Episode 46 - Watch out for the cross contracts deductions clause in your builder's contract
In this episode of The Tricks of Your Trade podcast, we delve into a crucial aspect of builder's contracts that often goes unnoticed but can have significant financial implications.
We shine a spotlight on the "cross contract set off" or "set offs" clauses, also known as "Other Monies Due" clauses in the Australian Standards. These seemingly innocuous clauses can pose a grave danger to contractors and subcontractors alike.
The inclusion of the phrase "otherwise than under the contract" grants builders the power to halt payments across all your projects, not just the current one, for claims made under the existing contract. This means that not only can the builder cease paying your claims for work carried out, but they can also absorb your retention funds from other projects.
One of the most frustrating aspects is that you can only pursue adjudication to recover these amounts on an individual contract basis. In other words, you are unable to consolidate all the contract disputes to have a single adjudicator decide on them. This limitation can result in expensive and time-consuming debt recovery processes. The episode also sheds light on the potential complications arising from signing a Parent Company Guarantee or a Director's Guarantee.
The inclusion of a cross contract deductions clause can have a ripple effect on these agreements and create a myriad of legal and financial challenges.
Tune in to this eye-opening episode of The Tricks of Your Trade podcast to gain valuable insights into the dangers posed by cross contract deductions clauses in builder's contracts.