Discrepancies over variations can cause major legal headaches for a builder.
This is why, no matter how tight the time frame, keeping your building contract agreements up to date is vital to protecting your rights.
It’s also essential to running a successful business.
Compliant contracts and variations will protect your right to get paid on time and for the right amount. Here’s how to make your variations compliant.
Between weather or contractor delays, product limitations and scope alterations, some projects can feel like they are ever changing and time frames forever extending.
Unfortunately it is commonplace for an owner/principal to think that a conversation and a handshake is enough to get on with an alteration, particularly if it is minor.
However being while being personable and developing trust with your client is a great quality in the building business, handshake agreements can be detrimental for a contractor because a payment for a variation is not legally binding if it was not made in writing.
When it comes to best practice in building variations, a sound construction contract is one that allows for variation notices such as ‘if the builder receives instructions, and the builder believes the instruction is a variation, they must provide a variation notice within x number of days.
Furthermore a successful variation notice is one where both parties agree to the changes, in price, scope and complies with the contract requirements.
This protects a builder’s rights as much it does the client, for a builder cannot be forced to
undertake work if they do not consent contractually.
Specific to residential building, it is required by the Home Building Act 1989 (NSW) that variations are agreed to by both parties in writing. It is also important that an agreement to a change variation is in place before commencing the work. Outlined here are the important elements to include in the agreement:
- The work to be performed including the scope and specifications
- Any additional costs
- Any effect the works will have on the construction program such as an increase in labor hours or a delay in commencement due to material sourcing
- Details of the instructions, the legal requirements, plus any other circumstances that are the cause of performing the variations.
The bottom line is we have so many insolvencies in our industry. If you want to be successful in the building business you need to get familiar with the terms and conditions of any contract you sign. Ensure your rights with compliant agreements that have been communicated both verbally and in writing.
Small Builders software is a smart and fast way to ensure your next building project runs compliantly from beginning to end. It’s like having a construction lawyer on your team, making sure you get paid for the right amount and on time (and making sure you are not in breach of contractual obligations).