To survive the cut-throat construction game, the true trick of the trade is building a contract which covers erratic price fluctuations, according to litigator Ben Twomey of Twomey Dispute Lawyers.
Twomey said Australia’s construction industry is like a pressure cooker, with increased demand, rising prices, and supply chain issues plaguing the sector.
He continued: “The complications being brought to bear on builders is where you’ve got fixed price contracts and timing pressure.
“There are some things builders need to take into consideration when estimating costs and creating a contract and this includes having things in place to avoid a dispute.
“Builders might have priced the job, factored in margins, and even included a contingency in their contract.
“But if prices go through the roof, they are contractually required to perform at that rate, and this can blow out the budget to a point where it ends up costing the builder.
“If this happens, builders are going to be asking whether or not they can get out of the contract or what can be included in the wording to enable them the ability to have those sums float.
“Builders need to ensure their prices float where possible, which is done by making it a provisional sum as well as providing a reasonable estimate of costs.
“If you make a representation of prices, you need to have a proper basis for making it, otherwise there’s a risk of deceptive conduct.”
On the other hand, homeowners could also be impacted by construction industry price rises.
Twomey added: “You could be a homeowner and have contracted someone to build your house when prices increase astronomically and they can no longer afford to complete the job, despite the fact you have an enforceable contract.
“Should you be diplomatic and accept that if you hold this person to this deal, they are going to lose money and might not be able to finish the build?
“The odds here are that the homeowner is going to be left with an unfinished house, wondering whether they can make an insurance claim and what that will look like.”
In addition to floating prices, Twomey said builders should also be aware of timing pressures created by expected completion dates.
He said: “It’s entirely plausible that projects don’t get completed on time through no fault of the builder, this can include things such as severe weather and supply chain issues.
“When it comes to the date for practical completion, there are certain mechanisms in a contract for that date to be pushed out, but contracts need to be correctly worded to give builders the ability to do this.”