Why Understanding Your Contract Matters More Than Signing It

Every week across New Zealand, construction companies sign contracts that they don’t fully understand. Some are small family-run firms; others are migrant-owned teams trying to keep projects moving. In the rush to secure work, many business owners flip straight to the price and start date, sign the last page, and move on. Yet time and again, it’s not the building work that gets them into trouble, it’s the paperwork.

The signature isn’t the safety net

We often treat a signed contract as a badge of protection. “It’s all there in writing,” people say. But a signature doesn’t protect you if you never knew what you agreed to. Clauses about variations, extensions of time, or payment procedures can quietly shift risk onto the subcontractor. One missed notice deadline can cost thousands.

In my work, I’ve seen capable builders lose entire margins because a time-bar clause expired before they even realised they had to give notice. Others faced back-charges or withheld payments under “set-off” clauses buried in the fine print. They thought the contract would keep them safe, but in reality, it locked them out.

Plain language is not ‘dumbing down’ — it’s smart contracting

When you reading your contract, do you ever feels like you understands every words but together in a sentence, it makes no sense?

Many of our standard contracts, including the commonly used NZS 3910, are written in complex, legalistic English. Sentences run for half a page; key terms rely on cross-references. Even native English speakers struggle to follow them, so it’s no surprise that migrant contractors find them intimidating.

Did you know that we actually have a Plain Language Act 2022? Google it!

Plain language is not about removing the law, it’s about making the law usable. Under the Plain Language Act 2022, it states that

The purpose of this Act is to improve the effectiveness and accountability of public service agencies and Crown agents, and to improve the accessibility of certain documents that they make available to the public, by providing for those documents to use language that is (a) appropriate to the intended audience; and (b) clear, concise, and well organised.

The contract write in a language should be appropriate to the intended audience. In many cases of construction industry, the intended audience are the small business owner who also work on the site, for the sole traders, for mom and dad businesses, they are not just for the tier 1 companies that have an army of lawyers.

A clearly written clause doesn’t change your legal rights; it makes them visible. When both sides understand the same document, the relationship starts from fairness, not confusion.

That’s why the best contracts I’ve seen aren’t just legally sound, they’re readable. They use short sentences, everyday words, and logical structure. They explain “what happens if…” instead of quoting five sub-clauses. Clarity is not a luxury; it’s risk management.

Knowledge is power, understanding is power

Before signing anything, just ask three questions:

1. Do I understand when and how I get paid? Look for progress payment clauses, timeframes, and “pay-when-paid” conditions.

2. Do I understand my responsibilities if something goes wrong? Delays, weather events, and design changes all have notice requirements.

3. Do I understand how to raise a dispute? The Construction Contracts Act gives you rights to adjudication, but those rights mean nothing if you don’t know when or how to use them.

   
   

If the answer to any of these questions is “I’m not sure,” stop.

Ask for advice, or at least take the time to read it again.

It’s better to delay signing by a day than to spend six months fighting over a clause you didn’t understand.

Education is the real protection

Plain language alone can’t fix all the problem, education must come with it. Imagine if every new construction company, when registering with the Companies Office, had to complete a short online course on tax, contracts, and payment rights. It would save countless businesses from avoidable disputes.

Understanding your contract isn’t just good business; it’s survival. When you understand what you’re signing, you’re no longer a passenger in someone else’s process, you’re an informed partner in a fair agreement.

A new standard for fairness

We can build a fairer construction industry, but only if we stop treating signing as the finish line and start treating understanding as the foundation. Contracts written in plain language, explained by people who care enough to make them clear, are how we get there.

Because fairness isn’t found in the signature, it’s found in the sentence you can actually understand.