A construction contract is a contract that involves – you guessed it – construction work.
The contract can be written or oral, and relate to work that is commercial or residential.
Arranging for construction work to be done generally involves a property owner instructing a builder to do some work on their property; the builder would then instruct trades people as contractors to carry out certain jobs. In the past, this type of arrangement meant that the trades people were last in line in terms of getting paid. On some jobs the builder would not get paid until all of the construction work was completed.
That means a trades person who did work at the start of a construction job would have to wait until all the other trades people had finished their jobs before he would get paid.
The Construction Contracts Act gives the trades people the ability to serve a notice, called a Payment Claim, on the builder. The Payment Claim requires the builder to pay the trades person’s invoices. The builder has a certain time frame to respond if it does not agree with the Payment Claim. If the builder does not respond and does not pay, the amount in the Payment Claim is “crystallised” and becomes a formal debt that the trades person can rely on to sue the builder. If a personal guarantee is given, then the debt crystallised by the Payment Claim can be enforced against the guarantor as well. This process saves the trades person from having to make a claim in the court for an order confirming the debt is owed, before commencing debt collection proceedings.
The builder has the right to serve a Payment Claim on the property owner to get paid. The same process, as outlined above, must be followed.
The Payment Claim process must comply with the Constructions Contract Act. Please contact one of our construction law or dispute resolution specialists before embarking on this process.