2023 has been tough for the building and construction industry. From subcontractor labour shortages, huge cost increases and long delivery times, there have been many challenges.
The industry is hard enough without having to deal with big legal issues, so as the weather heats up and we get tired heading into Christmas, make sure you don’t get tripped up.
We have been hearing a lot of common concerns from builders and construction companies recently, so we’ve listed some of those below, and some ideas about how you and your company can protect yourself.
Question 1 – We’re closing for a few weeks for Christmas, what happens with our invoices?
Response – Building contracts require payment within a specified number of days or business days (e.g. 5 business days). The building and construction industry has a Christmas shutdown period, but did you know that under the QLD building legislation and in most contracts, the days between 22 December and 10 January are not considered ‘business days’? So that means if you issue an invoice on 20 December 2023 and payment is due within 5 business days, your invoice is not payable until 16 January 2024?! This can affect payments and your business’s cash flow, so be careful to check what your contract says. If you have any queries, we can provide you with practical advice.
Question 2 – Building contracts are usually ‘fixed price’, but the prices of materials, trades, and subcontractors have gone up significantly, which we have to absorb, which affects our bottom line. Can we insert a condition into our contracts where we can pass on price rises if they are too significant to cover?
Response – we can help you draft your contract to cover those issues, but the standard ‘Master Builders’ and ‘HIA’ contracts do have some ways to allow you to adjust your price to cover cost increases. For example, in some situations, provided you properly draft your contract and give written notices, some items of work (materials, labour) can be classed as ‘Provisional Sums’ and some price rises passed on to owners. Care must be taken to ensure your contract is drafted properly and you comply with the terms.
Question 3 – Our build program is being stuffed around by availability or delays with materials, trades and subcontractors, and it can change daily, pushing back Practical Completion. Can our contract let us adjust the Date for PC if there are delays that aren’t our fault so that we can avoid liquidated damages?
Response – again, we can help draft your contracts to minimise these sticky situations, including clauses tailored to your needs, and ‘covering notes’ to owners explaining the current industry situation. The standard Master Builders and HIA contracts already have some ways to help you deal with delays outside your control, including claims for EOTs, however, you can be tripped up and miss out if the contract isn’t well drafted or you don’t properly claim. We can help you understand this process, including helpful tricks and mechanisms in your contract, and give you some tips and advice on how to manage delays.
If you have concerns or queries about your building and construction contract, any outstanding claims or payments, or generally in relation to your contracts or your business contact Sean Webb in our experienced building and construction law team.