Contracts for Building Work
Sections 362A-362Z, 393-399, Building Act 2004, Construction Contracts Act 2002
There are different forms of contract from the simplest steps of: “offer, acceptance, & consideration”, through to more formalised types of contract that are typically used for commercial, such as NZS 3910 - Conditions of contract for building and civil engineering construction.
Even when using a contract template, it is still useful to get legal advice on the terms and conditions of the contract before signing.
Bear in mind that once an agreement is signed it is legally binding. This means that not meeting the terms of the contract or trying to break the contract will result in legal action.
Even when using a contract template, it is still useful to get legal advice on the terms and conditions of the contract before signing.
Bear in mind that once an agreement is signed it is legally binding. This means that not meeting the terms of the contract or trying to break the contract will result in legal action.
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The parties to a contract on a large project normally are:
On a smaller project a contract may be direct between the contractor and installer.
The options could be:
In a full contract, the head contractor has full responsibility for delivering the work, hiring subcontractors and purchasing the materials and services. This contract lets the head contractor manage the entire project but also means they carry more risk.
A labour-only contract means the head contractor provides the skilled work but no materials or oversight of the project.
A managed labour-only contract means the head contractor manages the site but isn’t responsible for buying all the materials or hiring the subcontractors involved – this would generally be done by the owner.
The residential home owner contracts are slightly different to commercial contracts in that it is direct between the contractor and the home-owner. Contracts are required for any residential building work that costs $30,000 or more (including GST). This also includes the following pre-contract information, which must be signed by all relevant parties:
See also the Building Networks Knowledge Base article on Dispute Resolution for more on that topic.
- The client buying the service
- Someone overseeing the project on the client’s behalf (typically engineer, quantity surveyor and project manager)
- The head contractor (typically the builder)
- The subcontractor (the specialist trade)
On a smaller project a contract may be direct between the contractor and installer.
The options could be:
- Full contract
- Labour-only contract
- Managed labour-only contract
In a full contract, the head contractor has full responsibility for delivering the work, hiring subcontractors and purchasing the materials and services. This contract lets the head contractor manage the entire project but also means they carry more risk.
A labour-only contract means the head contractor provides the skilled work but no materials or oversight of the project.
A managed labour-only contract means the head contractor manages the site but isn’t responsible for buying all the materials or hiring the subcontractors involved – this would generally be done by the owner.
The residential home owner contracts are slightly different to commercial contracts in that it is direct between the contractor and the home-owner. Contracts are required for any residential building work that costs $30,000 or more (including GST). This also includes the following pre-contract information, which must be signed by all relevant parties:
See also the Building Networks Knowledge Base article on Dispute Resolution for more on that topic.
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Contract Templates
There are a number of standard form contracts from Standards NZ. These include:
- NZS3902 – Housing, alterations and small buildings contract
- NZS3910 – Conditions of contract for building and civil engineering construction
- NZS3915 – Conditions of contract for building and civil engineering construction (where no person is appointed to act as engineer to the contract)
- NZS3916 – Conditions of contract for building and civil engineering – Design and construct
- NZS3917 – Conditions of contract for building and civil engineering – Fixed term
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What does the Construction Contracts Act 2002 do?
This Act covers construction contracts, including design, engineering and quantity surveying work, as well as construction itself:
The purpose of this Act is to:
The Act also provides default payment provisions and bans the use of “pay when paid” arrangements, as per section 13 of the Act.
For construction contracts, must include a (Form 1) notice with any payment claims. The notice outlines:
In order to refer a dispute to adjudication, there must be a written notice served on the other party. This must include information (Form 2) which details:
Note that since 2015, residential and commercial construction were treated the same under this Act, with the exception of charging orders (a court order charging for payment).
The purpose of this Act is to:
- protect retention money withheld under commercial construction contracts (must be held in trust)
- provide a right to adjudication process for disputes
- enable enforcement mechanisms to recover any unmade payment
The Act also provides default payment provisions and bans the use of “pay when paid” arrangements, as per section 13 of the Act.
For construction contracts, must include a (Form 1) notice with any payment claims. The notice outlines:
- the processes for responding to the payment claim
- the consequences of not responding to or paying a claimed or scheduled amount.
In order to refer a dispute to adjudication, there must be a written notice served on the other party. This must include information (Form 2) which details:
- the respondent's rights and obligations
- an explanation of the adjudication process
Note that since 2015, residential and commercial construction were treated the same under this Act, with the exception of charging orders (a court order charging for payment).
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Case Law
IAG New Zealand Ltd v QBE Insurance (Australia) Ltd, [2022] NZCA 208
Xinhao Developments Ltd v Local Civil Construction Ltd, [2022] NZHC 1082
- This case concerns defective repairs (cladding and structure) to an earthquake damaged home, suit against repairer, project manager and insurer, and whether Judge erred in previous decision.
Xinhao Developments Ltd v Local Civil Construction Ltd, [2022] NZHC 1082
- Claim involving setting aside payments made under Construction Contracts Act 2002, on grounds that outstanding debt claimed by the applicant is not within the agreed scope of the contract.
South Pacific Industrial Ltd v Demasol Ltd, [2022] NZHC 885
- Case involving a dispute arising from the demolition of a large concrete tank contaminated with asbestos.
- This instance of the case dealt with costs:
- For original ruling see: South Pacific Industrial Ltd v Demasol Ltd, [2021] NZHC 3597
Dempsey Wood Civil Ltd v Concrete Structures (NZ) Ltd, [2022] NZHC 168
- Debt following a failure to issue a payment schedule in time for a construction contract for the Whau Bridge.
Nicholls Group Projects Ltd v Plan Design Build Homes Ltd, [2022] NZHC 56
- Claim under the Construction Contracts Act 2002 for setting aside payment, due to errors of double charging, late payments, and poor identification of work involved.
Haskell Construction Ltd v Ashcroft, [2020] NZHC 772
- See also Alpine Prime Properties Ltd v Haskell Construction Ltd, [2019] NZHC 3223
- Unsuccessful judicial review of adjudication decision alleging substantial breaches of contract by Haskell regarding architecture work.
Byrne v Rose, [2019] NZHC 273
- This case concerned defective drainage and plumbing work for a dairy shed, successful claim of loss of milk production due to defects.
Condor International Ltd v Steelhaus 2014 Ltd, [2019] NZHC 296
- Claim under Construction Contracts Act 2002 for setting aside payment following adjudication, and possible mistakes made by adjudicator.