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You and Your Rights

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last updated on 3 Aug 2008
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You and Your Rights

Please note that since this book was last published in 1997 some of the laws that have been referenced may have changed. We are doing our best to update the articles, however, it is advisable that you to consult an attorney before relying on any information contained herein.

Building Contracts

Conditions under which building is done

When you have accepted a quotation for building or altering your house, the next stage is to draw up a contract with the builder setting out the precise conditions under which the building is to be done and the responsibilities of the builder and yourself as the client.

Conditions of the contract

The conditions of contracts supplied by building contractors vary according to the type of work, but are generally drafted so as to favour the contractor. As the customer, however, you are at liberty to strike out any clauses to which you object. Although you may insert your own conditions, this will not always be advisable; the contract may be a standard document drawn up by building experts and the deletion of any clause or part of a clause may give rise to difficulties in the interpretation of other clauses in the contract later, and the contractor may, in any event, then be unwilling to accept the job. (You cannot compel the contractor to agree to the alterations you make to the contract presented to you. When you change that contract, you are in effect making a counter-offer, which the contractor is at liberty to accept or reject. See contracts.)

Typical conditions included in standard building contracts take away the rights that you would otherwise enjoy under common law and give the contractor several valuable advantages.

For example, they may exempt the contractor from legal liability for an inferior standard of work or limit responsibility for defects and deficiencies discovered within a short period after completion of work. Likewise, the contractor may refuse to accept responsibility for damage caused as a consequence of using defective materials or may limit responsibility to the compensation that can be recovered from the manufacturer or supplier. The contractor may refuse to accept responsibility for injury or damage resulting from work done by employees or subcontractors, even if this is done negligently. It is therefore advisable for you or your agent to obtain public-liability insurance and to ensure that your normal householder's and homeowner's insurance policies will cover the risks while building operations are in progress (see house-owner's insurance). The builder may also reserve the right to increase the price, and take away your old materials, such as bricks and piping, replaced during the execution of work.

Contracts containing clauses of this nature may leave you with little or no common-law protection if the contractor's work proves to be of an inferior quality. It is important therefore to take special care when drawing up a contract. A common condition on many contractors' forms is that any dispute arising out of the contract must be referred to arbitration. In some circumstances this is a valuable provision for a customer since it binds the contractor to a form of dispute settlement that is swift, decisive and often relatively inexpensive. There are, however, drawbacks to an arbitration clause; in some cases it effectively prevents the customer from going to court. (The threat of court action may be a useful way of attracting damaging media publicity to the contractor's inferior standard of work - possibly leading to a speedy settlement of a claim.)

WHEN NO CONDITIONS ARE IMPOSED Many smaller contractors do not impose conditions of the kind discussed above. In such an instance, you should record the main terms of the contract in writing. However, when a dispute arises that is not covered by the conditions of the contract, the common law will apply. Both the common law and the National Building Regulations and Building Standards Act, 1977, require a contractor to work in a competent and professional manner, that sound and proper materials should be supplied and that the structure should be fit for the purpose for which it was intended.

REASONABLE CONDITIONS Ask your attorney to draw up a contract or draw it up on your own. If you're dealing with a builder who is a member of the Master Builders and Allied Trades' Association or the Building Industries Federation of South Africa (BIFSA), ask for one of the standard forms of contract of BIFSA.

This standard contract, named the BIFSA Form of Contract for Minor Works and Dwelling Houses, not only gives the contractor considerable protection but it also ensures reasonable protection for the customer. For instance, the contract provides that any faults that appear within three months of completion of the job owing to defective materials or work must be made good by the contractor. In addition, it provides that if within six months, or when heavy rains occur if that takes longer, a leak becomes apparent in a roof built by the contractor and causes damage, it must be repaired at the contractor's expense.

The contract also stipulates that if the contractor stops work without reasonable cause, fails to proceed with the work with reasonable diligence or refuses to remove defective work or poor materials after having received notice in writing to do so, you may set out this default in a registered letter to the contractor. If the default continues for 14 days after that, you may then send a registered letter to the contractor ending the employment; the contractor will be liable for any damage that you may have suffered.

The contract, which provides for payment by instalments as work is completed, gives you the right to withhold an amount not exceeding five per cent of the contract price from the final instalment for three months after completion, or until the contractor has rectified any material faults or defects. The contract also states that the contractor must insure the building in progress and all materials on site against fire, earthquakes, explosions and certain other risks. Should the contractor become liable to replace or repair work damaged in any of these ways, this ensures that no financial difficulty is suffered for these replacements or repairs.

Although BIFSA's contract is intended for the construction of a complete house, its clauses may be adapted for use in a contract for the installation of plumbing, for instance, or for additions to a building.

BIFSA distributes its contracts only to members of master builders' associations and you may be able to acquire one from a member. The contracts are also reproduced in books dealing with the legal aspects of building in South Africa and are periodically updated.

Types of contract

In most building contracts it is agreed that the materials will be supplied either by the client or by the builder. An escalation clause giving the builder the right to exceed a quoted price by the amount of an actual increase in the cost incurred for labour and materials is usually included if the builder supplies the materials. BIFSA does not generally distribute 'labour-only' building contracts.

LUMP-SUM CONTRACTS This is the most common form of building contract, in which the builder undertakes to build the house according to plans and specifications for a fixed sum.

MEASUREMENT-AND-VALUE CONTRACT This is also known as a 'contract at schedule rate'. It allows for payment at a determined or 'fair and reasonable' rate. The price is set according to the amount of work that has been done and consequently the question of liability for extras is then unlikely to arise.

COST-PLUS CONTRACT When speed is important, a cost-plus contract is often drawn up in which the builder undertakes to finish work by a certain date in return for its reasonable cost to him plus an agreed percentage of that cost as a fee.

FIXED-FEE OR MANAGEMENT-FEE CONTRACT This is similar to the cost-plus contract in that it is based on cost to the builder plus a fee. In the cost-plus contract, however, the fee varies in proportion to the cost, whereas in this type of contract the fee, once established, remains fixed on condition that the actual and estimated costs do not differ by more than an agreed amount. In addition to this, a bonus is sometimes paid to the builder if the actual cost is less than the estimated cost.

Implied terms

Certain terms or conditions are implied in the contract and therefore do not need to appear in writing in order to be valid and enforceable.

In a building contract it is implied that the client or the architect representing the client will supply the builder with the necessary plans and specifications and make the site available for work. There is an implied warranty on the part of the builder to perform the work in a 'proper and workmanlike manner' and that the materials used will be of good quality and suitable for the purpose.

If you decide to supply the materials yourself, the builder cannot be held responsible for their quality or suitability for the job. However, a builder who has recommended the materials that you have supplied at your own expense, may be held liable for defects in them. It is also implied that the builder will comply with current local authority building regulations (see building regulations).

Reading the small print

Conditions in builders' contracts are typical of those used by many other types of contractor and as the customer you may have to accept them if you want the builder to go ahead and do the work in question for you - unless you enforce an agreement in terms of the standard BIFSA contract, which is to the advantage of both parties.

The provisions of the building contract often attempt, in the interests of the builder, to regulate the conditions under which work is carried out by limiting or removing the legal protection that you would otherwise have. If you then sign the contract or agree that the work will be done on those terms, the small print will be binding upon you. (See caveat subscriptor.)

Your only realistic alternative is to find a contractor who does not impose terms of the kind to which you object, or to negotiate the objectionable provisions with the contractor. Should you decide to delete certain clauses, you run the risk that the contractor may then refuse to do the job. Some of the terms that commonly appear in building contracts are listed below.

STANDARD OF WORK Defects that appear within three months of the completion of the work and are proved to have been caused by a standard of work or materials not in accordance with the contract will be made good by the builder at own cost.

Notice in writing of the defects must be given to the builder before the three-month period expires. In the absence of a clause of this sort, the contractor's legal liability continues for as long as defects can be positively attributed to improper work or use of inferior materials and not, say, to subsequent wear and tear. This is subject to the general rule that a dissatisfied homeowner must take action against the contractor within three years of the date on which a claim arose (see debts, recovery of; prescription). If the matter is referred to arbitration or if legal action is taken as a result of the disagreement, the arbitrator or court will decide upon the extent of the contractor's liability.

MATERIALS REMOVED Contractors often specify that credit will not be given for any materials necessarily removed to allow for the execution of the work. If during the course of the job, materials such as old bricks have to be removed, this clause gives the contractor the right to keep them without reducing the charge given in the quotation. (In cases in which no allowance is shown on the builder's estimate for materials removed, a clause of this kind may lead the customer to suspect that materials with scrap or reuse value generate an added profit for the builder.)

DEFECTIVE MATERIAL Materials are supplied subject to conditions of sale attached by the manufacturer or supplier. If any materials prove faulty, the builder's liability is limited to such amount as may be recovered from the manufacturer or supplier.

Even though the contractor agrees to provide all the required labour, materials and equipment and to take reasonable care in performing all aspects of the job, responsibility is not normally accepted if materials or goods turn out to be faulty unless the contract specifies the quality of materials; the contractor's liability is limited to the amount of money that can be recovered from the supplier.

NO INTERFERENCE In terms of this type of clause, you are prevented, either personally or through your agent, from issuing instructions to, hindering or obstructing any of the contractor's workers, any subcontractor employed on the work or any other person employed by or acting on behalf of the contractor. You then have no right to give instructions to the workers; all negotiation must be with the contractor or the contractor's agent. If you give instructions related to the construction work directly to a worker, the worker need not obey them.

There are many other examples of clauses like this in building contracts; you should therefore read the entire contract thoroughly before signing it. If you have any doubts, consult your attorney or architect (if you have employed one).

Breach of contract

Failure to complete the work within the contract time is probably the most common form of breach of contract by builders. Other forms of breach of contract by a builder that may entitle you to cancel the contract include:

  • Failure to take possession of the site;
  • Failure to complete the work, or to complete any stage of the work timeously according to the conditions of the contract;
  • Any departure from the agreed plans or specifications;
  • Abandoning the work;
  • Doing defective work.

If the builder fails to complete the work or abandons the work while it is incomplete, you may be able to claim damagesI, the amount being based on the difference between the unpaid balance of the contract price and the cost of engaging someone else to complete the work.

A builder who abandons the work may still be entitled to some payment, usually on the basis of unjust enrichment, a doctrine in terms of which no person is allowed to seek unjustifiable enrichment at the expense or to the detriment of another. In this instance, you would be enriched by the builder's work, and cannot therefore expect to receive it for nothing.

Encroaching on the property of a neighbour

A builder who departs from the plans might construct part of your house on the property of a neighbour. The neighbour will then probably demand demolition of the encroaching portion or the payment of compensation. A court might rule that demolition would be unreasonable and direct you to take transfer of that part of your neighbour's property on which the building has encroached. Your claim against the builder would then take into account the ensuing costs and the amount of compensation that you would have to pay to your neighbour, less the value of the land transferred to you. (See boundaries, walls and fences; encroachment.)

Guarantee of completion of work

If a builder persistently refuses to guarantee that the work will be completed, either by himself or by a nominated builder, you may be entitled to cancel the contract.

Your duty to the builder

Your first duty is to give possession of the site to the builder. A builder who has been refused permission to be on the site or who has not been furnished with the relevant plans, can withdraw from the contract. A builder forced to cancel a contract in this way may be entitled to sue you for the loss of profit that could reasonably have been expected had the work been completed.

If the contract provides for the payment of an amount stated on an architect's inte-rim or progress certificate (a valuation of the job and instruction that payment be made by the client), the builder may sue you if you fail to pay the agreed amount within the specified time. If the contract does not state where payment is to take place, it should be made at the site where the work is being done or at the place of business of the building contractor - the rule being that the debtor must seek out the creditor if there is an agreement that an amount of money must be paid by a specified date.

Time limits

If your house is not finished by the date specified in the contract, you may be able to claim damages (monetary compensation) from the builder. Alternatively, the contract may contain a penalty clause in terms of which the builder forfeits a certain sum for every day or week that expires after the time stipulated in the contract for the completion of work.

Compensation may be claimed only for loss that was reasonably foreseeable at the time the contract was signed - for example, loss of profit or the cost of finding alternative accommodation. You may not claim for loss of rental unless the builder knew or must have known that you intended to let the house as soon as it was completed. It is therefore a good idea to advise the builder with whom you enter into a contract if you intend to let the property as soon as it is completed.

The builder cannot be held liable for a delay in completion that has been caused by you or by someone acting on your behalf. The builder is also not liable if the delay is due to unforeseen circumstances such as continuous heavy rain (you should therefore keep a daily logbook of weather conditions as it will be difficult or impossible later for you to determine the amount of delay caused by rain) or sometimes, if agreed, the non-availability of essential building materials.

Extras and variations

It may happen that, while construction of the building is in progress, variations are made to the original plans and the builder is asked to do work that was not specified in the initial contract. To make provision for such an eventuality, the contract should contain a clause dealing with liability for such extras and stating that these may be carried out only on your written authority. The builder is obliged to work in strict accordance with the plans and specifications and may not deviate from them.

Generally, claims may not be made for any unauthorised extras. If, however, you knew that the builder was doing extra work from which you would benefit and you allowed this extra work to continue, a court might uphold the builder's claim for additional payment on the basis of implied agreement even if the work was not within the scope of the original written contract.

Subcontractors

Various aspects of building are dealt with by specialist contractors who install electrical wiring, plumbing, air-conditioning or roofing, or who paint the interior or exterior of your house.

You may enter into a contract directly with a contractor of this type, but it is more common for the main contractor or builder to employ whichever specialist subcontractors are considered necessary. Subcontractors are usually paid by the builder, although the contract may provide for you to pay them directly and deduct the payments so made from the amount that you owe the main contractor. It should be a condition that payment to a subcontractor is due, or released, to the subcontractor only after an architect has approved the work. A certificate of approval from the local authority should be obtained before payment is made for plumbing, sewerage or electrical installations.

If the builder goes insolvent, a subcontractor who previously looked to the builder for payment may not claim payment directly from you. The liquidator or trustee of the builder's estate has a claim against you for the full agreed price for work done (up to the date of liquidation or sequestration), and the subcontractor must lodge a claim against the builder's insolvent estate. (See insolvency.)

Defects

At common law you have the right to deduct from the contract price the amount it will cost to rectify defective work caused by poor work or the use of unsuitable materials, provided that this has been agreed upon first. If the full sum has already been paid, you are entitled to claim damages based on the cost of repairs and reasonable related costs.

The contract should contain a clause obliging the builder to make good any defect that may appear within a specified time after the work has been completed. Defects that fall within this ambit are usually limited to those arising from default on the part of the builder.

If approval of the work before final payment is not provided for, payment even with knowledge of defects will not necessarily prevent you from taking action against the builder, although it may be advisable to withhold payment if you are aware of defects. That will both provide an incentive for the builder to remedy the defects and obviate any possibility of an argument later that, by paying, you have agreed to accept the work in its defective state. You may take action against the builder for defective work even after the period specified in the contract for the execution of repairs has elapsed.

A maintenance clause, or repair and upholding clause, requires the builder to maintain the house for a specified period in the condition in which it was on completion or acceptance. Such a clause cannot, however, be used to compel the builder to repair defects that were present either on completion or on acceptance of the work.

Disputes and arbitration

Although a contract may stipulate that an architect's decision is binding in a dispute with the builder, most contracts provide for the dispute to be referred to arbitration.

Standard building contracts usually stipulate that if a dispute arises between you (or your architect acting on your behalf) and the builder, the builder may ask for the architect's decision to be conveyed in writing. If the builder objects to the decision within 14 days of receiving it, the matter will be referred to an arbitrator for a final decision. Note, however, that you as owner do not have the right to refer your architect's decision to arbitration.

The arbitrator, in terms of the standard building contract, can be anyone over the age of 18 and may be chosen by agreement between the architect and the builder or may be appointed by the president of the Institute of South African Architects.

An arbitrator's decision is final and binding and the courts will refuse to enforce it only in exceptional cases - for example, when it can be shown that the arbitrator exceeded his or her powers or has been guilty of improper conduct, or that the award was improperly procured. (See arbitration.)

Approval of the work

A building contract usually stipulates that the work must be completed to the satisfaction of the owner, his or her architect or a named third party. You may not withhold your approval of the work unreasonably or dishonestly.

If the architect who must approve the work issues a final certificate, this will be taken to be a certificate of approval. The builder will thereupon be entitled to payment of whatever amounts are still due and will at the same time be released from any further responsibility.

Withholding full payment

After completion of the work, it is usual for a customer to withhold full payment as security, to ensure that defects which may later become apparent will be made good by the builder.

The percentage to be withheld in the 'retention fund' depends on the contract, but it is usually 10 per cent if the total contract price is not above R30000 and 10 per cent or a negotiated amount if the cost exceeds R30000. The retention money is usually deposited in an account opened jointly in the names of the client and the builder, with interest accruing to the builder.

The builder is usually entitled to half of the retention money when work is completed, while the remainder is normally paid out once the architect has issued the penultimate and final certificates.

Builder's lien

A lien, or right of retention, is a form of security for the builder; for example, it entitles the builder to refuse to hand over a newly-built house to the customer until the full sum due on completion of the work has been paid, less the money in the retention fund.

To exercise a lien, the builder must be in actual physical possession of the house. In the eyes of the law, possession will not be lost due, for example, to temporary absence at night. You may not take possession from the builder by force, fraud or any other illegal act. If you do, the builder may apply to have possession restored immediately by order of court.

A lien ends or is 'extinguished' when the builder relinquishes or loses possession of the property, or is in receipt of all of the money due.

What to do about work of a poor standard

Anyone who engages a contractor to do a job and discovers that it has been done badly is entitled to have the work brought up to standard. This principle applies to a wide range of building, repair and maintenance work.

In terms of the law, as soon as a contractor accepts a job and the customer agrees to pay for it, a contract comes into force, even if nothing is set out in writing (see contracts). Although the customer's rights under the contract depend on the terms agreed upon, two conditions apply in almost every case.

First, the customer is entitled to have the work done as requested, with the measurements, materials and finishes specified. A contractor who wishes to make changes to the agreed specifications must obtain the customer's agreement before going ahead.

Second, the customer is entitled to have the work done in accordance with professional standards.

When a contractor fails to do what is asked or does the work badly, your first step should be to point out the defects and asked that they be rectified. Confirm this request in writing and don't forget to keep a copy of this correspondence.

If the defect is the result of unnoticed shoddy work carried out by an employee, it will probably be repaired without delay. The contractor cannot charge extra for this, or for repairing any damage resulting from work of an inferior standard. The best action to take against a contractor who refuses to accept responsibility for shoddy work and refuses to make repairs, or who demands extra payment for repairs, would be to hire an attorney and be prepared, if necessary, to go to court.

If you're not prepared to spend your time or money taking legal action, you can deduct the cost of repairs from the contractor's bill, appoint an arbitrator (if provision has been made for this) or appeal directly for assistance to the Master Builders' and Allied Trades Association or to the National Association of Homebuilders if the contractor is a subscribing member of the relevant organisation.

DEDUCTING FROM THE BILL If the work has not been paid for, the quickest method is to have the defect remedied by another contractor and to deduct the cost for this from the original contractor's bill. It is, however, important to follow the correct procedure:

  • Stage one: As soon as you suspect an inferior standard of work, ask the contractor to repair it. Confirm the request in writing and keep a copy of the letter.
  • Stage two: If the contractor refuses to remedy the fault, do not pay for the work until it is completed as agreed. By refusing to pay, you will place the contractor in the position of having to choose whether to remedy the fault or to sue you. Generally, because it is easier to do so, the contractor will repair the fault, which is exactly what you wanted.

It is important to ensure that you would be able, if it became necessary, to prove in court that the work carried out was of an inferior standard. How you do this will depend on whether the contractor has failed to do the work agreed upon or has simply done it badly. If you believe that the contractor has not followed instructions, check the written contract if there is one, or the quotation, or your copy of the letter commissioning the work. Any of these may provide proof that the contractor has failed to follow instructions.

When there is no such written proof or the written evidence is unclear on the point in dispute, the advice of an attorney will be essential. If, on the other hand, your complaint revolves around defective work, you will need an expert assessment.

Suppose you build an extra room into the roof of your house and you find that a few days after the builder leaves, parts of the roof work surrounding the window of the new room break loose in a thunderstorm and water damages the interior. When you lodge a complaint, the builder denies being at fault, puts in a bill and demands payment in full. Unless it was a freak storm or you damaged the roof yourself, bad workmanship would be the most likely cause of damage.

To confirm this, you should call in an expert who can report on the cause of the damage and the likely cost of repair. The expert may be an independent specialist of high standing, such as an architect or a well-respected builder. The builder should be a person more experienced than the original contractor, and preferably a member of the local master builde

Disclaimer :: You and Your Rights
Although we have gone to great lengths to ensure the accuracy of the information contained in this database, it is important to remember that laws, government departments, interest and taxation rates are constantly changing. If you have a particularly difficult problem you are advised to consult a qualified legal authority. The publishers, editors and their representatives cannot accept responsibility for any act or omission arising from consulting the information contained herein.
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