The Law Handbook 2024

Chapter 6.3: Building or renovating a house 569 Variations Two major issues in any building contract are contract price variation and completion date extensions. Variation to contract price Variations to the contract pricemay arise at the request of either the consumer or the builder. Changing your mind about the works after the contract has been signed can be costly. Should a builder request to vary the plans or specifications, the builder must give the consumer written notice of the variation, state why the variation is necessary and state the time it will take to complete the works. The builder must also provide a cost of the variation and state the effect it will have on the contract price. Unless a building surveyor requires a variation, a builder cannot carry out any variation without the signed written consent of the consumer. The DBC Act and most building contracts limit the circumstances in which a builder can request additional money for variations. Consumers should familiarise themselves with the relevant contract provisions before agreeing to pay any additional money. Under the DBC Act (s 37), a builder is not entitled to recover any money in respect of a variation unless the builder can establish that the variation is both necessary and could not have been reasonably foreseen at the time the contract was entered into. If a consumer wishes to vary the works, they must provide a written notice to the builder requesting a variation. If the variation is of a minor nature (i.e. it will not add more than two per cent to the contract sum), the builder may carry out the variation without following the procedure set out below. However, be careful, as in large projects two per cent may amount to significant additional expenditure. In all other circumstances, the builder must give the consumer a notice stating: • whether the variation will require a variation to the building permit; • whether the variation will result in any delays; • an estimate of the delays; and • an estimate of the cost of the variation and its effect on the contract price. A builder cannot proceed with a variation requested by the consumer unless the consumer signs and returns the variation notice to the builder. Delays and extensions of time Major domestic building contracts must specify a date when the work will be finished, or the number of days that will be required to finish the work. Most contracts allow builders to claim an extension to the finish date when their work is delayed. A lazy or disorganised builder who has fallen behind schedule may deliver a number of requests to extend the finish date towards the end of the project. Consumers should carefully read the provisions in their contract dealing with delays and extensions of time. Normally building contracts only permit extensions of time in certain circumstances that are beyond the builder’s control; for example, inclement weather, certain industrial disputes, delays by the consumer, and variations to the plans requested by the consumer. Consumers should carefully scrutinise a builder’s claims for extensions of time to ensure they are allowed by the contract. The DBC Act (s 32) requires a builder to make allowances in the contract for inclement weather, public holidays, weekends, rostered days off and any other delays. These allowances must be exhausted by the builder before the builder is entitled to extend the completion date under the contract. Each day on site involves the builder in some costs, for example, the hire of equipment and labour. As such, delays caused by the consumer normally attract a claim for additional money. So, a consumer should be careful to avoid delaying the builder’s work. Consumers are advised to keep a written record of the daily progress of the project. Note who is on site, what work is undertaken and the weather conditions; also take regular photos of the state of the work. Always monitor the finish date, as adjusted from time to time. Liquidated damages Liquidated damages are a pre-estimate of the daily or weekly costs to the consumer of any delays. These costs are normally calculated with reference to rental and finance costs. A builder is liable to pay liquidated damages if they are late in completing the work and such costs are normally deducted from the progress payments that are payable to the builder. You should ensure that the contract allowance for liquidated damages is sufficient to cover all costs you will incur if the project is delayed. Talk regularly with the builder about the progress of the works and discuss any concerns you have as soon as they arise.