There are some important points to keep in mind when entering in to a construction contract.

1. Progress Payments:   Unless agreed otherwise, the Act gives contractors the right to receive monthly progress payments whether or not these are stipulated in the contract.

2. Pay When Paid Clauses:  Progress payments may not be subject to a condition that these are only payable if and when the head contractor is paid. “Pay when paid” and “pay if paid” clauses are not permitted, and if included in a contract are invalid.

3. Claims for Payment:  Payment claims may be served on the owner or head contractor at the end of each month unless the contract specifies a different period. The payer must then, within 20 working days or the time specified in the  contract, pay either the amount claimed, or such other amount as the payer sets out in a Payment Schedule (which must explain the reasons for any difference between the claimed amount and the schedule amount).  If the payer does neither the contractor may:

      (i) Give notice of intention to suspend work; and/or

      (ii) Recover the money due as a debt.

This is a pay now/argue later type provision, so, if a payment schedule is not given, the client must pay the payment claim and cannot raise any defence to Court action.

4. To be a valid Payment Claim or Payment Schedule all the information required, plus the necessary form must be included. See our Guide: Payment Claims and Payment Schedules.  

5. Suspension of Work:  Contractors are legally entitled to suspend work if they have not been paid.  Any provision in a contract attempting to prohibit this action is invalid.

6. Charging Orders:  A contractor can apply for a Charging Order against a construction site owned by the employer under a construction contract or an “associated person” to the employer.

7. Disputes Resolution:  A dispute resolution procedure called “adjudication” is intended to offer a quick and cheap method of settling differences between the parties, as an alternative to arbitration or court proceedings.

8. All construction contracts of over $30,000 are required to be in writing, but it is recommended to have a written contract for all construction work, so that everyone knows their rights and obligations.