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Building disputes – Do not try DIY – Real Estate and Construction – Australia



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It’s probably fair to say that you wouldn’t ask your
builder to give you legal advice (and you definitely wouldn’t
ask us to build your house).

However, we regularly see disputes between builders and home
owners where both parties have failed to get legal advice at an
early stage and have attempted to resolve matters themselves.
Often, despite their best intentions, the parties will do more
damage than good.

A recent matter heard in the NSW Supreme Court1 is an
example where both parties, but in this case mainly the homeowners,
adopted positions that were wrong – and where early legal
advice would have most likely resulted in a better outcome.

Background Facts

The Cohens, the homeowners, and the builder, Zanzoul, entered
into a building contract in 2013 under which Zanzoul agreed to
knock down the Cohen’s home and build a new multi-level
house.

In 2015, Zanzoul issued five progress claims (similar to
invoices) to the Cohens. The Cohens only part paid some of these
progress claims.

The Cohens claimed that Zanzoul’s work was incomplete and
defective and refused to make further payments. Zanzoul said that
he was willing to rectify the work but only if the Cohens paid the
progress claims.

As is often the case in these types of matters, there were lots
of emails, phone calls and conversations between the Cohens and
Zanzoul where both parties tried to communicate their alleged
rights under the contract.

Repudiation

Every (decent) contract will set out what a party has to do if
they disagree with a progress claim, invoice or request for
payment. In this case, the Cohens adopted a position which was
entirely inconsistent with what they agreed to do under the
contract. By failing to follow the required process to dispute the
progress claims (which they rightfully could have done), the
progress claims became due and payable.

The Court found that the Cohens, in continually and wrongfully
refusing to pay the progress claims when they were due,
demonstrated that they no longer intended to be bound by the
contract. In legal terms this means that the Cohen’s repudiated
the contract.

When one party repudiates a contract, the contract is not
automatically terminated; it will only come to an end when the
other party accepts the repudiation. Zanzoul accepted the
Cohen’s repudiation and the contract was therefore
terminated.

Consequences

With the contract terminated, the parties were no longer
required to perform their obligations under the contract.However,
the parties could still rely on the contract to protect their
rights that had accrued up to its termination.

The Court found that both parties had accrued rights before the
contract was terminated; the Cohens had the right to recover
damages from Zanzoul for the allegedly defective work and Zanzoul
had the right to recover monies owed to him.

What does this case mean for me?

At the end of the day, both parties ‘won’ –
Zanzoul was ordered to pay the Cohens for the defective work,
whilst the Cohens had to pay the outstanding progress claims.
Ultimately though, both parties suffered the stress of litigation,
which was only finalised in August 2020, and had to pay
considerable legal costs.

If you are a party to a building contract, it is important that
you understand your legal position before you take any action. Had
the Cohens understood their rights under the contract and taken the
right steps to dispute the progress claims, the matter may well
have been resolved by the parties without going to court and at
less personal and financial cost.

Footnote

1Cohen v Zanzoul trading as Uniq Building
Group [2020] NSWSC 592

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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