Variation Clause
The variation clause is a common amendment that allows the builder to make changes to the contract during the construction process. This clause can have significant implications for the homeowner, including potential delays and additional costs.
Change Management Process
To manage variations, it’s essential to have a clear change management process that outlines the procedures for making changes to the contract, including how changes are proposed, assessed, and approved. The following steps should be considered:
- Define the process for requesting and reviewing variations to the contract.
- Determine who has the authority to approve variations and the criteria they will use to make decisions.
- Establish a system for tracking and documenting variations, including the scope of work, costs, and timelines.
- Ensure that all variations are signed off by the homeowner and the builder to avoid disputes or misunderstandings.
Cost Implications
The variation clause should specify how changes will affect the contract price, including how variations will be valued, approved, and documented. Homeowners should be aware that changes to the contract can lead to additional costs, so it’s important to negotiate and agree on a fair price before approving any variations. Some key considerations include:
- Determine how variations will be priced, such as fixed price, cost plus, or percentage-based.
- Clarify what costs are included in the variation, such as labour, materials, and overheads.
- Establish a process for managing changes to the project schedule, including the impact on critical path items and the overall completion date.
By carefully managing the variation clause, homeowners can minimise the risks associated with changes to the contract and ensure that their interests are protected throughout the construction process.
Extension of Time
A variation to the construction contract that frequently appears is the “extension of time” clause. This clause allows the builder additional time to complete the project. It is essential to note that this clause may delay the completion date, leading to additional expenses for the homeowner.
Liquidated Damages
If the builder fails to complete the project within the stipulated period, the extension of time clause should indicate whether the homeowner is eligible for liquidated damages. Liquidated damages are pre-determined compensation that the homeowner is entitled to if the builder does not complete the project by the agreed-upon completion date. The compensation covers costs incurred by the homeowner as a result of the delay.
Relevant Events
The extension of time clause should also specify the relevant events that allow the builder to request an extension of time. These events may include delays caused by the homeowner, unforeseen circumstances, or force majeure events. It is essential to clarify what constitutes an unforeseen circumstance or force majeure event, as this may vary depending on the contract and jurisdiction.
It is vital to understand the implications of the “extension of time” clause before signing the construction contract. Homeowners should ensure that they fully understand the circumstances that may warrant an extension of time and the compensation they are entitled to if the builder fails to complete the project within the stipulated time.
Payment Clause
The payment clause is a crucial amendment in a construction contract that outlines the payment terms and conditions for the project. As a homeowner, it’s essential to pay close attention to this clause to avoid any disputes over payment and financial hardship.
Payment Schedule
The payment schedule is a critical aspect of the payment clause that outlines the amount, timing, and conditions for each payment. It’s essential to ensure that the payment schedule aligns with the project’s progress and that the homeowner has sufficient funds to make payments when they are due.
Retention Amount
The retention amount is the percentage of each payment that the homeowner can retain until the completion of the project. This amount is usually held back as security against any defects or issues that may arise after completion. It’s important to ensure that the retention amount is fair and reasonable and that it’s released promptly after the project’s completion.
The payment clause is a critical amendment that should be carefully considered, ensuring that it protects the homeowner’s interests while also providing fair compensation for the builder. A clear payment schedule and reasonable retention amount are essential components of this clause that can help to avoid disputes and ensure a successful project outcome.
Dispute Resolution Clause
Mediation
Jurisdiction and Governing Law
Key Considerations for Homeowners in Amending Construction Contracts
In conclusion, common contract amendments, such as the variation clause, extension of time, payment clause, and dispute resolution clause, can have significant implications for homeowners in construction projects. It is essential to carefully review and understand these amendments before signing any contract. As a construction lawyer in NSW, I highly recommend seeking legal advice to ensure that your rights and interests are protected throughout the construction process.
To help you navigate the construction process, we have created a “Request and Compare Builder Quotes Checklist.” This checklist will guide you through the process of requesting and comparing quotes from builders to ensure that you get the best deal possible. Contact us to learn more about how we can assist you with your construction project needs.
