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When engaging in building work, it is important to ensure that there is an executed contract that contains all the required elements. Depending on the types of work performed, building contracts can be differentiated into domestic building work (i.e. building a driveway, swimming pool, fence at a residential property) and commercial constructions (i.e. constructions of high-rise towers, shopping centres).

The South Australian legislation requires builders who are carrying out domestic building work to hold an insurance policy relating to that building work, if the contract price exceeds $12,000 and development approval is needed for the work. Builders must provide a copy of the certificate of insurance to the building owner and to other relevant authorities at the time of planning approval application. Builders must be mindful that any building work cannot start without the insurance in place. Importantly for subcontractors, works normally domestic in nature are not considered “domestic” under the Building and Construction Industry Security of Payment Act 2009 (SA) as works are being carried out for the contracting entity and not the homeowner.

Requirements of a Building Work Contract

For a domestic building work contract to be binding, there are several formal requirements to comply with: –

  1. the contract must be in writing, clear and legible;
  2. all terms of the contract are set out;
  3. details about the builder including license number must be included; and
  4. signatures of both building owner and the builder must be present

Other terms to be included in the contract are:

  1. Calculation of contract price:

 

  1. Fixed price lump sum: the cost of the work is fixed at an agreed price. However, the cost of some elements may still change depending on the actual cost. This is the most common price calculation.

 

  1. Rise and fall clause: this allows the builder to alter some costs after the contract has been signed. For instance, increasing cost of materials.

 

  1. Cost-plus: allows the builder to add a margin to the actual cost of the work. In South Australia the margin is capped at 15%.

 

  1. Date of commencement and date of completion of work (or an estimate of the total number of days required for work to be completed).

It is vital to be mindful about the wording of the terms. If a contract contains terms that are deemed harsh or unconscionable, the contractual party can apply to the Magistrate Court seeking appropriate relief.

There are several other components that need to be considered. These include the cooling off period, progress payments, reference dates, contract variations and statutory warranties governed under the Building Work Contractors Act 1995 (SA). It is also important for builders to comply with other technical details and rules under the Planning, Development and Infrastructure Act 2016 (SA).

Once the contract is signed, a copy of the contract must be provided to the building owner as soon as practicable. It is mandatory to have a written contract if the domestic building work is worth $12,000 or more. Although there is no requirement of a written contract for work below $12,000, it is still a recommended practice to have one prepared so both contractual parties are aware of their respective rights and obligations.

If you are a builder requiring assistance with the Building Work Contract or a building owner requiring further information, Straits Lawyers are here to help. We are now offering online services in both English and Chinese.

Simply book an online consultation with us via this link: https://straits-lawyers.square.site/product/online-consultation-/11?cs=true or email us at info@straitslawyers.com or call at 08 8410 9069 to arrange an appointment.

 

Straits Lawyers is evolving! With our recent growth and development, we have expanded and are excited to announce the launch of our new name H&O Lawyers. Stand by for the new age of legal representation brought to you by H&O!

 

Please note that this article does not constitute legal advice and Straits Lawyers will not be legally responsible for any actions you take based on this article.