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Damages for Delay.
In the recent case of Knott v Beechwood Homes (Home Building) [2012] NSWCTTT 393 (3 October 2012) the Consumer Trader and Tenancy Tribunal found that the builder had been guilty of delay under the contract. The applicant owner, who was paying for rental accommodation during the period of the delay, sought damages being that lost rental.
The builder relied upon a term of the home building contract which read as follows:
“53. Should the building works not be completed by the date for Practical Completion, then it is agreed that an amount of one dollar per day is an agreed pre-estimate of the owner’s general and liquidated damages. “
The owner asserted that the clause was unfair and that he did not understand its implications at the time he entered into the contract. That argument was not accepted by the Tribunal which applied the contract in strict accordance with its terms.
It should be noted that there is a statutory warranty implied by section 18D of the Home Building Act which is as follows:
"the work will be done with due diligence and within the time stipulated in the contract, or if no time stipulated, within a reasonable time;"
and a further provision, section 18G which provides:
"Warranties may not be excluded"
A provision of an agreement or other instrument that purports to restrict or remove the rights of a person in respect of any statutory warranty is void. Despite these provisions the Tribunal has consistently taken the view that such clauses should be allowed full force and effect according to their terms.
I strongly recommend that the Act be amended to provide that,
Should a builder fail to complete the works within the time stipulated in the contract as provided for in section 18D, the owner shall become entitled to liquidated damages being interest on the contract sum at the rate provided by the Uniform Civil Procedure Act for unpaid monies until the works are practically completed, which money may be deducted by the owner from progress payments as they fall due and to the extent that such liquidated damages are unpaid, the contract price shall be reduced, and, to the extent that such liquidated damages exceed the balance of the contract sum payable, they shall be a debt recoverable by the owner against the builder.
The builder relied upon a term of the home building contract which read as follows:
“53. Should the building works not be completed by the date for Practical Completion, then it is agreed that an amount of one dollar per day is an agreed pre-estimate of the owner’s general and liquidated damages. “
The owner asserted that the clause was unfair and that he did not understand its implications at the time he entered into the contract. That argument was not accepted by the Tribunal which applied the contract in strict accordance with its terms.
It should be noted that there is a statutory warranty implied by section 18D of the Home Building Act which is as follows:
"the work will be done with due diligence and within the time stipulated in the contract, or if no time stipulated, within a reasonable time;"
and a further provision, section 18G which provides:
"Warranties may not be excluded"
A provision of an agreement or other instrument that purports to restrict or remove the rights of a person in respect of any statutory warranty is void. Despite these provisions the Tribunal has consistently taken the view that such clauses should be allowed full force and effect according to their terms.
I strongly recommend that the Act be amended to provide that,
Should a builder fail to complete the works within the time stipulated in the contract as provided for in section 18D, the owner shall become entitled to liquidated damages being interest on the contract sum at the rate provided by the Uniform Civil Procedure Act for unpaid monies until the works are practically completed, which money may be deducted by the owner from progress payments as they fall due and to the extent that such liquidated damages are unpaid, the contract price shall be reduced, and, to the extent that such liquidated damages exceed the balance of the contract sum payable, they shall be a debt recoverable by the owner against the builder.
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