The Importance of a Solid Building Contract: What You Need to Know

It is often said that the strength of a marriage is well-tested when the couple undertake a building contract. If their marriage survives the building process it should survive almost anything. Undertaking a building contract is undoubtedly a stressful project, whether it’s renovating, adding a room, building another story, or erecting a residence from scratch. Dinner-table talk is littered with war stories and battle scars as people exchange experiences and run-ins with building contractors. The stress of undertaking a building project can, however, be tempered with a suitable Building Contract.

1. The Tasks

What, exactly, is required of your building contractor? How large is the room? How many and what type of windows? What type of paint is to be used? How many plug points are required? What type of bricks must be used? What must the finishes look like? The more comprehensive the description of the project, the lower the chance of dispute over what the building contractor is expected to do. By way of illustration, consider these two descriptions:

• Description 1: Building on an extra bedroom;
• Description 2: Building an extra bedroom as per the attached architect’s plans, with finishes as per the attached mock-ups. All building materials to match the quality and appearance of the existing structure. All finishes (including paint, carpets, cupboards, door handles, light fittings, electrical plug-points) to be approved in writing by the customer prior to fitment.

It goes without saying that Description 1 leaves the building contractor with far more wiggle-room than Description 2, while deviations from Description 2 gives the customer far greater negotiation power when holding back the next milestone payment, or even deciding to cancel the contract.

2. The Money

With tongue-in-cheek your friends may caution you, when they hear of your building plans, that you need to take the initial building quote, double it, and that’s about what the final cost will be. You can lighten the burden on your stress-levels, if not your pocket, by ensuring that the project costs are quoted as completely as possible. In addition, it is generally accepted that payments will be made in instalments at agreed milestones. And negotiate upfront what percentage of the payments will be retained until the snag list has been dealt with. Because there will, without a doubt, be snags. And the final payment can serve as a good motivation for the contractor to remedy the snags if his conscience and service ethic isn’t incentive enough.

3. The Adjudicator

The contractor contacts you for the next milestone payment. You walk into the room to confirm the milestone has been met. And your mouth drops. The structure is visibly smaller than what you had envisaged, and one precarious-looking wall certainly doesn’t look like it’ll withstand the first summer storm. You point this out to the contractor, who denies any wrong-doing and insists that he has performed his end of the bargain as agreed. What do you do? The more vague and ambiguous your original construction contract was, the more difficult and tense this stand-off will be. Added to which, the contractor argues the point, rather vociferously, that as the building expert he is in a far better position to judge than you, the customer. One way to resolve this stand-off before it gets too ugly is to provide for the appointment of an independent expert to assess the building work and make a final and binding ruling on whether or not the work has been done in accordance with the building agreement.

4. The Recourse

Despite your best endeavours, the builder still hasn’t performed his side of the bargain. What then? This is where you would proceed in accordance with the breach clause in your building agreement. Typically, this would entail giving the builder a letter of demand, which will detail what the builder has done wrong and give him a specified period of time within which to remedy his wrong-doing. If he fails to do so, you would typically be able to either enforce specific performance (ie. insist that he remedies the problem, and complete the project) or you can cancel the agreement. Usually you would also be able to claim any damages that you can prove you have suffered as a result of the builder’s breach. It is strongly suggested that you consult your attorney before you take any drastic steps such as terminating the building contract. Because if you try to terminate the contract incorrectly, the builder may well land up with a claim against you! So make sure that you have a Building Contract, complete with comprehensive details about the anticipated building project, before the project commences.

Please note that this information is supplied for general information and does not constitute legal advice. It is advisable for you to contact a legal practitioner for guidance in respect of your unique requirements.