If you are about to sign a construction contract with a builder, you need to note a few standard things and some major points. Even those are long, boring documents, you must spend the time reading those papers page by page. If you proceed in ignorance of these things, you risk being ‘bitten’ later on. Today I will talk about some key provisions when signing the contract.
1. Check the builder's license
When you want to hire a builder to undertake a construction project larger than $10,000, you need to check whether the builder has a builders license. It would help if you also made sure that:
the builder's registration with the Victorian Building Authority is current.
The license covers the type of work you need.
The name and number on the licence match those on the contract.
Checking the builder's license information will ensure that you deal with law-abiding builders, who would most likely do the right thing.
2. Check that the builder is insured
When the contract amount is greater than $16,000, the builder must have domestic building insurance for the owner. Only licenced builders are eligible to purchase insurance. So make sure the name of the builder/building company to whom the DBI policy is issued is consistent with the name of the builder/building company on the contract and the building permit.
3. Scope of work
The scope of work must be precise, both in terms of what the builder needs to do and what the builder will not do. It must be written very specifically to prevent any misunderstanding and confusion. A contract also needs to state that the builder must comply with all existing project plans, specifications and building codes. By specifically set forth within the agreement, discrepancies in the future as to the duties and obligations of the contractor will be significantly minimised.
4. Payment Terms
The payment terms and schedule can be a bit sensitive issue for the contractual parties. Disagreements cause most construction disputes with payment, so it is best to ensure that the method of progress payments is clearly stated. Construction contracts usually have an instalment clause that specifies the percentage of payments to be made when the construction of the building reaches a certain stage.
5. Time frame
Usually, the contract will specify when it is to begin and when it is expected to end. Although neither the builder nor the owner wants delays in the project, many construction projects are delayed. The owner should read the contract about the liquidated damages and negotiate with the builder for the compensation method for the damage caused by the delay.
6. Dispute Resolution Clause
The Dispute Resolution Clause sets out the measures to be taken in the event of a disagreement. This agreement sets out the steps to be taken to resolve the problem before it escalates. For example, resolving a problem through communication, mediation or arbitration can avoid costly and lengthy legal proceedings. A well-drafted dispute resolution clause can save you a lot of time and money and provide flexibility in resolving problems.
7. Termination Clause
Ideally, the builder completes all work according to plans and specifications within a specified time frame, and the owner pays all amounts due according to the payment schedule. Unfortunately, the ideal situation does not always happen, and if the relationship breaks down, consider terminating the construction contract. This is the time to check the terms in the construction contract to see if a prescribed procedure must be followed in the termination clause. If there is such a procedure, follow it strictly, or you may be charged with a breach of contract.
Those are critical provisions for signing a construction contract, and you can contact me if you have any questions. I wish you good luck to build your new home.
工作范围（scope of work）
争端解决条款（Dispute Resolution Clause）