Why is having a building contract important?
We recommend that for any construction work you create a written contract so that both parties understand their rights and obligations. The easiest way to avoid disputes is for both the builder and the principal to state what they are agreeing to.
The Home Builders Act (NSW) 1989 also requires a builder or tradesperson to have a written contract for residential building works if:
- the contract price is over $5,000 (including GST), or
- the contract price is not known, is for the provision of labour and materials by the contractor the reasonable market cost of which is more than $5,000 (including GST).
Work between $5,000 and $20,000 require a ‘small job’ contract with minimum basic information, while building jobs worth more than $20,000 must be covered by more extensive written contracts.
NSW Fair Trading provides standard contracts for residential building works for small jobs and large jobs.
As a bare minimum a building contract must include:
- the parties’ names, including the name of the holder of the contractor licence as shown on the contractor licence;
- the number of the contractor licence;
- a description of the work;
- any plans or specifications for the work;
- the contract price (if known);
- warranties required by the Home Building Act 1989;
If you are a builder you could be prevented from receiving payment as you will be unable to enforce your building contract as it is unlawful. It may still be possible to receive payment if you make a claim for quantum meruit. See Pavey & Matthews v Paul  162 CLR 221.