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Top 6 tips for good Terms of Trade
A good Terms of Trade or building contract is key to avoiding costly disputes and debts.
Since the beginning of 2015 it has been mandatory to have written Terms of Trade for all building projects (residential and commercial) valued at $30,000 or more. Even where the value of a project falls under this threshold, we recommend having written Terms of Trade for all building work.
There are prescribed minimum requirements under the Building Act for the higher value contracts, but all good Terms of Trade should include the following 6 matters:
- Who are you contracting with? If the parties are not correctly recorded you may not be able to enforce the contract;
- What is the scope of the building work? Take time to clearly describe the nature of the work required and being provided. This helps to prevent disputes later and, where the building work has a value of over $30,000 you are required to be very specific.
- How will the work be carried out? Again to avoid disputes (and as required by the Act) as well as describing what will be done, clearly describe how it will be done.
- How much will the work cost? The main cause for disputes is money and so you need to be clear from the outset about how much the work will cost. This may be an agreed quote or estimate, or simply a method for determining cost. Whatever the arrangement, make sure it’s recorded in your contract.
- When will you be paid? Be clear about when payment is due in your contract – do not rely on terms of an invoice. Identify whether you will be making payment claims and if so how and when they will be issued, and also identify when they will become due and how they are to be received.
- Your agreement signed and dated by all parties. This is mandatory where the work is valued at more than $30,000 but it is good practice for any contract.