Many of my clients report that, once they have signed a construction contract, that contract gets filed away in the back of a drawer… that is, until a dispute arises.
Contract administration is, however, vital to being able to effectively monitor and control your project as the work takes place. It is the contract that tells the parties what their rights and obligations are in relation to making claims, providing notifications and otherwise performing the works.
Don’t get me wrong, contract administration can seem like an unnecessary formality but consider this as an example - construction contracts often include strict requirements around how and when certain claims may be made against the principal/head contractor. If you are unaware of what those requirements are, there is a chance that your claim may be time-barred or otherwise fail as a consequence of not meeting a particular contractual formality.
Can your business afford the cost of such a simple mistake that could have been avoided with appropriate contract administration?
Cross the T can work with you to prepare an easy-to-use and accessible guide on a project-by-project basis outlining when claims may be made, how claims may be made and any other formalities under your particular contract.
I have been providing legal advice to the construction industry for over 12 years, across a range of projects that adopt differing delivery structures via a vast array of differing documentation.
During that time, the key construction risks for contractors is always the same:
The best way to identify, minimise or otherwise mitigate your risk is to:
If you’re in the construction industry and are not sure what you should be looking for from a risk perspective in your contracts, why not contact Cross the T for a free, no-obligation conversation.
When you consider the cost of not understanding and addressing these construction risks at the outset, can you really afford not to Cross Your Ts?
Due diligence…sounds boring. Really who wants to get stuck in a room with paper work, accountants, lawyers and other advisors pouring over the records, looking at the products and otherwise tearing apart the new shiny business your heart is set on?
Due diligence may be hard work, and may seem painfully tedious, but the downside of not performing due diligence can be catastrophic.
Let’s imagine for a moment, we are looking at a reticulation retailer. We look at the business and the seller show us a set of glossy sales figures, lots of profit and a really exciting margin. Not knowing anything and without seeking advice we get all excited as we envisage new cars, overseas holidays and so on. This vision nags at us and a confirmation bias kicks in, as we are only human. Next thing is we are parting with our hard earned for this shiny vision.
We take possession of the business and the old owner walks away. Within a short period, there is something very wrong. The number of sales are significantly lower than the financial records indicate. In fact, within only a few months the turnover is less than half of what we were shown and thought we were purchasing. Appropriate financial due diligence would have revealed the issue and we would have known what we were actually buying.
That’s not the only area where we may get stung. In the same scenario the owner walks away and in a few months, things are going as promised, however suddenly out of seemingly nowhere the landlord serves us a notice to vacate. The building in which the business operates is about to be demolished and we need to move to a less than ideal location. Again, due diligence would have found the impending end of lease and enabled exploration of the issues prior to parting with the investment.
Imagine for a moment another scenario…our small reticulation store is named Irrigation Bushies Machinations, or IBM for short. The business has been named this for perhaps 20 years and has a great reputation. Part of what we invested in is the name, the legend and history of this long-established retailer. As we didn’t complete due diligence, we didn’t discover there is a passing off action pending… IBM (the company International Business Machines) has served previous notices to cease and desist with respect to using their business name. The previous owner has completed some research and discovered name recognition was responsible for 50% of the turnover and consequently didn’t want to change the name. The choices faced now are to defend the passing off case, which could very well be expensive, change the name and face an immediate drop in turnover, or perhaps worst of all, if this can't be resolved, is to walk away from the business altogether.
In this short article we have considered the potential downside of not performing due diligence. This article can’t take the place of professional advice, however, hopefully helps you appreciate the necessity of those rather boring due diligence discussions the accountant, lawyer or financial advisors have suggested.
Want to know more? Contact Cross the T by emailing Tania at email@example.com or Barry at firstname.lastname@example.org
When you hire a worker, you must check if they are an employee or a contractor. Why?
It is against the law for a business to incorrectly treat their employees as contractors. Businesses that do this are:
In addition to accurately determining whether a worker that is assisting you is an employee or a contractor, you should also put in place appropriate contracting arrangements to ensure that you are not only legally compliant, but that the interests of your business are adequately protected.
Key documents to consider having in place from an employee and/or contractor perspective:
Not sure where to start? Ask Cross the T for assistance and remember, your first 15 minute phone call is free!
Accountants use acronyms like a second language, GM, COGS, EBIT, EBITDA, NPAT, ROI, ROCE, NPV, IRR, AR, AP, WCE, DSO the list goes on and on....
Over time a large amount of accounting and financial acronyms have become part of the business community vernacular which is great for communicating and understanding your business, but which may seem like a foreign language at first!
Here are a couple of the profitability acronyms to help your understanding:
On starting a company with more than one shareholder, shareholders are often advised to make a Shareholders' Agreement... why?
While a Shareholders' Agreement is by no means a legal requirement, shareholders are well advised to record their agreement at the outset of business operations in order to regulate the way business between them is conducted.
A Shareholders' Agreement is usually formed at the beginning of a new business venture.
A Shareholders' Agreement is a binding contractual arrangement between shareholders and governs their relationship with one another, their business relationships and arrangements.
Quite often, shareholders will ask whether a Shareholders' Agreement is actually needed particularly when the business is young, relationships are good and finances may be tight.
So, why should shareholders seriously consider entering a Shareholders' Agreement?
Remember: the initial cost in setting-up a Shareholders’ Agreement is nothing compared to the costs of disputes and you should therefore view the cost of preparing a Shareholders’ Agreement as an investment. An investment in the smooth-running and stability of your company.
Adequate protection of confidential information is an absolute must for SMEs as that information is so often one of the business' best assets.
The first question for businesses is “what is our confidential information”?
Often, confidential information will include client lists, your financials (including your margins), your design and methodology, ‘secret’ ingredients, contracting arrangements and proposed business takeovers/mergers.
The next question for your business is “how can we protect that confidential information”?
There are a range of legal and practical mechanisms that businesses can and should implement to protect their information, which is often one of their key assets.
These mechanisms include:
Remember, privacy is not about secrecy… it is about being transparent about how you handle personal information and giving individuals confidence that it will be managed securely and appropriately.