Oral agreements, although theoretically legal, are often the cause of enormous problems in the construction and building industry and should be avoided.

This is the view of the Uwe Putlitz, CEO of the Joint Building Contracts Committee (JBCC). Putlitz says that while oral agreements are considered acceptable they pose a great risk should something go wrong as one or both parties could conveniently forget what was agreed upon.

To stay out of potential sticky situations Putlitz believes no deal should be conducted without Standard Form of Building Contracts (SFC) at the least.  SFC’s were developed to fairly balance the contractual risk, obligations and rights between the employer and the contractor.

Reducing risk

Through the contract the employer’s risk is reduced when dealing with a reputable builder who is a member of the Master Builders Association 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,”Putlitz explains.

Defining obligations

He adds: “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 also to make payments at regular intervals,” Putlitz concludes.

The SFC also includes dispute resolution procedures as well as deals with insurance and claims matters.