(Written by Mullins Lawyers Partner, Mark Madsen)
We have previously touched on some of the matters to consider pre-contract when looking to undertake a build or renovations of a venue. Moving forward, we highlight some of the key provisions of the construction contract which should be explored.
No contract is perfect in that it cannot predict and cover every scenario but a review by an experienced legal advisor before finalising and entering into the contract can potentially save much trouble during the course of the project.
A common issue in construction disputes is whether an item of work is part of the contract scope and, therefore, contained within the original price or whether it amounts to a variation. Following on from ensuring that the original design and specifications are as accurate and as comprehensive as practicable, the process for any variations to be claimed and assessed should be clearly set out.
The programme and period for the works must be clear and allowances for probable intervening events (such as inclement weather) considered. Major renovations will have a significant impact on the venue’s business, and there will be an obvious desire to minimise the period of disruption. Further, the programme of works will affect ancillary decisions, such as the timing for tendering for additional gaming authorities.
Hand-in-hand with this is the liquidated damages provision; in particular, the reasonable, periodic amount to be applied for any delay in completion of the works. That can become crucial to the commercial outcome of any build. Consider the potential losses to be suffered in terms of holding costs and loss of trade if the project drags on.
The contract should provide for a practical and expeditious dispute resolution process and what types of disputes (if any) are grounds for the works to be suspended or whether the balance of the contract must continue to be performed. A level of objectivity and commonsense by all involved can go a long way to minimising disagreements.
It is well known that the construction industry across Australia is facing challenges and builders are ‘going under’ on a daily basis. Thought needs to be given to what security should be sought from the contractor, whether in terms of retention monies, bank guarantees and/or personal guarantees to provide some protection against the prospect of the contractor not being able to complete the works and those potential losses.
Equally important, the security provisions in the contract must make clear whether the owner can call upon the security during the course of the works and the threshold for doing so; otherwise, the owner’s recourse may need to wait until the final claim at the end of the contract which could be several months away.
The termination provisions within any contract are crucial and should be considered by a legal advisor. The ability to take certain works or all of the works out of the hands of a builder who has not performed or even to terminate the contract can be crucial to avoiding a negative outcome for the build.
Finally, some contracts will seek to limit liability on the part of the contractor. For obvious reasons, this should be avoided.
Should you have any queries or require any further information about this topic, please contact me on (07) 3224 0241