It can seem onerous and time consuming, but thorough processes and the occasional awkward conversation will help to keep your business safe from legal disputes. By Angela Tufvesson
Whether it’s a disagreement about variations, quality of work or the type of fitting or fixture that’s been installed, legal disputes with clients can do a lot of damage to your cash flow, profitability and, in the age of social media, reputation. Resolving these sorts of disputes can take time and effort, which can have flow-on effects to other aspects of your business—not to mention your energy levels. Thankfully, protecting your business from legal disputes is simpler than you might imagine. All it takes is solid systems, an understanding of your legal rights and a commitment to clear communication with your clients. Here’s how to go about it.
WRITE IT DOWN
Most disputes occur because there isn’t a clear agreement between tradie and customer, says business coach Jon Dale from Small Fish, a consultancy that specialises in the trades. Jobs or variations are agreed on a handshake, leaving oodles of room for miscommunication. “Disputes are almost 100 per centa failure to communicate,” says Dale. “The customer has an idea of what’s going to happen, and the trades person has an idea of what’s going to happen,
but they’re not the same. And what can then happen is the customer withholds some payment.” The solution: a clear, detailed and legally enforceable written contract. “A contract protects tradies because any dispute will get resolved according to what’s in the contract,” says Dale.“Clear documentation about what you will do and written acceptance by the customer is massively valuable.”
If you’re sub-contracting, the same goes for the contract you sign. In this situation, be sure to read the contract thoroughly—and don’t be afraid to push back on unsatisfactory terms, says lawyer Fionna Reid, a director at Aitchison Reid Building and Construction Lawyers. “It’s really important the contract is fair,” she says. “If you’re a good subbie and you have a good relationship with the builder, don’t underestimate your ability to negotiate the subcontract. Often they will change the subcontract because they don’t want to lose you.
PAY ATTENTION TO THE T&CS
It might not seem like it, but a quote YOUR BUSINESS scribbled on the back of your business card or a scrap piece of paper is an offer, and if the client accepts it, it’s a contract. If you decide you want to add terms and conditions after the fact, you might run into trouble. “If your quote is accepted, a contract is formed,” says Reid. “Then if you agree to a contract or subcontract later, that’s a variation to the original contract. So it’s really important to think about getting those terms and conditions in at the quote stage.”
Dale agrees, explaining that including terms and conditions on all quotes should be part of a consistent sales process used with clients. “You decide up-front what happens in a whole range of situations and you write it down,” he says. “You have terms and conditions that say, for example, if we find rock, we’ll have to vary the contract. If they say they don’t like that door and want a different door, you explain you’ll give them a quote for how much it will cost, they will sign it and accept it, and you won’t do the work until they have.”
BE WILLING TO HAVE AWKWARD CONVERSATIONS
It might be a bit awkward, but being clear and up-front with your customers, especially when it comes to money matters, is vital. “It starts with your sales process—be clear with what you’re quoting for and what’s excluded—and it goes through to your project process,” says Dale. “What people tend to do is not say it because it’s a bit confronting, but it’s really important to discuss these things with your customers.” For sub-contractors, valuing your work is crucial to making sure you’re paid on time and preventing disputes from escalating.
“On one hand, subbies often really care about their relationship with their customer, which is often the builder, because if they look after the relationship, they hope to get more work,” says Reid. “Unfortunately, the other part is payment and what often happens is the sub- contractor sacrifices payment to maintain the relationship, so they’ll take on a new job even though they haven’t been paid for the last one.”
What’s more, under security of payment legislation there are limited time frames in which to chase up overdue payments. “The legislation is very fast acting because it’s all about cash flow, but in order to maintain their relationships many tradies aren’t using it,” says Reid. She says it’s really important to enforce your right to be paid and not be so concerned about damaging relationships: “If you’re not getting paid, what kind of relationship is that?”