‘Think in Ink’ when managing construction contracts

When dealing with construction contracts in New Zealand it is best to capture it all in writing.

The term ‘think in ink’ is a good mindset to have when dealing with construction contracts in New Zealand. There are many minute and important details that need to be captured in construction, so by ‘thinking in ink’ you are ensuring that the information is captured in a manner that everyone can read and agree to.

What is contract management in construction?

construction plans

Contract Management in construction focuses on ‘works contracts’ for the provision of constructing buildings and infrastructure.

It can encompass the terms of procurement through contract compilation (and associated scopes, specifications and drawings and price schedules) through to day to day contract management.

Contract Management primarily focuses on the day to day management of the Contract in accordance with the terms and conditions (general conditions of contract and special conditions of contracts).

What is a construction contract?

A contract between two entities, the owner (Principal) and the Supplier (Contractor) for the provision of works, services and products to construct / build a facility of infrastructure (vertical / horizontal infrastructure).

What constitutes a construction contract?

The Contract ‘construct’ spans:

  • General Conditions of Contract
  • Special Conditions of Contract
  • Scope of Work
  • Specification
  • Drawings
  • Schedule of Prices
  • Reference to a Programme (timeline)

What are the three approved construction contracts commonly used in New Zealand?

  1. NZS 3910 (Build only)
  2. NZS 3916 (Design & Build)
  3. NZS 3915 (Build only no Engineer to Contract)

What is a standard form of construction contract NZ?

  • NZS 3910:2013

What are the different types of building contracts NZ?

  • NZS 3910 (Build only)
  • NZS 3916 (Design & Build)
  • NZS 3915 (Build only no Engineer to Contract)
  • For professional services (design), ACENZ CCCS form of agreement (services only)

Do you need a building contract?

No. But a Building Contract protects both parties and recognises NZ Laws.

The NZS 39 series is the most popular and understood form of construction agreement in NZ. Written by NZ Engineers and Lawyers for NZ Conditions.

Information about the “New Zealand Construction Act 2002”:

construction building

The Act:

  • protects retention money withheld under commercial construction contracts
  • helps to ensure a fair, balanced and timely payment regime
  • provides a fast and cost-effective adjudication process for people with disputes
  • provides enforcement mechanisms to recover any unmade payments.

The Construction Contracts (Retention Money) Amendment Act 2023 (the Amendment Act) strengthens and clarifies protection for subcontractors’ retention money by:

  • clarifying that retention money is automatically held on trust by the head contractor once the contract allows it to be withheld from the subcontractor
  • removing the ability to mix retention money with other money and assets
  • requiring that retention money held as cash must also be held separately in a bank account with prescribed ledger accounts.

The changes in the Amendment Act increase transparency by introducing regular reporting requirements, adding the need for head contractors to confirm with the subcontractor the amount and location of the retention money being held.

The Amendment Act also introduces offences and penalties of up to $50,000 for a director, and up to $200,000 for a company for each offence that fails to uphold the obligations.

The Amendment Act will come into force on 5 October 2023.

Help transform the construction industry with your contract management skills. Join our Contract Management in NZ Construction course today!

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