PRM SEM 01 - 10. The Construction Contract Flashcards
Remember, in construction, a contract generally exists, whether there is an actual
written contract or not.
Whether stated or not, contract terms must comply with construction law.
When a builder quotes on a job and the client/ owner accepts it…
When a builder quotes on a job and the client/ owner accepts it, a contract exists.
Labour Only Contracts
Generally when discussing contracts we mean a full contract with the builder responsible for management of the project, all materials and services, all tradesmen, Code compliance, site security and safety.
Labour only is when the client takes responsibility for all these and the builder provides only skilled labour. In effect the client becomes a contractor and the builder one of many trades (“sub-contractor”). Clients do this in the mistaken belief that they will save money but generally underestimate the time and organisation required, the liability they take on and the diminishment in quality of the job.
Architects should stay away from labour only jobs for these same reasons.
Construction Contracts Available to Designers
Many contracts are available, produced by other professional bodies including
Registered Master Builders Federation (RMBF)
Institute of Professional Engineers of NZ (IPENZ)
Some large building firms refuse to use the NZIA contract because they feel it favours
architects but it has been endorsed by the RMBF.
You can even write your own contract, however this is not recommended.
The websites www.consumer.org.nz and www.buildingguide.co.nz provide information for lay people on contracts. The defunct www.consumerbuild.co.nz website had a good contract checklist (attached).
The most authoritative website is the governments’s Building Performance website http://www.building.govt.nz with information on contracts at http://www.building.govt.nz/projects-and-consents/why-contracts-are-valuable/
When using an unfamiliar contract, the architect should have it reviewed by a lawyer or consultant with expertise in the architectural field.
Standards NZ Construction Contracts (NZS)
Standards New Zealand (SNZ) produce a number of standard contracts for about $80
each (visit www.standards.co.nz and search “contracts”):
NZS 3902: 2004 Housing, Alterations and Small Buildings Contract “provides a form of building contract agreement suitable for owners who are making their own building arrangements for houses, alterations and small buildings. It is intended to be a fair and clearly understood contract that sets out all parties rights and responsibilities.”
NZS 3915: 2005 Conditions of Contract for Building & Civil Engineering Construction (Where No Person is Appointed as Engineer to the Contract) “provides a New Zealand standard contract form in plain English, for incorporation in building and construction contract documents, in situations where the client (Principal) administers the contract directly. Also includes conditions of tender and forms for special conditions, contract agreement and bonds for contractors and principals. Provides a range of disputes resolution procedures. The intent and content of this Standard has been aligned with NZS 3910:2003 and the provisions to the Construction Contracts Act 2002.”
This contract involves no architect or designer administering it, is about 100 pages long,
includes some guidelines and is on desk copy in the library.
NZS 3910: 2013 is similar but involves a designer or engineer administering the contract.
The SNZ and NZIA contracts are fairly similar though some nomenclature varies.
NZ Institute of Architects NZIA) Construction Contracts:
There are several, these are the latest versions and they cost about $50 for reference
only copies. You must be an NZIA member to get copies to use:
NZIA SCC 2018 Standard Conditions of Contract (more on this later) and NZIA SCC SF 2018 Standard Conditions of Contract Short Form
These are for NZIA members only to use. They have been endorsed by the Registered Master Builders Federation (RMBF).
They involve an architect to administer the contract.
They are easy to read and navigate around.
The Short Form is for “smaller and / or less complex projects”.
NBC G 2015 National Building Contract General and
NBC SW 2015 National Building Contract Small Works
These can be used by anyone.
They involve no designer or architect to administer the contract.
The small works one is for alterations or simple, short duration, low value work. It is on desk copy in the library.
What are the NZIA SCC 2014 Standard Conditions of Contract broken down into to?
It is split into two halves: General Conditions and Schedules.
SCC Person Terminology (Principal, Contractor Agent)
The client/ owner (“contractee”) is known as the principal or employer. The builder is the
contractor.
The architect is the principals agent / representative and administers the contract.
SCC The General Conditions are fixed and cannot be changed
.
SCC: General Conditions - Section 1: Main Obligations
Section 1 : Main Obligations.
The contractor’s is “to do the work required by the Contract Documents”.
The principal’s is “to pay”!
The architect’s is to “issue all directions” and “administer the contract impartially” (more
on this in Practice Management when we discuss ethics and the architects code of
practice).
SCC: general Conditions - Section 2: The Documents
These are “the Contract Documents listed in the Contract Agreement” in the Schedule that follows.
2.2 spells out precedence if there is any inconsistency or contradiction between
documents (eg figured dimensions over scaled dimensions). The architect must also be
notified of these issues and give an instruction.
SCC: General Conditions - Section 3: Bond
Only if required by the Specific Conditions.
SCC: General Conditions - Section 4: Contract Administration
Will be by the architect or their representative.
SCC: General Conditions - Section 7: The Site
Ensures free access by parties.
SCC: General Conditions - Section 8: Contract Works
Reiterates that the contractor will “supply all labour, materials, services necessary” and that they can appoint sub-contractors. It also allows the principal to run other contracts concurrently on site (eg landscaping).
SCC: General Conditions - Section 19: Interpretations
Defines words.
Do ALL sections as Cards bro
SCC: General Conditions - Section 5 and 6
Indemnity and Insurance
SCC: Standard Conditions - Section 9
Variations
SCC: Standard Conditions - Section 18
Miscellaneous
SCC: Schedules
These bring together all the documents used by the builder to arrive at the price:
architectural and structural drawings, details, specification, memos and letters that clarify
details, materials, issues etc.
The Sections are customised for each job by striking out those that don’t apply and
writing in names, sums of money and periods of time:
SCC: Schedules - A1: Contract Agreement and Contract Documents
Names the Contract Price, lists the Drawings, Specification and Tender Documents (including the Contractor’s quote etc to be explored in the Procurement lecture).
SCC: Schedules - B1: Specific Conditions of Contract
This lists contact details of consultants, bond and insurance figures, Monetary Allowance and Contingency figures, Practical Completion date and Defects Liability Period, Retentions and Liquidated Damages figures etc (all to be discussed in the next contract administration lectures)
SCC: Schedules - B2: Special Conditions of Contract
This lists anything that modifies the Standard conditions. Usually there isn’t anything.
CRC goes here
SCC: Schedules - C2: Special Conditions of Contract
A list itemising materials and labour, usually prepared by a Quantity Surveyor, is included here (if there is one).
SCC: Schedules - Remember
When using the NZIA contract the architect should stick to the terms and conditions. When issues arise, the architect should seek expert advice from the Institute or a consultant.
