Building Disputes
Orchiston Architects Ltd  An architecture firm with specific expertise in building disputes

“Basic Building Contract” Terms

Even if these contract terms are not used, they are "generic" and may help clients/owners understand what they are entitled to from the contractor, and the information required for the contractor to enter into contract.

RETURN TO MANDATORY CONTRACTS

The “Implied Terms” set out in Schedule 3 of the Building (Residential Consumer Rights and Remedies) Regulations 2014 are the minimum contract terms in law for NZ residential building contracts. For most projects, and for the reasons described in the Building Disputes website, they are unlikely to be acceptable as contract terms without some additions. Those additions and changes are suggested below (deletions and additions shown in italics) for a "Basic Building Contract" for domestic-scale projects. They are based on the author's experience over many years in the review of building contract terms, including those used by Standards NZ and by the NZIA, but they are not necessarily directly applicable: the particular circumstances of a project must be considered.

You are welcome to copy/alter/use these terms free of copyright and entirely at your own risk, and if you do so, it is on the conditions that:

  • You, and any parties associated with or affected by the use of the terms, shall not have any recourse to nor make any claim against Orchiston Architects Ltd or the author on any basis.
  • If a dispute arises out of a building project, due and favourable consideration is given to the engagement of Orchiston Architects Ltd to advise upon or resolve the dispute in whatever capacity is appropriate. 


 

1)    Building consents

 1.1.         The building contractor Unless otherwise specifically described in the Schedule of Contract Documents, the client undertakes to obtain all necessary approvals, including building consents, and to provide them to the contractor before commencing the building work.

1.2.         If any approval or consent is issued subject to conditions which are in addition to the building consent, the building contractor client must, as soon as practicable, advise the client contractor by notice of those conditions.

1.3.         If any approval or consent is issued subject to any conditions that will require a variation to the building work, the building contractor must advise the client, by notice, no later than 10 working days as soon as practicable after the date the consent is issued, of -

a)    the building work that will be required to achieve the variation; and

b)    the effect (ie, the increase or decrease), if any, on the quoted or estimated price for the building work; and

c)     the effect, if any, on the due date or the estimated due date for completion of the building work.

1.4.         If the terms of the variation are not agreed within 10 working days of notice being given under clause 1.3, either party may, by notice, cancel the contract.

1.5.         Notices under this clause must be in writing, despite anything to the contrary in the contract.

2)    Code compliance certificates

2.1     The building contractor undertakes to provide the documentation within its control required to obtain all code compliance certificates for work done by the building contractor.

2.2     The building contractor must provide that documentation the code compliance certificates to the client before the building contractor submits its final payment claim under the contract.

3)    Variations

3.1     The client may ask the building contractor to carry out variations to the building work.

3.2     If a variation requested by the client will affect either—

a)    the quoted or estimated price for the building work; or

b)    the due date or the estimated due date for completion of the building work,—

the building contractor must, within 10 working days after receiving the client's variation, advise the client by notice of the matters set out in clause 3.3.

3.3     If clause 3.2 applies, the building contractor must advise the client by notice of—

a)    the building work that will be required to achieve the variation; and

b)    any additional approvals or consents that will be needed; and

c)     the effect, if any, on any existing approvals or consents for the building work; and

d)    the effect (ie, the increase or decrease), if any, on the building contractor's quoted or estimated price for the building work; and

e)    the effect, if any, on the due date or the estimated due date for completion of the building work.

3.4     The client may agree to the variation either by notice or by countersigning the notice provided under clause 3.2.

3.5     Where the building contractor considers that a variation to the building work arises from site conditions (including weather or force majeure events), ambiguity/uncertainty in the contract documents, or from the instructions from the BCA or persons authorised under the contract to issue instructions to the contractor, or because urgent action is required, then the building contractor shall, within a reasonable time, provide the client with the information required under clause 3.3.

3.6     If clause 3.5 applies, the building contractor may proceed with the work in the absence of notice or the client’s agreement.

4)    Payments

4.1     The building contractor is entitled to progress payments in accordance with this clause.

4.2     The amount of a progress payment must be calculated by reference to—

a)    the relevant period; and

b)    the value of the construction work carried out, or to be carried out, during that period; and

c)     any other relevant provisions of the contract.

4.3     For the purpose of clause 4.2,—

a)    the relevant period is—

(i)     the period beginning on the day of the month on which construction work was first carried out under the contract and ending on the last day of that month (ie, the first period); and

(ii)    each subsequent month:

b)    the value of construction work must be calculated with reference to—

(i)     either—

(A)    the contract price for the work and any other rates or prices set out in the contract; or

(B)    if the contract does not expressly provide for the matters referred in subsubparagraph (A), the reasonable value of the work; and

(ii)    any variation to the construction work authorised under the contract; and

(iii)    if any work is defective, the estimated cost of rectifying the defect.

4.4     Progress payments are payable 20 working days after a written demand for payment (made in accordance with the contract) is received or deemed to be received.

4.5     The building contractor is entitled to submit payment claims in accordance with Part 2 of the Construction Contracts Act 2002.

5)    Subcontractors

5.1     The building contractor may engage a subcontractor or subcontractors to undertake any part or parts of the buildingwork.  However, the building contractor may not subcontract the whole or substantially the whole of the buildingwork.

5.2     If the building contractor elects to subcontract any part or parts of the building work, the building contractor remains responsible and liable to the client for—

a)    any building work undertaken by the subcontractor or subcontractors; and

b)    the quality and performance of any materials supplied by the subcontractor or subcontractors.

6)    Dispute resolution

6.1     If the building contractor or the client considers that a matter in relation to the contract or arising out of cancellation of the contract  is in dispute, that party must serve notice on the other party advising the other party of the nature of the dispute.

6.2     Both parties must use their best efforts to resolve any dispute through good faith negotiations.

6.3     If a dispute cannot be resolved within 10 working days of notice being given under clause 6.1, either party may serve written notice on the other referring the dispute to mediation.

6.4     The mediator must be agreed between the parties.  However, if the parties cannot agree on a mediator within 5 working days of the matter being referred to mediation, a mediator must be appointed by the President of the Arbitrators and Mediators Institute of New Zealand.

6.5     Each party must pay its own costs associated with the mediation.

6.6     Despite the dispute, each party must continue to perform its obligations under the contract as far as practicable given the nature of the dispute.

6.7     Nothing in clauses 6.1 to 6.6 shall affect the rights obligations and processes of the Construction Contracts Act.

7)    Notices

7.1     All notices under this contract must be in writing and either delivered by hand or sent by fax, email, or post to a contact address that has been provided by the relevant party.

7.2     A notice is deemed to be received,—

a)    if it is personally delivered, when delivered; or

b)    if it is posted, 3 working days after posting; or

c)     if it is sent by fax, on production of a transmission report (by the machine from which the fax was sent) that indicates that the fax was sent in its entirety; or

d)    if it is sent by email, when the email leaves the communications system of the sender, provided that the sender—

(i)     does not receive any error message relating to the sending of the email; and

(ii)    receives confirmation that the email was delivered (which confirmation may include an automated delivery receipt from the communications system of the recipient).

7.3     Despite clause 7.2, any notice received after 5 pm, or received on a day that is not a working day, is deemed not to have been received until 9 am on the next working day.

8)    Documentation and Interpretation

8.1. Before signing a contract, the building contractor and the client shall agree on the content of the Schedule of Contract Documents below and provide the information required and available at that time.

8.2.  Within 12 months of completion of the building work, the client shall provide to the building contractor a list of items (if any) which in the client's opinion require further action by the building contractor.  The building contractor shall attend to those items as soon as practicable thereafter.

8.3. The building contractor is the entity described in the disclosure statement.

8.4. The client is the entity described in the Schedule of Contract Documents

8.5. The building work and the scope of the work under the contract is described by the Schedule of Contract Documents and the documents referred to in the Schedule of Contract Documents

8.6. Completion of the building work is when it is ready for normal use or occupation, despite minor outstanding work defects and blemishes.

8.7. Completion of the contract is when all the obligations of the contract have been met by both the building contractor and the client.

9)    Schedule of contract documents

Documentation to be provided by the contractor to the client ahead of the contract:

  1. The prescribed checklist [HERE] informing the client about the building process 
  2. The building contractor’s infilled disclosure statement [HERE]  as prescribed
  3. The building contractor’s quote or estimate  

 Documentation to be provided by the client to the contractor ahead of the contract:         

  1. Name of client (full legal name).
  2. Client contact details including postal address, telephone numbers, email address.
  3. Type of entity: individual/partnership/limited liability company/trust/other
  4. Names and contact details for person(s) (being the client or as appointed by them) who will be responsible for issuing instructions which may affect time, cost, quality, or scope, and who are available to the building contractor to discuss any aspect of the building project. 
  5. Owner’s acceptance of the building contractor’s quote or estimate.
  6. Names and contact details for person(s) authorising payments in relation to the building work.
  7. A declaration (and if necessary proof) that the funds are available to meet the costs of the building work and that there is adequate security for them.
  8. A description of any payment procedures which may affect cashflow to the building contractor, such as approval processes involving lawyer/bank/project manager/architect/designer
  9. Details of insurance policies held for existing buildings, and in relation to the proposed building works or items which may be relevant to the building works

 Other documentation to be provided ahead of the contract by Client or Contractor as agreed  

  1. Description and location of the site; legal description, survey or boundaries and topography, recent certificate of title if and as required for building consent. 
  2. The drawings, specifications and supporting information included in the approved building consent (if any), and any conditions attached to it.
  3. Other (if any) drawings, specifications and supporting information as separately listed and agreed by the building contractor and the client.
  4. Other documents (if any) describing the scope of work, costs, timeframes, and project circumstances which are relevant to the performance of the contract, as separately listed and agreed by the building contractor and the client (including but not limited to: agreed changes which may affect time cost or quality;  who is to apply for and pay for approvals and consents; the extent of work to be undertaken by the client or by subcontractors or suppliers directly controlled by the client; the extent of materials or equipment or services to be provided by the client; site access; occupation; methods of payment) 

Documentation to be provided by the contractor to the client at completion of the contractor's work:

  1. Completion documentation (if any, and as separately listed and agreed by the building contractor and the client), as required to complete the disclosure statement 
  2. Other information and documentation required for signoff on building code compliance for the building work done by the building contractor 
  3. Records of Work required to be provided by LBPs for Restricted Work done by them.
  4. Information about the processes and materials that must be used to maintain elements of the building work if maintenance is required to meet the durability requirements of the building code; or the validity of any applicable guarantee or warranty could be affected by how and whether maintenance is carried out.
  5. A copy of any guarantees or warranties that apply to materials or services that comprise the building work, including information about whether the guarantees or warranties are transferable;  how to make claims under the guarantees or warranties;  whether the guarantees or warranties need to be signed and returned to the issuers in order to be valid.