“We’ve worked together for years. We didn’t think we needed anything in writing.”

It’s a familiar story in the construction and trades industry.

A builder engages a subcontractor they’ve used for years. A tradie agrees to take on some additional work. A project runs over schedule, costs increase, or a client decides they’re not happy with the finished result.

Everything seemed straightforward at the beginning. But now there’s a disagreement about what was agreed, who is responsible and, more importantly, who is going to pay.

For businesses in construction and the trades, these situations can quickly turn into costly distractions.

 

When a handshake isn’t enough

Relationships are a big part of the construction industry. Builders, subcontractors, suppliers and tradespeople often work together across multiple projects, building trust over time.

And while a good working relationship is valuable, it doesn’t necessarily protect a business when something goes wrong.

One of the challenges we see in construction-related disputes is uncertainty about the original agreement.

Perhaps the scope of work wasn’t clearly defined. Additional work was requested along the way, but nobody documented the change. A subcontractor expected payment for extra materials, while the builder assumed those costs were included in the original price.

Suddenly, two businesses have very different understandings of the same job.

Having clear agreements in place from the outset can help avoid these situations. And when things change, documenting those changes is just as important.

 

The ripple effect of delayed payments

Cash flow is critical in construction.

Businesses often need to pay staff, subcontractors and suppliers well before receiving payment themselves. When an invoice goes unpaid or a payment is disputed, the impact can extend well beyond one project.

For smaller operators in particular, a delayed payment can affect their ability to take on new work, meet existing commitments or keep projects moving.

Victoria’s security of payment legislation provides important protections for eligible construction work, including processes for recovering progress payments. However, strict requirements and timeframes can apply, so understanding your rights and obligations early is important.

And while recovering unpaid invoices is one part of the picture, having appropriate payment terms, variation procedures and dispute resolution provisions in your contracts can help reduce the likelihood of problems arising in the first place.

 

Who carries the risk when things go wrong?

Construction projects involve plenty of moving parts, and not everything goes according to plan.

Materials arrive late. Weather interrupts work. A subcontractor doesn’t turn up. A client changes their mind halfway through a project.

The question is often not simply what went wrong, but who is legally and financially responsible for the consequences.

That can depend on the terms of the contract, the circumstances and any applicable legislation.

For example, does the agreement allow for an extension of time? Can additional costs be passed on? What happens if one party fails to meet its obligations? And what rights does a business have if it needs to suspend or terminate work?

These are the kinds of questions that are much easier to answer when the paperwork has been properly considered before a dispute arises.

 

Protecting the business behind the work

Running a successful construction or trades business involves more than delivering quality work.

It also means managing commercial relationships, protecting cash flow, understanding legal obligations and making sure the agreements supporting the business are fit for purpose.

At Rankin Business Lawyers, we work with businesses across a range of industries, helping them navigate contracts, commercial disputes, unpaid debts and the legal challenges that come with running a business.

Whether you’re a builder, subcontractor, supplier or trades business owner, getting the legal foundations right can save considerable time, money and frustration down the track.

Because in construction, the job might be finished, but that doesn’t always mean the problems are.