LEGAL
NZS 3910:2013
The new standard form building contract: key changes by Carolyn Culliney The Standards New Zealand contract NZS 3910 is the most widely used standard form of contract conditions in New Zealand.
Terminology changes
It provides a standard form of general conditions of contract that can be adapted and incorporated into construction contract documents. NZS 3910:2013 was published on 1 October 2013. It is the first of three new standards that are being published in place of the NZS 3910:2003. These three standards are: • NZS 3910:2013 – Conditions of Contract for building and civil engineering – Construction. • NZS 3916:2013 – Conditions of contract for building and civil engineering – Design and Construction (published on 31 October 2013). • NZS 3917:2013 – Conditions of Contract for building and civil engineering – Term Maintenance (to be published in early 2014). In this article we summarise some of the key changes in the new NZS 3910:2013.
• Defects Liability Period is now ‘Defects Notification Period’; • Defects Liability Certificate is now ‘Final Completion Certificate’; • Contract Documents is now ‘Contract’; and • The definition of Net Cost now includes the word ‘reasonable,’ meaning the Net Cost will only include the ‘reasonable actual or assessed expenses or direct cost to the contractor.’
Carolyn Culliney is an Principal in the Commercial Corporate team at Meredith Connell. Carolyn’s practice encompasses advice on all forms of commercial contracts. Carolyn has a particular specialization in construction law and has been a guest speaker for the New Zealand Law society on the subject. Carolyn can be contacted on (09) 336 7500 or by email at carolyn.culliney@meredithconnell.co.nz
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First, it is important to note that there are some distinct changes in terminology in the NZS 3910:2013. These are:
Cost Reimbursement Contracts The cost reimbursement provisions for cost reimbursement contracts have been substantially rewritten. In the former NZS 3910:2003, costs were paid, and parties could set out a particular method for calculating payment for any allowance for profit, which was tailored to the requirements of each contract. The new NZS 3910:2013 now sets out in clause 2.4 specific methods for calculating costs in cost reimbursements contracts. Firstly, parties will have to specify whether rates will be included when calculating costs. If rates are not included in the calculation of costs, costs will be calculated by default at net cost plus on-site overheads, off-site overheads and profit costs combined. In this situation, contractors will have to keep records of all these additional costs, and the engineer is entitled to inspect these records when requested. If rates are included, the parties must specify whether the costs calculation additionally includes the on-site overheads, off-site overheads or profit.
Bonds The biggest change to contractors’ bonds in NZS 3910:2013 is that pursuant to the new section 3.1.3, a contractor’s bond will only have an expiry date if the principal to the contract agrees to this. If an expiry date on the contractor’s bond is agreed, a replacement bond must be provided by the contractor one month before it expires. However, if practical completion has