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Dangers of on-site oral contracts
Although oral agreements for building work are legal in theory , they frequently cause enormous problems , explains Uwe Putlitz , CEO of the Joint Building Contracts Committee ( JBCC ).
Putlitz says an oral agreement — perhaps a drawing and / or a job description — between employer and builder to undertake certain work based on discussions between the two parties is acceptable ... provided nothing goes wrong .
“ When matters do go wrong , the parties could conveniently forget what was agreed upon . The employer could maintain that the builder is not getting on with the job , the product is not as envisioned by the employer , and the builder is overcharging . On the other hand , the builder could say the employer is continuously making changes but does not want to pay for them or allow more time , and the employer has not paid for months .” The Standard Form of Building Contracts ( SFC ) has been developed to fairly balance the contractual risk , obligations , and rights between the employer and the contractor . The employer ’ s risk is reduced when dealing with a reputable builder who is a member of the Master Builders Association ( MBA ), because the MBA would protect the public by blacklisting a non-performing contractor . “ The parties involved in a building contract must comply with the laws of the country — including adhering to the National Building Regulations and the Construction Regulations , obtaining statutory approvals for all building work , and registering domestic projects with the National Home Builders Registration Council .
“ The SFC generally defines the obligations of the parties : what the contractor must do , how to deal with unforeseen events or changes after the award of a tender , and how the builder will be compensated for additional time and / or costs . The employer ’ s obligations , simplistically , are to define the scope of work and to provide a specification of the quality of work to be provided as part of the construction information ( approved by the local authority ) for the builder to work from , and to make payments at regular intervals .”
Putlitz says the building works must be insured — preferably by the employer — with the owner as the beneficiary in the event of a claim . The insurers must be given all information , including :
• New building or alterations ;
• Occupation during construction ;
• Ground conditions ; and
• Risks to adjoining properties .
JBCC
A signed contract is always preferable to oral agreements when it comes to building or any other kind of project , says the JBCC .
“ The builder must carry statutory insurances for staff and equipment . The professionals — architects , engineers , quantity surveyors , health and safety consultants — must all carry professional indemnity insurance in addition to insurances for the business risks ,” Putlitz cautions .
He says , depending on the SFC chosen , the employer may have to appoint a principal agent to administer the contract . “ This is an additional cost , but it may be cheap when serious problems occur in the contractual relationship that could have been prevented with a little foresight and implementation of the SFC .”
The SFC describes procedures to be followed to deal with claims from the builder for additional time and / or money . The principal agent will deal with such issues in terms of the agreement . The SFC also includes dispute resolution procedures such as mediation , adjudication , or arbitration . “ By following the correct contractual procedures , claims can be kept to a minimum and most disputes can be avoided — provided the parties are prepared to cooperate ,” Putlitz adds . CLA
12 www . coldlinkafrica . co . za COLD LINK AFRICA • May 2018