Building Contracts & Subcontracts

Building and Subcontracts are Critical

Building Contracts are generally agreements between the owner of land, or their agent, and the contractor which will carry out building works.

The intention of a building contract is to document each party’s rights and obligations with respect to the carrying out of the works and payment for those works.

Some of the main issues addressed in a building contract include, amongst others:

  • obligations regarding payment of the contract sum;
  • the requirements with respect to quality of workmanship;
  • security and retention monies;
  • provisional sum and prime cost items;
  • risk of site conditions;
  • risk of damage to the works, people and property, and any insurances required;
  • any design obligations and risk of defects in design documents;
  • variations;
  • defects liability periods and defect rectification;
  • risk of delay and extensions of time;
  • payment of liquidated damages and delay costs;
  • time for progress claims and payment; and
  • termination including termination for convenience

You can obtain standard building contracts from many sources, however, such contracts do not go far enough and it is often critical that the terms of these contracts are amended and tailored in order to address various risks which the parties are exposed to and/or seek to minimise depending on their risk appetites and the specific nature of a particular project.

While the terms of any building contract are fundamental, the scope of works forming part of the contract plays the pivotal role in setting out the builder’s obligations under the contract and what forms part of the contract sum.

In this way, it is crucial that the scope of works attached to any building contract is accurate and properly reflects what each party understands to be its and the other party’s responsibility. A poorly defined scope of works can often lead to greater scope for variation claims and disputes as to which party is responsible for certain work or costs.

We understand construction matters from both a legal and commercial point of view. We take the time to listen to you, understand the nature of the project and provide our experience in preparing, reviewing and/or negotiating such contracts. Failure to obtain proper advice or being unclear about your obligations can be incredibly costly and cause excessive financial and emotional strain, as well as delays in completing the project.

Subcontracts

Subcontracts are agreements between a builder and subcontractor (or a subcontractor and a sub-subcontractor) for the carrying out of a specific trade or work including for example, plumbing, electrical, joinery, formwork, scaffolding or demolition and excavation in relation to a specific project.

Usually, subcontracts are prepared by or on behalf of the builder and provided to the subcontractor. It is not uncommon however, for subcontract terms to be negotiated between the parties.

Subcontracts generally aim to define the obligations and risks of the parties and often, the builder will seek to transfer its obligations under the head contract onto the subcontractor. For example, where the builder has accepted the risk of contamination under the head contract, the builder will often seek to pass that risk to its excavation subcontractor by placing the risk of any contamination on the excavator under the subcontract.

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As with a building contract, one of the most crucial documents in any subcontract is the scope of works which sets out the obligations of the subcontractor including what comprises the subcontract sum.

Often subcontracts can be drafted in complicated terms and are difficult to understand. It is common for subcontractors to simply enter into a subcontract without reviewing or considering its terms. The inherent risk in doing so however, is that subcontractors may find themselves committed to a subcontract which places them in a position which they had not anticipated.

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