Why Contracts Matter
Construction disputes are expensive, stressful, and damaging to business relationships. Most disputes have their root in ambiguity — about what was agreed, what the price covers, who bears the risk of unexpected conditions, and how variations and delays are handled. A well-drafted contract eliminates much of this ambiguity before work starts, and provides a clear framework for managing the issues that inevitably arise during construction.
New Zealand’s construction industry has developed a set of standard form contracts that are widely used and generally understood by industry participants. Understanding the main contract forms — and knowing which one is appropriate for your project — is a fundamental business skill for construction contractors.
NZS 3910: The Standard Commercial Construction Contract
NZS 3910 (Conditions of Contract for Building and Civil Engineering Construction) is the most widely used standard form for commercial construction in New Zealand. It establishes the framework for the relationship between the principal (the client), the contractor, and the engineer (who administers the contract on behalf of the principal).
Key features of NZS 3910 include: a structured variation procedure that requires engineer approval before additional costs are incurred; provisions for extension of time claims; payment procedures aligned with the Construction Contracts Act; and a dispute resolution pathway that escalates from expert determination through arbitration.
NZS 3604: For Residential Construction
NZS 3604 — not to be confused with the building standard of the same number — is a standard form for residential construction. It’s less commonly used than NZS 3910, and many residential builders use their own contract templates or those provided by Master Builders or Certified Builders associations.
Whatever contract form is used for residential construction, the Building Act requires that contracts for residential building work over $30,000 be written and include specific information: a description of the work, the price and payment schedule, start and completion dates, and information about the contractor’s LBP licence.
Customising Standard Contracts
Standard form contracts can be modified by special conditions that override or supplement the standard terms. Special conditions are common in large commercial projects, where principals seek to allocate risks differently from the standard form’s defaults. Contractors should have any non-standard special conditions reviewed carefully — preferably by a construction lawyer — before signing, as they can significantly shift risk from the standard position in ways that are not immediately obvious.