Welcome to the module Select, prepare and administer a construction contract. Selecting and preparing construction contracts require understanding the existing legal system and recognising various requirements essential to creating one.
As you progress through the learning, you will learn to:
- identify and analyse business contracts
- select appropriate contract
- prepare the contract
- administer the contract
- finalise a contract.
In general, a contract is a legally enforceable agreement made between two or more parties. Contracts are entered into either by verbal, written or part verbal and part written agreement.
You enter into a contract (sometimes unconsciously) with every purchase of a product or service you make. Selecting a product and paying for it in return, signing a lease document, being issued a receipt, or clicking an ‘I agree’ button on a web page are among a few instances of agreements that are made every day. Learning to understand the contract you agree to will be crucial in knowing what your rights and obligations are in the said agreement and how you can negotiate and implement contracts that are beneficial to all parties involved.
Contracts abide by legal systems. A legal system describes the existing laws of the land, how these laws are made, and how these laws are enforced in society. Australia’s form of legal system is Common Law. Its major sources of law come from cases and legislation. It regulates construction contracts to ensure that all parties involved perform their obligations and that their rights are protected.
Contracts enforced in building and construction, whether they are for building a house or for smaller renovations, are based on either their costs or the type of project planned. You need to know the types of building and construction contracts to apply them appropriately in your projects, and to know your duties and responsibilities for compliance. After selecting the type of contract, you must map out their requirements and how they will be enforced.
Case study
Building your dream home or even renovating an existing property is a big and costly project that involves working with different tradespersons. A June 2019 CHOICE Consumer Pulse survey of 1176 households found that among those who have undertaken renovations (35%), almost a third (32%) of respondents thought tradespeople made the project more difficult than they thought it would be. Misunderstanding and miscommunication is very common when the client assumes a job will be done in one way but receives a different end-result. There are also disputes around cost and payment that may delay the work or put financial strain either on the client or the tradesperson. Regardless, whether a job is smaller or bigger, a written contract is vital if you are going to build a house, or intend repairing, renovating, or extending your home, regardless of how much you are spending.1
Disputes can arise even when there is a written contract, especially if it is written poorly or it has gaps in it.2
Each type of contract will have to comply with the general legislations that affect construction contracts in Australia as well as the specific requirements in the state/territory where the project is located.
Below are the common general legislations that affect construction contracts in Australia:
| Legislation | Application |
|---|---|
| Fair Work Act | The Fair Work Act is used to ensure contract stipulations comply with:
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| WHS Laws | The WHS Laws are used to ensure contract stipulations comply with:
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| Building and construction | The building and construction legislations are used to ensure contract stipulations comply with:
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| Consumer Laws | Consumer Laws are used to ensure contract stipulations comply with:
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Below are some of the building and construction legislations for various states and territories in Australia that contract stipulations must adhere to:
Compliance with this legislation is compulsory for contracts to prevent any penalties, delays or even legal consequences.
