Understanding Payment Obligations
When entering into a cost-plus building contract, it is essential to understand your payment obligations. The Keegan case illustrates that payment obligations can be complex, and the specific terms of your contract will determine your obligations.
In the Keegan case, the contract provided that an appointed architect would administer the contract on behalf of the owner and assess and certify the builder’s payment claims. The owner argued that the architect’s assessment and certification of payment claims were a condition precedent to the owner’s obligation to pay the builder. However, the court held that the language of the special condition did not make the assessment and certification of payment claims by the architect a condition precedent to the builder’s entitlement to payment. As a result, the owner was obliged to pay payment claims independently of whether they had been assessed and certified by the architect.
Lessons for Homeowners
The Keegan case provides several essential lessons for homeowners when entering into cost-plus building contracts:
Understand the terms of your contract
Before signing a cost-plus building contract, it is essential to understand the payment obligations under the contract. The specific terms of your contract will determine your obligations.
Seek legal advice
Construction law is complex, and it is essential to seek legal advice before entering into a building contract. A construction law specialist can review the contract and advise you on your payment obligations.
Ensure clear language is used in your contract
The Keegan case illustrates that for certification by a third party to be construed as a condition precedent to a principal’s obligation to pay a contractor, the building contract must contain clear and express language to that effect. It is essential to ensure that the contract is clear and unambiguous in its language.
Conclusion
The Keegan case provides valuable lessons for homeowners when entering into cost-plus building contracts. It is essential to understand your payment obligations, seek legal advice and should engage a construction lawyer to review the residential building contract and get advice prior to signing their contract., and ensure that the contract is clear and unambiguous in its language. By following these steps, homeowners can minimise the risk of disputes and ensure a successful building or renovation project.
