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Building Contracts need to contain the right clauses to be effective …

Good terms of trade (building contracts) are key to avoiding disputes and debts.

From 1 January 2015 it is mandatory to have written terms of trade for projects worth $30,000 or more.  We recommend having written terms of trade for all building work.

You should make sure that, in addition to the minimum requirements of the Building Act for projects worth $30,000 or more (including the long list of ‘prescribed content’ set out under the Building (Residential Consumer Rights and Remedies) Regulations 2014), your building contract has these essentials:

  1. The parties to the contract.  Is your client a partnership, an individual, a body corporate, a trust, or a society?  If this is not correct in the contract you may not be able to enforce it.
  2. The scope of the building work.  Is it to build a residential property from scratch; or is it a commercial kitchen re-fit?  The Act requires you to be very specific about describing the building work where its value is over $30,000, and in any event it helps to be very clear on this point to avoid disputes.
  3. How the building work will be carried out.  As required by the Act and to avoid dispute in the future, it is important that, as well as describing what it is that you will be doing, you also describe in detail how it will be done.
  4. The cost of the building work.  The main cause for dispute between people is money and no matter the eventual value of the work, you need to be clear at the outset about how much it will cost.  This may be an agreed quote or estimate, or a method for determining cost.  Whatever the agreement, make sure it is recorded in your contract.
  5. Payment.  It is also very important that your contract is clear about when payment is due.  It is not enough to include a due date for payment on an invoice when it is rendered without having a specific clause in your contract – your contract should therefore:
  • First, identify whether you will be making payment claims and, if so, how many you expect to make over the course of the building work; and
  • Secondly, identify when payment claims and/or invoices will be issued, when they will become due, and how you will receipt them.

In order for your terms of trade to be enforceable against the other party, it is best (and mandatory where the building work is over $30,000) to have them signed by both parties.  You should give two signed copies of the building contract to the client for signing and to have one signed copy returned to you before you start work.

Ensure your Building Contracts comply with the new requirements of the Building Act or else you might not get paid what you should for your work.