I started this series with an article: Home build and renovation contracts part 1 - what you should know followed by my next article Home build and renovation contracts part 2 - the rules of the project. Last week I discuss what should be included in a home build or renovation contract with your contractor: Home build and renovation contracts part 3 - What contracts should include.
In this article I discuss different types, or forms, of contract.
Types of home building contracts
Building contracts can be standard industry documents, contractor drafted contracts, or even your own form of contract.
For most building projects contractors prefer using their form of contract. This is particularly the case with suppliers, installers and home-builders. However, it’s possible to use an industry standard form of contract, or you may prepare your own contract. It should be noted that many contractors will be loath to sign contract documents that owners have prepared. If you want to use a specific form of contract this should be given (or specified) when the contractor is requested to price the work. Asking the contractor to sign a contract document which they didn’t have when they priced the project may give them an opportunity to submit a variation claim. If the terms of the contract you propose using are too onerous then contractors could decline to price your project.
The motto of any contract should be to keep it simple and always seek expert advice.
Standard forms of contract
There are many standard forms of construction contract which are used internationally, within certain countries, or are promoted by some construction industry bodies. So for instance there is often a contract for home builders.
The advantage of using a standard form of contract is that they’ve been tailored to specific needs of that industry, they have been drafted by experts within the industry, have been tested legally in the country, they are usually complete and fair to both parties and they’re usually readily understood by contractors.
Unfortunately some contractors are tempted to tinker with the contract, deleting some clauses and adding others. This could make the contract one-sided, even unworkable with contradictions and loopholes.
Some of these contracts are licensed and there’s a small fee to be paid to the originators of the document. Failing to pay this fee could make the document null and void. Many of these documents can only be used on condition that the main clauses aren’t altered. Usually these documents provide blank spaces to insert the names and addresses of the contracting parties, the contract price, start and completion dates, and project specific conditions. All pages to the contract should be signed by you and the designated representative of the contractor (usually the owner or a person appointed by the owner).
It should be noted that even when using a standard form of contract this will in most cases refer to the special conditions and the specifications pertaining to your project. But again, you should take care that the special conditions included in the contract document don’t conflict with the general conditions causing ambiguity.
Contractor drafted contracts
Often contractors draft the contract documents. Many of these documents are flawed since they could offer you little protection, they are often one-sided giving the contractor rights to literally do as they please, they could contain contradictory clauses, or they’re incomplete and don’t include some important points.
If you’re prepared to accept such a contract you need to carefully check the terms to ensure that they’re agreeable to you and that you will be protected should a dispute arise. It’s always worth having a legal expert scrutinise the contract. Check the contract to ensure that all the items that you want included in the contract have been included.
The contract is your protection
There are different forms of building contract. As we've previously discussed they should include certain items. They must provide protection for both the client (you) and the contractor and they should not place excessive risks on one of the parties, particularly risk which they cannot reasonably control.
It's best to use a standard form of building contract which is applicable to the work, and one which is regularly used in building works in your country. This contract should not be altered, or have clauses modified or deleted unless the clauses really aren't applicable to your building project.
It's vital that you read through the building contract before signing it to ensure that the terms and conditions of the contract are clear and they are the terms that you agree with. The contract should clearly layout the responsibilities of the parties and how the contractor will be paid. Failing to read or understand the building contract will not be an excuse for you not being bound by the terms of the contract.
The contract must not have ambiguous or contradictory clauses and it must be enforceable under the law of the country. A faulty building contract often leads to misunderstandings and disputes, and you may have little protection should things go wrong with your construction project.
This is an extract from 'An Introduction to Building and Renovating Houses: Volume 1' written by Paul Netscher.
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Paul Netscher has written 2 easy to read books 'An Introduction to Building and Renovating Houses - Volumes 1 and 2'. An Introduction to Building and Renovating Houses Volume 1 deals with Hiring Contractors, Managing Construction and Finishing Your Home. and Designing your ideal home Volume 2 deals with Finding Your Ideal Property and Designing Your Dream Home.
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I’m a construction professional, author of several successful construction management books, and a home owner. I’ve made mistakes in construction management, I’ve seen others make mistakes, but importantly I’ve had multiple successful construction projects and I’ve learned from the mistakes. I want to share these lessons and my knowledge with you.
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