How to Assess the Fairness of Your Construction Contract?
- Emmolina May
- Jul 25, 2025
- 4 min read
When starting a construction project, whether you're a homeowner or a professional, the construction contract is one of the most important documents you'll encounter. And if there's no contract? You need to ask yourself again, why do you start a project without a contract?
Contract is the one and only one document that lays out the expectations, responsibilities, and rights of everyone involved. A good contract can ensure a smooth construction and successful results, and a bad one? It will lead to all sorts of problems.
So, how can you tell if your contract is good or bad? Fair or not fair?
This week's EM Fridays will provide insights on how to review construction contracts to ensure fairness and balance for all parties.
Understanding the Basics of a Construction Contract
To effectively assess the fairness of a contract, it’s important to know what constitutes a contract. Many of the adjudication claim was requested that the adjudicator determine whether there was a contract before even moving to the argument of " who owes whom how much".
A contract is fundamentally a legally enforceable agreement between two or more parties. It is founded on key elements including offer, acceptance, consideration, intention to create legal relations, and certainty of terms. Without these elements, an agreement may not be recognised as legally binding.
Under New Zealand’s Construction Contracts Act 2002 (CCA), the term “construction contract” is specifically defined. According to Section 5 of the CCA, a construction contract means:
(a) means a contract for carrying out construction work; and
(b) includes any variation to the construction contract; but
(c) does not include a lease or licence under which a party undertakes to fit out, alter, repair, or reinstate the leased or licensed premises unless the principal purpose of the lease or licence is the carrying out of construction work
This broad definition includes both oral and written, or partly written and partly oral agreements and covers a wide range of contractual structures, including head contracts, subcontracts, and consultancy arrangements where construction work is involved.
Now that we understand the definition of a contract, a construction contract under CCA, next, we will talk about what components a typical construction contract should include.
Key elements typically covered in contracts include:
Scope of Work - A detailed description of the work to be performed.
Timeframe - Start and completion dates, along with penalties for delays.
Payment Terms - Total contract price, payment timeline, and change order conditions.
Warranties and Guarantees - Coverage for issues that may arise after project completion.
Dispute Resolution - Procedures for addressing disagreements.
Understanding these elements is the key when evaluating whether your contract is fair.
Key Factors to Consider for Fairness
Clarity and Transparency
A first sign of a fair contract is clarity.
Are you finding that you are reading English but you are not understand it at all?
Are the terms written clearly without any ambiguity?
Are the contract using some big fancy words that make it hard to read?
If the language is vague or complex, it may not be in your best interest.
For example, a contract with unclear definitions of "acceptable work" can lead to conflicts later. Always ask for clarification if something isn’t clear. Making sure everyone understands the terms from the beginning is the first step for a smooth project.
Balanced Risk Distribution
Fair contracts also distribute risk evenly. Neither party should bear all the risk. For instance, if weather delays are solely assigned to the contractor, it can create an unfair environment. Contracts should outline how to share potential risks.
Fair Payment Terms
Payment terms can greatly influence a contract's fairness. Ideally, the payment schedule should reflect project progress. A good contract often includes specific measurable requirements for the payments claims and payment schedules, so there's no space for misunderstanding.
Timelines and Schedule Management
Timelines can lead to disputes if not handled properly. A fair contract sets realistic completion dates while considering potential delays. Strict penalties for minor delays make a contract one-sided and unfair.
I recommend including a clear schedule that allows room for potential disruptions, such as bad weather. This approach can build trust and collaboration between all parties.
Warranties and Liability
Warranties and liabilities are very important for a fair contract. The client should provide clear standards of workmanship and materials. On the other hand, contractors need protection against unreasonable liability.
When reviewing contracts, I normally will closely examine the warranty and liability clauses. A reasonable warranty period along with clearly defined liabilities will keep both parties accountable while providing peace of mind.
Dispute Resolution Process
A fair construction contract should offer an effective and accessible dispute resolution process. If the contract outlines a complicated, one-sided resolution method, it can lead to additional tension.
I encourage that contracts provide various options for resolving disputes, such as mediation before resorting to adjudication, arbitration or litigation. This flexibility often leads to quicker resolutions and minimises conflict.
Checklist for Evaluating Your Construction Contract
Here is a checklist you can use to ensure the fairness of your construction contract:
Is the contract clear and understandable?
Are risks balanced fairly between all parties?
Are payment schedules reasonable and measurable to project deliverables?
Do timelines reflect realistic expectations with allowances for delays?
Are warranties and liabilities well defined and equitable?
Is the dispute resolution process straightforward and fair?
Navigating Your Construction Contract with Confidence
Evaluating your construction contract’s fairness is the key for a successful project, no matter what role you play. By understanding key contract elements, seeking professional help when needed, and using this guide, you can manage your contract with greater confidence.
Ultimately, a fair contract establishes a positive working relationship, reduces disputes, and contributes to a successful construction project. Take the time to assess your contract carefully. A fair agreement now can save you from complications down the road.
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Want to stay one step ahead of disputes? I help contractors, consultants, and small businesses build better contract habits. Reach out via emmolinamay.com or follow EM Fridays for practical advice that makes difference.