Familiarity with building contracts essential for emerging contractors

Failure to fully familiarise oneself with the contents of a building contract can cause conflict between parties and result in costly problems, says nonprofit industry representative the Joint Building Contracts Committee (JBCC) CEO Uwe Putlitz.

He highlights that this problem is particularly prevalent among emerging contractors, whom he urges to engage with the content of contracts so that their rights and obligations are clearly understood.

“Some emerging contractors lack communication and administration skills or are uninformed about any of the contracts that are in common use in the construction industry. As subcontractors they can, thus, be easily taken advantage of by main contractors, especially regarding late, partial or no payments and unfair imposition of penalties.”

Putlitz explains that standard building and construction industry contracts are drafted to clearly define the obligations of the employer and contractor in a manner that is fair and easily understood by all parties involved. These standard contracts are usually drafted with input from all role-players, while bespoke contracts generally favour one party only.

He points out that a lack of understanding between parties of a contract, or a lack of vigour in familiarising oneself with the terms of the contract, mean that often such documents are read only when a problem occurs – and, by then, it is often too late to resolve the issue amicably.

“Disputes between parties in the building and construction industry can lead to significant problems, such as cost escalation, which could be avoided with proper planning. A lack of understanding of a contract can also lead to an employee missing deadlines during a project or opportunities to submit valid claims, and employers attempting to enforce unfair performance conditions and, most critically, failing to pay within the specified time . . .”

To highlight the importance of contracts and facilitate their use, the JBCC has redrafted standard agreements to remove old-fashioned and verbose legal jargon. However, Putlitz stresses that it is still imperative that contractors familiarise themselves with the content of such contracts, and suggests that emerging contractors enlist the assistance of a mentor in the industry to help guide them in this aspect.

“JBCC documents are constantly reviewed and updated to remain up to date, reflect changes in the industry and legislation, and republished when appropriate – but not too frequently, as this would cause more confusion rather than making things simpler. JBCC, as an organisation representing the industry, is also in regular contact with various government departments to encourage best principles of work in the industry.”

Six editions of the building contract have been published by the JBCC since 1991, with supporting documentation such as guides and certificate forms. The main objective of these redrafts has been to equitably share risk between the employer and contractor, with clauses in the contract providing a kind of checklist of the rights and obligations of each party.

Putlitz highlights that the level of language and style of writing used in the 2014 edition of JBCC Agreements is considerably simpler, compared with earlier editions, although he points out that future editions are likely to include further improvements in choice of wording, with more subclauses used instead of long clauses, which can cause confusion. The JBCC also aims to further simplify the wording and layout of future publications.

The committee, moreover, offers regular training courses to the public in South Africa and Southern African Development Community countries, dealing with the appropriate application of the various clauses in a standard contract.

“This is an attempt to enhance understanding among those in the construction industry and, consequently . . . to minimise problems and disputes. In addition, dispute avoidance is stressed and trainees are made aware of the implications of making changes to standard contracts – almost all of which can be avoided by following the provisions in the contract,” Putlitz concludes.