Articles > Construction

Are Verbal Instructions enough for a Building Contract?

December 18, 2020   Kristine TranPhilip Evangelou

Generally, contracts do not have to be in writing to be enforceable. In everyday circumstances such as entering a car park, a written contract is not required but they are still legally binding. However, for any contract to be enforceable, there must be three key features:

  1. An agreement between the parties with particular obligations
  2. An intention to make the agreement legally binding 
  3. Consideration for the performance of such obligations

Therefore, verbal instructions of an agreement can establish a building contract on the basis that there is both intention to enter the agreement and consideration for the contract.

Non verbal agreements in the Construction Industry

Building contracts are legally binding agreements between two or more parties which require the parties to perform obligations such as building, renovating or undergoing certain works for a certain sum of money. This type of contract may consist of express or implied terms which require certain obligations from the builder and relevant party. 

As building contracts involve a substantial amount of money, it is highly recommended for parties to have these contracts in writing. Otherwise, it may be difficult to prove if there are any issues arising with the performance of the contract. Including express terms that specify each party’s obligations in the contract can better protect the parties from potential disputes regarding payment, or performance of the building requirements. 

Express Terms in a Building Contract

Typical express provisions in a building contract may include:

  • The building to be constructed
  • Costs associated with the building 
  • Time frame of the constructions
  • Building materials to be used 

Other express terms may include the rights, liabilities, duties and responsibilities of each party such as:

  • Professional Standards to be used
  • Payments
  • Inspection
  • Rectification warranties
  • Indemnities
  • Any other specific provisions in relation to the type of building being constructed

As such, where there is no express term on a particular obligation for the parties, implied terms to a contract can also protect parties in a dispute. Where a term is implied by an Act of Parliament, parties have the choice to exclude them. However, if the Act prevents certain terms from being excluded in a contract, then that particular term will still form part of the contract, regardless of whether both parties agree or not. For example, the parties cannot agree that the Home Building Act 1989 (NSW) does not apply. 

What type of implied terms arise in a building contract?

In a building contract, implied terms may include the contract warranting that the work will be: 

  • Performed in a proper manner and accordingly to the plans and building specifications. All materials will be suitable and new, and reasonably fit for that purpose unless specified.
  • Carried out with proper skill and due diligence 
  • Completed within a reasonable time frame unless specified otherwise
  • Completed by the contractor who is given possession of the site within a reasonable time

Main points

  • To prevent parties from building disputes,  it is strongly recommended for building contracts to be explicitly in writing. 
  • In doing so, this protects parties from certain issues regarding the building, payments or rectifications. 
  • Having a written contract ensures that all parties perform to the standard provided in the contract, and protects parties when certain issues arise from the contract.

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About Kristine Tran

Avatar photoKristine is a legal intern at OpenLegal. She is a fifth year UTS law student nearing the final stages of her law degree. She has previously worked for a boutique law firm and volunteered as a paralegal with the Refugee Advice and Casework Services (RACS).

About Philip Evangelou

phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.