LEGAL PROTECTING YOUR BUSINESS
Contract Pitfalls CT
HEAD CONTRA
ntial) Cost Plus (Reside
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BA Lawyers receives many inquiries from members that appear to indicate some pitfalls that builder’s regularly fall into. Below is a few of those that keep reoccurring.
at Schedule 2(a). This is not for the subcontractor’s rates. When claiming under a MBA Cost Plus Contract (residential or commercial) you must supply copies of documents that evidence the costs.
For residential work a undertaken on fee or cost plus fixed in. percentage marg
The contract requires you to claim all costs (materials, subcontractor invoices and builder’s employee hours) as GST exclusive, then add the fees (percentage or fixed), then calculate GST on that total.
BC4 Deposits In the BC4 the deposit is not taken into account in calculating the staged claims. The staged claims should add up to 100% of the contract price. The deposit is only taken into account when crediting it to the final stage.
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Variations Variations that are not properly documented is the most consistent issue that cause builders to not get paid. Variations should always be in writing and signed by the owner and the builder. Emails are considered to be signed by the sender so are satisfactory to detail a variation. Phone texts are discouraged, as they are not directly authorised by the contract, but are better than nothing.
Hours for the builders or employees should be kept, say in the form of a schedule or otherwise, have a brief description of the work done, and shouldn’t include time taken for lunch or other breaks.
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Prime Cost and Provisional Sums Lump su m cont ract for new houses , major resident ial renov ations or small multi un it develop ments with no architec t supervi sion.
Properly documented variations ensure the builder is entitled to get paid. If not, the builder risks an owner refusing to acknowledge or pay the variation.
PC and PS allowances are for specific scopes of materials or work/materials. If the cost of that scope is greater than the allowance then contracts will generally allow the builder to claim up to the allowance then the amount above the
Cost Plus In the Cost Plus Residential Contract there is provision for the builder to nominate an agreed rate for himself and other employees
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GC21 - MW21 Training
Make sure you are aware of how contracts treat these items. The BC4 treats them as only the cost of an item for PC’s and of the work and item for PS’s, and is not for any part of the builder’s mark up, which should be in the balance of the contract price.
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MBA NSW | Issue Three | July-September 2020
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