A couple decided to undertake some major renovations to their house.  

The builder asked them to pay a deposit for the materials. The couple agreed and paid it but did not sign a contract with the builder. 

The builder began the construction work but quickly started not showing up for work. After a month of following up with the builder they still had not heard anything about when his crew would return. The couple consulted with a lawyer for advice about their legal rights.             

If a contractor fails to perform the expected work you have paid them to do, your first point of call should be to look at your contract.  

All building work over $30,000 requires a written contract.  We recommend having a written contract for works under this amount as well.   

Generally, most construction contracts will contain a dispute resolution clause which outlines how issues regarding the performance of the contract should be handled.  

Typically, this will involve a private negotiation before attempting the more costly processes of mediation and adjudication.   

The Building Act also provides a basic process to follow if you do not have a signed contract. 

If you do not have a contract you can still pursue a claim for: 

1. A breach of contract under the Contract and Commercial Law Act (CCLA) 
2. A breach under the Consumer Guarantees Act (CGA)  
3. A breach of the Building Act  

Contract and Commercial Law Act 

For the purposes of the CCLA, a verbal agreement will be sufficient to establish that a contract was in place. However, it is always best practice to have a written contract that establishes the rights and obligations of the parties.  

If you do not have a written contract, it is important to keep a record of any emails, letters, invoices, or other documents which may establish things such as the stipulated completion date, pricing, and the work being undertaken.  

If the contractor does not meet their obligations by completing the works, then this could be a breach of contract and you may have a remedy under the CCLA. Typically, you will either be able to cancel the contract or sue for specific performance (i.e. forcing them to carry out the work).  

The CCLA allows for the cancellation of a contract if a party either commits a serious breach of the terms of the agreement, or by repudiating the contract (acting in a way showing they do not intend to carry out the contract).  

To prove repudiation, the other side must make it known that they will not perform the contract either by their words or actions. The party must not have a good reason behind their intention to not fulfil their obligations under the agreement.  

For a serious breach to occur, there must be a breach of the contract by one party and that breach must be considered an essential term of the contract. 

If either of these can be satisfied, then the Court will cancel the contract and award damages. 

The amount awarded will generally be measured by attempting to put the aggrieved party back to the position that they were in before the contract however, depending on the circumstances, the Court may also award additional damages for mental anguish or stress caused by the other party.  

Sometimes, the Courts may require a company to perform the specific task that was required by the contract, with no additional costs. This is a relatively uncommon remedy as the Courts tend to prefer to award damages.  

Further, in many cases the working relationship has badly eroded by the time the parties come to Court. People in this situation will need to consider carefully whether it would be wise to request such a remedy.  

Claiming the costs for the repairs, or the completion of the contract by another builder will typically give you better results.  

The Consumers Guarantees Act 

A remedy under the Consumers Guarantees Act (CGA) may be available to you if there is a problem with the service provided by the builder.  This means the contractor’s work must have been performed negligently in some capacity.  

The builder must have breached one of the four guarantees that relate to service: 

1. Services will be provided with reasonable care and skill 
2. Services will be fit for purpose  
3. Services will be done within a reasonable time, if no timeframe was agreed upon 
4. Services will be a reasonable price 

This means that if a contractor has not completed the works in a reasonable timeframe, then you will have a remedy under the CGA.  This means that you are entitled to request that they complete the job for no additional cost. If they refuse, then you can engage someone else to do so and claim the cost from the other party.  

The Building Act 

If the work relates to construction work being undertaken on a residential building, then you may have remedies under the Building Act. 

The Building Act requires any tradesperson to warrant that any work they do will be done competently, with the correct materials and completed in the time specified. These warranties last for ten years after the completion of the work and exist irrespective of whether the contract refers to the warranties or not. Therefore, if a contractor has left incomplete works, they have likely breached these warranties.  

The Act also provides for the event that you uncover a defect with the building within 12 months of the completion of the works. In that case the builder must correct the mistake or prove they are not responsible.  

After the 12-month period, you may still be able to pursue a remedy under the Building Act. However, you would have to prove that the builder was at fault.  

Relief 

If a contractor fails to perform (or adequately perform) the work that you have paid for, we recommend that the first step is to write a letter to the contractor outlining what rights and obligations they have breached in the performance of their services.  

Most people who are pursuing a claim against a contractor for incomplete work should make a claim citing breaches of Consumer Guarantees Act, the Contract and Commercial Law Act, and the Building Act.  This is because these Acts have a wide range of remedies available to customers and will likely capture a wide range of circumstances.  

If the contractor is still unwilling to perform the work, then you may wish to look at any remedies available to you.  You may potentially be able to apply to the Building Disputes Tribunal to help resolve the dispute. This can be a useful way to have smaller claims dealt with.   

Ultimately, if you are renovating or building, it is vital to take legal advice to ensure you have a building contract that is fit for purpose and fully protects you.   

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.