates
- daywork
- provisional sums
- time charge
- advance payments
- estimates
- contingency
- errors
4. Caveat Clauses
Construction contracts usually contain clauses that state who will bear the burden of loss or liability, should there be breach of contract. This is extremely important.
Watch out for the following:
- No Damage for Delay Provision - this provision would prevent you from claiming damages should the contractor incur delay in construction.
- Contractors Review of Documents Provision - this frees the owner (you) of liability when building defects develop.
- Indemnity Provision or Clause - this clause requires one party to assume responsibility for third party claims made against the other party.
How We Can Help
Construction Lawyer Melbourne has been in active practice of construction law for more than 10 years now. Should you find any problems in your contract, or should you require assistance in ensuring that your contract will be carried out as agreed upon, you may contact us for advice and for contract administration services.
