The Builder’s Obligations: some common contract queries in WA

When you enter into a building contract with a client the contract documents provide a record of the agreement you have made by setting out the rights and obligations of each of the parties.

In order to avoid breaching the contract it is important for you to both understand your obligations.  Broadly speaking, a builder’s obligations under a home building contract are to deliver the works in accordance with the contract documents, for the price and in the time frame stipulated.  Builders also have statutory obligations to home owners and these are reflected in the HIA suite of contracts.

HIA often receives queries from builders wishing to clarify their rights and obligations.  With reference to the HIA HBCA Lump Sum Building Contract (the Contract) some common themes are discussed below.

Before you sign

Before entering into the Contract you should ensure that what you are promising to do is within your means.  This includes ensuring you have sufficient capacity under your home indemnity insurance (HII) policy to obtain HII insurance for the works.  You should also ensure that you have allowed sufficient time to commence and complete the works.

You are required to give the Owner a copy of the Notice to the Home Owner prior to signing.  Following execution you must give the Owner a copy of the signed Contract, including all of the Contract documents, such as drawings and specifications.

When does the Contract become binding?

There is no statutory cooling off period for building contracts in WA.  Once the Contract is signed it becomes binding on the parties.  The Contract is binding regardless of whether you have accepted a deposit or whether finance has been approved.

In the event that the Owner is unable to obtain finance within the agreed timeframe or otherwise provide you with proof of its capacity to pay for the work, you have the option to terminate the Contract.  Termination is also an option if the Owner does not pay the deposit, or other progress payments, when they fall due.

The Home Indemnity Insurance certificate

There is no set timeframe for providing the HII certificate, however you must provide the Owner with a copy of the HII certificate prior to commencing any works under the Contract or requesting any payments, including payment of the deposit.  This could happen shortly after Contract signing or much later, depending on the progress of the works at Contract signing and the time frames agreed by the parties.

Provisional Sums and Prime Cost Items

The law in WA states that provisional sums and prime cost items in residential building contracts must not be understated. This means you must strike a careful balance between allowing sufficient funds to carry out the work and submitting a competitive price.  HIA has a detailed information sheet on provisional sums and prime cost items that can offer further clarification.

Time for completion

Where a delay has arisen it is important that you request an extension of time.  The circumstances under which an extension of time will be permitted are listed in the Contract.  If you do not request an extension of time, or the claim is not made in accordance with the Contract, and you do not complete the work on time, you could be liable to the Owner for damages. Damages can include additional costs incurred by the Owner as a result of late completion, such as additional rent and storage fees.

Termination

There are certain circumstances under which you can terminate the agreement and these are listed in the Contract. Termination must be carried out carefully and is usually used a last resort.  When terminating it is important that the correct reasoning and procedures are followed to ensure your attempts to terminate don’t result in wrongful termination (breach of the Contract).

If you require assistance with contract interpretation or are unsure of the next steps to take, the HIA Workplace Services team can help.

To find out more, contact HIA's Workplace Services team

Email us

More articles on: