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6 Things to Know Before You Sign a Construction Contract

Property owners often believe that developers are out to trick them but the truth is builders are afraid that contractors and subcontractors will try to pull a fast one on them despite a Construction Contract.

The construction industry would be a complete mess were it not for international and Australian construction law that regulates the relationship between all parties involved in real estate, from the investor to the family purchasing their first property.

If you’re any of the parties in this chain, then these are the 6 essential things you need to know before you sign a construction contract.

1. Visit the actual site

We live in a world where everything has gone online, so investors and buyers alike forget to visit the actual construction site. This is imperative because you need to discover all the details of the site and find out if there are any conflicts with project plans. Only if you know the state of the construction can you organize the logistics effectively.

2. A project checklist is mandatory

Reviewing contracts in detail can be tiresome, so you should come up with a checklist you can use several times over.

The list should include the scope of work, all the insurance requirements, payment procedures, bonding, and cash flow requirements, a project schedule, authorized personnel (from blue-collar workers to senior managers), required meeting, national and municipal permits (requirements in NSW are different than on a national level), site access, available parking spaces, etc.

The list is by no means conclusive, as you’ll add new items after each successful job.

3. Be sure to verify the project’s funding

“Money makes her world go around” and nowhere is this statement more true than in the construction industry. Investors’ coffers are the ones making the build possible, so make sure the funding doesn’t run dry.

In fact, it is the general contractor’s right to know whether the project they are working on is adequately funded. After all, your banker would never let you sign a contract that is obviously underfunded; they get commission only if you get paid, so the bank will protect your personal interests in this case.

4. Keep experienced lawyers by your side

You needn’t be a polymath to work in the construction industry in Australia but when it comes to legal issues; it is good to solicit help from legal experts. Both home renovations and new construction projects come with legal issues you cannot resolve in your favour on your own.

Hiring local Sydney lawyers is a smart move, even if their role is going to be purely advisory. Construction law isn’t overcomplicated but here there are thousands of pages of legislation you don’t have time to peruse. From tenders to environmental contamination prevention, experienced lawyers will stop you from making cardinal errors when drafting construction contracts.

5. Read all sections of the contract

A contract is a legal document set in print that is intended for reading. This might seem like stating the obvious but you’d be surprised by the number of professional builders prefer to skim read legal documents. This is the surest way to get yourself in trouble, so read the entire contract before you sign it.

Construction contracts are long but in general, you should at the clauses dealing with payment methods and schedules, indemnification, court arbitration and jurisdictions conflict resolution, delays due to weather, liquidated damages, cleanup responsibility, etc.

All of the points listed above should reflect the fairness of the contract for all parties.

6. Do you know the project’s schedule?

Agreeing orally the general schedule of the project is one of the biggest snares of striking a construction job. Unless you have in writing what you agreed in person, the deal is legally unbinding. It is wiser to add a clause to the contract relating to the schedule to know exactly what you are agreeing to.

Otherwise, improper scheduling of equipment, material, and construction work itself could take the profit out of the entire build. Instead of making money, you will be losing it just because one of the parties failed to deliver their product or service within a stipulated timeframe.

The 6 things listed above are the most basic info you should collect before you sign a construction contract. Remember, the legal aspect of the construction industry in Australia is foreign to all parties, from seasoned investors to families buying their first home. That’s why reading and amending the contract several times over is considered normal.

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