Select and Prepare a Construction Contract

This article provides a comprehensive guide on how to prepare a construction contract. It covers topics such as ensuring the owner understands the contract, types of contracts, building specifications, schedules of finishes, legal terms and conditions, progress claims, and more. It also lists relevant legislation and documentation required for building contracts. The article is suitable for students studying building and construction courses, such as CERT IV Building and Construction, and professionals in the industry.

First Name Last Name
Instructor
CERT IV BUILDING AND CONSTRUCTION
21 November 2018
Select and Prepare a Construction Contract
Question 1: Name one step you could take to ensure the owner is able to understand the contract
documentation if they have language and cultural background differences?
Answer:
By using assistance of a family member or friend of the client who can help with
communication.
Question 2: Name 2 types of contracts commonly used in domestic/residential construction:
Answer:
a. Period Trade Contract
b. Cost Plus Contract (not legal in all states & territories)
Question 3: What is a Small works contract used for?
Answer:
The small works contract is used when works are to be performed under the value of $20 000.00.
Question 4: Can you use a cost plus contract for building a house in any state or territory?
Answer:
No, this is due to the unexpected costs that cannot be forecasted by the owner.
Question 5:
a) Who use a period trade contract?
b) How long are they current for?
Answer:
a) A contractor (Builder) and the sub-contractor.
b) One year hence termed as annual document.
Question 6: Provide a list of items that you would expect to find in a Building Specification.
Answer:
a) Document names and numbers (Plans & Engineer Drawings)
b) Type of concrete & finish

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c) Height of wall tiles
d) Number of shelves in a cupboard
e) Who is supplying the temporary services for construction
f) Number of power points
g) Drainage requirements
h) Color
i) Nominated contractors, and
j) Nominated suppliers.
Question 7:
a) When would you be likely to see or use a Schedule of Finishes?
b) Name 2 items which could be contained in this schedule
Answer:
a) When an Architect is involved during the design and briefing process.
b) i. Owner’s individual specified finishes for any areas that are relevant.
ii. Cabinetry detailed drawings or specifications.
Question 8:
a) What does the term B.A.L stand for?
b) What does it mean if the B.A.L number is higher?
Answer:
a) Bushfire Attack Level
b) The higher the number, the more measures need to be implemented to protect the
dwelling and the inhabitants.
Question 9: Provide a list of features you may find in an Engineer’s report.
Answer:
a) Soil type
b) Soil test data and details
c) Strength and slump of concrete to be used
d) Strength and quality of steel to be used (Structural & Reinforcing)
e) Any connection requirements and inspections required for the construction process.

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Question 10: Provide a list of clauses, sections, or items that you would find within a
construction contract.
Answer:
a) Delays / Extension of time
b) Dispute resolution
c) Variations
d) Practical completion
e) Termination of Contract
f) Progress Payments
Question 11: When specifying the Construction Project Timeframe/Building Period, what 3
factors must you consider when calculating the number of days, you require to complete the
project?
Answer:
a) The building time
b) Any weekends and Public holidays during this period
c) Any inclement weather allowance (rain or other)
Question 12: Special Conditions/clauses are important. List one reason why you would need, or
want to include Special Conditions within a contract?
Answer:
So as to itemize any special requirements that both the contractor and sub-contractor are
mutually agreeing on.
Question 13: Legal terms and conditions are vital for understanding the contract and the
implications of any breaches that may occur. Name 3 clauses you would find in the terms and
conditions of a contract and provide an example for each.
Answer:
a) Delays / Extension of time. Examples of a good case for an ‘extension of time’ may be
due to:
• Wet days,
• Industrial dispute,
• Defect Rectification works

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• Work Health and Safety issues, or
• Client supplied contractor delays.
b) Dispute resolution: Disputes and disagreements are not good and need to be managed
delicately. The procedure you should follow is;
• Communicate clearly and calmly with the client about your concerns.
• Give written notice to the client about the dispute details
• Lastly, refer the dispute to the State/Territory Building Authority if the dispute
cannot be resolved amicably.
c) Variations: Variations can be raised by either the builder or the client. They must be in
writing and must be signed off by both parties. They will contain information such as;
• The variation detail
• Who requested the variation
• The extension of time relating to the variation
• The cost amount of the variations
Question 14: Name the steps required to resolve a dispute.
Answer:
i. Communicate clearly and calmly with the client about your concerns.
ii. Give written notice to the client about the dispute details
iii. Lastly, refer the dispute to the State/Territory Building Authority if the dispute cannot be
resolved amicably.
Question 15:
a) What is the number one reason for building disputes?
b) Name the 2 steps you must take to help avoid building disputes.
Answer:
a) Poor documentation and communication
b)
i. Keeping clear and concise communication and
ii. Keeping clear and concise documentation.
Question 16:

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a) What are progress claims based on?
b) What is the maximum allowable deposit amount (%) for a contract amount over $20 000.00 in
your state?
Answer:
a) They are set out in the standard structure for a new home or they can be customized to
suit the project.
b) 5% of the contract total
Question 17: Name all 4 details required on the Variation document to make it valid.
Answer:
a) The variation detail
b) Who requested the variation
c) The extension of time relating to the variation
d) The cost amount of the variations
Question 18: Delays and Extension of time can occur during construction.
a) What should you do when you become aware of an unexpected delay?
b) What information is contained in the Extension of Time document?
Answer:
a) You should notify the client immediately by phone and in writing. In some cases, you
will be required to apply for an “Extension of Time”.
b) It setsout what the delay is and a detailed description of specific events, time, date and
persons involved.
Question 19:
a) Why is a “Rise and Fall” clause in a contract beneficial to the builder?
b) When can the Rise and Fall clause be incorporated into a contract?
c) How can it benefit the Owner?
d) How can you accurately calculate the costs of this?
Answer:
a) It is a cost plus contract, price inflation can be passed onto the client minimizing financial
risk. It guarantees profit to the builder on completion of a project.
b) On substantial building projects.

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c) Allows increases or decreases to be passed onto the client by the builder.
d) Based on data from the Bureau of Statistics.
Question 20: Name four ways an owner may be in breach of contract.
Answer:
When the owner:
a) Does not pay progress payments under the specified clause
b) Does not pay the deposit
c) Does not give evidence of title
d) Does not give evidence of capacity to pay
e) Does not give possession of the site
Question 21: Termination of contract cannot occur when?
Choose the correct answer below.
1. The contractor is engaged to be married
2. The owner is seeking legal advice from their solicitor
3. The matter has been referred to the Building authority of that state
Answer:
1. The contractor is engaged to be married
Question 22: Changes to the contract maybe requested by the owners. Name one reason for a
change.
Answer:
Client wishes to change the details of any construction aspect to be completed. This is common
and you are encouraged to work with the client and facilitate the change requested. You should
also reflect the change to the construction in the contract amount. Once this is completed, you
can re-issue the draft contract for review.
Question 23: In your own words, specify the requirements of an offer to be valid.
Answer:
a) A valid and binding agreement. This implies there must be a legitimate offer and there
must be acknowledgment of the offer. Acknowledgment can be oral, composed or by
method for direct;

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b) Consideration. Thought can be anything of significant worth guaranteed to another, it
tends to be as cash, an administration, or a guarantee to embrace, or abstain from
undertaking an activity;
c) Capacity. The gatherings must have the ability to go into legitimate relations. The
gatherings must be of legitimate age and of sound personality, note anyway that lawful
age might be postponed sometimes, for example, for the buy of a need;
d) Intention. The two gatherings must mean upon, or anticipate that the assention will be
legitimately authoritative;
e) Formalities. An agreement is substantial in whatever shape (composed, oral or both),
given every one of the components to its legitimacy are available. Now and again,
contracts must conform to specific conventions, for example, being composed, else it is
unenforceable; and
f) Legal purpose. The agreement must meet the necessity of both suggested and express
statutory legitimateness, and for custom-based law lawfulness.
Question 24: Explain the term acceptance, and identify when acceptance cannot exist.
Answer:
Acceptance occurs when an offeree approves to be mutually bound to the terms of the contract
by giving consideration, or something of value like money, to seal the deal. An acceptance would
cease to exist if there is no consideration by the concerned party to contract.
Question 25: Provide a list of the relevant legislation you may be governed by regarding
building contracts.
Answer:
a) Australian Standards
b) Home Building Contract Act
c) Home building Act 1983
d) Building Code of Australia
e) Building and Construction Industry Payments Act
f) Fair work Act
g) National Employment Standards
h) Subcontractors’ Charges Act
i) Work Health and Safety Act 2011

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Question 26: Provide a list of all relevant documentation that make up, and may accompany a
building contract.
Answer:
a) The article of agreement and conditions of contract.
b) Working drawings.
c) Bills of quantities.
d) Specifications.
e) Schedules of work.
f) A schedule of tender adjustments.
g) The employer's requirements.
h) The contractor's proposals.
i) The contract sum analysis.