CONSTRUCTION LAW & YOU
Introduction
This is a short article aimed at providing a capsule summary of the key tenets of construction law. It is targeted at home owners or other persons who are involved in a construction project. This article was first published in This Quarterly issue 4/4, 2016.
What is construction law: who is it for?
Construction law is the area of law concerning renovation, building, engineering, and infrastructure projects. Construction lawyers have to deal with multiple issues arising under construction law; contract law; tort law; banking law; insurance law, as well as statutory and regulatory issues. Construction law is relevant as many are involved in and affected by construction projects i.e. property/ project owners; main and sub-contractors; suppliers of building materials; architects; engineers; quantity surveyors – even your neighbours!
Why it is important
Knowledge of the basics will help lay readers and owners to better protect their rights and interests in a construction project. This is important as problems and disputes are common in construction projects –managed poorly, it results in a significant increase in construction cost; losses and damages; and stress for the project owners.
8 Tenets to build by
A Solid Contract is Key
For sale and purchase of property, standard industry clauses readily balance the rights of buyers and sellers. Construction projects are varied, ranging from simple renovation to rebuilding a home and so are contracts for construction projects. For example, a 1-page quotation for redoing your dining room suffices, but a 150-page tome may still be lacking when constructing your dream home. Regardless of the size of the project, construction contracts must clearly detail in writing the scope of work, price, deadlines and most importantly, the parties responsible.
Get legal advice early
Problems arise because most contracts are not reviewed by construction lawyers at an early stage. It will help if proper legal advice is sought early in the project, especially high value project. The cost upfront will save you much heartache later. Bickering over ambiguous responsibilities can drag for years in Court, be costly and draining.
Put everything in writing
A construction contract may be made in writing; orally or a be mixture of both. Oral agreements should be recorded in writing as soon as possible. Oral terms lead to uncertainty and disputes.
SOPA Means Pay First
SOPA is the industry acronym for the Building and Construction Security of Payment Act (2004). It applies to most construction contracts and facilitates cash flow to contractors. For example, if you are entitled to claim damages from a contractor but fail to do this in a timely and proper manner, you may be ordered to pay the contractor first, pursue your claim later, or risk not getting repaid at all. Contractors may enforce their SOPA rights through the adjudication process.
Keep Track of Changes
Contractors are entitled to claim for more payment and for more time when you make changes to the works. Quarrels usually arise over additional payment and the price of additional works. Your contract should include that only written instructions on changes will be recognised, and the price must be agreed before starting works.
There are Two Sides To Delays
When the contractor cannot finish by the completion date; owners may seek compensation for delay. This is usually a fixed rate of damages called liquidated damages. However, your claim for liquidated damages may be defeated if the delay or part of the delay is not of the contractor’s doing as the contractor would be is entitled to extra time. To preserve your entitlement to liquidated damages, it is necessary to have clauses specifying conditions under which the contractor is allowed extra time rather than omitting them in an attempt to discourage any delays.
Completion Is Not the End
Most construction contracts provide for a defects liability period (“DLP”). The DLP starts when the property is handed over and expires 12 to 18 months later. During the DLP, you should record and notify the contractor of any defects and the contractor can carry out repairs at its own cost. However, the contractor remains responsible for latent (hidden) defects appearing after DLP. Design defects are the responsibility of architects and engineers.
Use Alternative Dispute Resolution (ADR)
Litigating disputes in Court or Arbitration is taxing, costly and time consuming. It’s best to try to resolve disputes amicably with mediation or neutral evaluation. An independent mediator helps to negotiate a settlement while a neutral evaluator provides an unbiased opinion of the merits of your case.
Tan Joo Seng
This is a short article aimed at providing a capsule summary of the key tenets of construction law. It is targeted at home owners or other persons who are involved in a construction project. This article was first published in This Quarterly issue 4/4, 2016.
What is construction law: who is it for?
Construction law is the area of law concerning renovation, building, engineering, and infrastructure projects. Construction lawyers have to deal with multiple issues arising under construction law; contract law; tort law; banking law; insurance law, as well as statutory and regulatory issues. Construction law is relevant as many are involved in and affected by construction projects i.e. property/ project owners; main and sub-contractors; suppliers of building materials; architects; engineers; quantity surveyors – even your neighbours!
Why it is important
Knowledge of the basics will help lay readers and owners to better protect their rights and interests in a construction project. This is important as problems and disputes are common in construction projects –managed poorly, it results in a significant increase in construction cost; losses and damages; and stress for the project owners.
8 Tenets to build by
A Solid Contract is Key
For sale and purchase of property, standard industry clauses readily balance the rights of buyers and sellers. Construction projects are varied, ranging from simple renovation to rebuilding a home and so are contracts for construction projects. For example, a 1-page quotation for redoing your dining room suffices, but a 150-page tome may still be lacking when constructing your dream home. Regardless of the size of the project, construction contracts must clearly detail in writing the scope of work, price, deadlines and most importantly, the parties responsible.
Get legal advice early
Problems arise because most contracts are not reviewed by construction lawyers at an early stage. It will help if proper legal advice is sought early in the project, especially high value project. The cost upfront will save you much heartache later. Bickering over ambiguous responsibilities can drag for years in Court, be costly and draining.
Put everything in writing
A construction contract may be made in writing; orally or a be mixture of both. Oral agreements should be recorded in writing as soon as possible. Oral terms lead to uncertainty and disputes.
SOPA Means Pay First
SOPA is the industry acronym for the Building and Construction Security of Payment Act (2004). It applies to most construction contracts and facilitates cash flow to contractors. For example, if you are entitled to claim damages from a contractor but fail to do this in a timely and proper manner, you may be ordered to pay the contractor first, pursue your claim later, or risk not getting repaid at all. Contractors may enforce their SOPA rights through the adjudication process.
Keep Track of Changes
Contractors are entitled to claim for more payment and for more time when you make changes to the works. Quarrels usually arise over additional payment and the price of additional works. Your contract should include that only written instructions on changes will be recognised, and the price must be agreed before starting works.
There are Two Sides To Delays
When the contractor cannot finish by the completion date; owners may seek compensation for delay. This is usually a fixed rate of damages called liquidated damages. However, your claim for liquidated damages may be defeated if the delay or part of the delay is not of the contractor’s doing as the contractor would be is entitled to extra time. To preserve your entitlement to liquidated damages, it is necessary to have clauses specifying conditions under which the contractor is allowed extra time rather than omitting them in an attempt to discourage any delays.
Completion Is Not the End
Most construction contracts provide for a defects liability period (“DLP”). The DLP starts when the property is handed over and expires 12 to 18 months later. During the DLP, you should record and notify the contractor of any defects and the contractor can carry out repairs at its own cost. However, the contractor remains responsible for latent (hidden) defects appearing after DLP. Design defects are the responsibility of architects and engineers.
Use Alternative Dispute Resolution (ADR)
Litigating disputes in Court or Arbitration is taxing, costly and time consuming. It’s best to try to resolve disputes amicably with mediation or neutral evaluation. An independent mediator helps to negotiate a settlement while a neutral evaluator provides an unbiased opinion of the merits of your case.
Tan Joo Seng