Risks and Corresponding Building Contract Clauses to Manage Them

Here is a table outlining the risks experienced by the homeowner in the case, along with the contract clauses that could manage or mitigate those risks:

It is important to note that these suggested clauses are not exhaustive and that homeowners should seek legal advice to ensure that their building contract adequately manages and mitigates risks specific to their individual project.

Related content: Homeowners Guide: Risk Management Clauses for Home Building Contracts

Sample Building Contract Clauses for Managing Risks in NSW Home Building Contracts

Here are some sample clauses that a homeowner in NSW could consider including in their home building contract to manage the identified risks and allow for termination if the clauses are not followed:

  1. Timeframe Clause: The builder shall complete the construction of the dwelling within the agreed-upon timeframe set forth in the contract. The homeowner may terminate the contract if the builder fails to complete the project within this timeframe.
  2. Quality Clause: The builder shall perform all work in a good and workmanlike manner and in accordance with all applicable building codes, regulations, and standards. The homeowner may terminate the contract if the work performed is not of a satisfactory quality or fails to meet the relevant codes, regulations, and standards.
  3. Payment Clause: The homeowner shall make payments to the builder in accordance with the payment schedule set forth in the contract. The builder may terminate the contract if the homeowner fails to make timely payments.
  4. Variation Clause: The builder shall not vary the plans, specifications, or materials without the written consent of the homeowner. The homeowner may terminate the contract if the builder fails to obtain the homeowner’s written consent before making any variations.
  5. Defects Clause: The builder shall rectify any defects identified in the dwelling during the warranty period set forth in the contract. The homeowner may terminate the contract if the builder fails to rectify any defects within a reasonable time frame or if the builder is unable or unwilling to rectify the defects.
  6. Termination Clause: Either party may terminate this contract if the other party breaches any of its obligations under this contract and fails to remedy the breach within a reasonable time frame.

It is important to note that these clauses are not an exhaustive list and should be tailored to the specific needs and risks of the homeowner and the construction project. 

Additionally, it is recommended that homeowners seek legal advice when drafting or reviewing their home building contracts to ensure that they adequately manage risks and protect their interests.

Related content: Builders: What Are the Most Important Clauses in Construction Contracts?

Final Thoughts

Homeowners in NSW face significant risks when entering into building contracts. However, by identifying and managing these risks through carefully drafted contract clauses, homeowners can better protect themselves and their investments. The case of Martignago v Visual Building Construction Pty Ltd [2022] NSWCATCD 219 illustrates the importance of understanding and addressing these risks at the outset of a building project.

If you are a homeowner in NSW considering a building project, it is crucial that you seek the assistance of a specialist construction lawyer to review and advise on your contract. 

With the right legal guidance, you can be confident that your interests are protected and that your building project will proceed smoothly.