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An effective and well drafted building contract is as important to the success of a building or construction project as the plans, designs, materials and labour involved. An effective building contract will be signed by all parties and contain terms which are clear, correct and relevant to the project.
The strength of a building contract relies on effective drafting and clear terms about payment requirements, the scope of works for the project, the materials to be used and other rights and responsibilities of the parties to the contract.
The Scope of Works in the contract must clearly and accurately reflect the works which form part of the contract. Where any change or variation to the scope of works or additional work is requested by the client, it is imperative that this request is made and agreed to in writing between the parties before any of this variation work is commenced.
Any variations to the contract must describe the nature of the change, the costs involved and the time impact that the change will have on the project. For residential constructions all Variations MUST be in writing and signed by the Owner and Builder [Home Building Act (NSW)] to entitle the Builder to demand payment. Including conversations and other notes and details in a site diary may be a useful practice to implement.
All tax invoices [progress claims] must be addressed to clients in accordance with the terms of the contract and include any relevant documents. If the contract is for work done on a job that is NOT intended to be the principal place of residence for the client, then the provisions of the Building & Construction Industry Security of Payments Act (NSW) will apply to ensure the builder will be paid within the required time frame and provided the builder prepared the Progress Claim in the prescribed manner. The contract must include terms setting out the procedures to be followed for recovering payment of invoices.