Design And Construct Contract Checklist For Fitouts

What should you check before signing a design and construct contract for your fitout? The reassuring answer is that most fitout disputes can be prevented by getting a few practical clauses clear before work begins.

Fitouts move quickly. You might be locking in a shop opening date, coordinating a landlord's requirements, ordering joinery, and trying to keep costs under control at the same time.

A good design and construct agreement should help everyone understand the job, the budget, the timeline and what happens if things change. A vague one can leave you arguing about scope, delays, defects and final payment when you should be opening your doors.

What Is A Design And Construct Contract For A Fitout?

A design and construct contract is an agreement where one party is responsible for both the design and the building work for your fitout.

In a typical commercial fitout, this means the contractor doesn't just install what someone else has fully designed. They may also prepare or coordinate drawings, finishes schedules, engineering input, shop drawings, approvals, site measurements and construction.

This can be very efficient, especially for retail, hospitality and office fitouts. You have one main party to deal with, which can reduce gaps between the designer and the builder.

The trade-off is that the contract needs to be clear about responsibility. If a bench doesn't fit, a council requirement has been missed, or the landlord rejects a design detail, you need to know who fixes it and who pays.

For example, say you run a cafe in Brisbane and sign a $220,000 design and construct contract for a new shop fitout. The contractor prepares the layout, sources the joinery and manages trades. If the exhaust system later needs redesign because the original plan didn't meet the centre's requirements, the contract should tell you whether that cost sits with the contractor, you, or another consultant.

That's why a fitout design and construct contract needs more than a price and a start date. It should turn the commercial deal into a practical project roadmap.

What Should Be In Your Fitout Design And Construct Contract?

Your contract should clearly set out the work, price, timing, change process, risk allocation and handover requirements.

A commercial fitout contract review should focus on the clauses that will matter if the project gets messy, including any limits of liability. Templates can be a useful starting point, but fitouts are site-specific, so the document usually needs tailoring before you rely on it.

Design And Construct Contract Checklist Australia

1. Parties: Write the correct legal names, ABNs and ACNs for your business, the contractor and any trustee entities.
2. Site Details: Identify the premises, access points, loading dock rules, trading centre requirements and any landlord conditions.
3. Scope Of Works: Attach drawings, specifications, finishes, inclusions, exclusions and any assumptions.
4. Design Responsibility: State who prepares, reviews and approves drawings, engineering and shop drawings.
5. Contract Price: Set out whether the price is fixed, provisional, cost-plus or a mix, and how GST is treated.
6. Payment Milestones: List the amount due at each milestone and what evidence is needed before payment.
7. Variations: Explain how changes are requested, priced, approved and recorded before work starts.
8. Delays: Set the start date, completion date, extension of time process and any agreed delay costs.
9. Approvals: Allocate responsibility for landlord consent, council approvals, certifier sign-off and specialist permits.
10. Insurance And Safety: List required policies, licence checks, WHS obligations and subcontractor responsibilities.
11. Defects And Handover: Include practical completion, defects lists, warranties, manuals, keys, certificates and training.
12. Termination And Disputes: Set out default notices, suspension rights, payment disputes and a practical escalation process.

This outline isn't a finished legal document. A lawyer should tailor it to your project, especially if your lease, landlord works guide or franchisor requirements impose extra obligations.

How Do You Avoid Scope And Variation Disputes?

You avoid scope and variation disputes by making the contract specific about what is included, what is excluded and how every change is approved.

Most fitout arguments don't start with bad intent. They start with different assumptions, often because the customer contract is unclear. You thought feature lighting was included. The contractor priced standard lighting only. You assumed after-hours work was part of the deal. The contractor priced ordinary business hours.

Your scope should be detailed enough that someone new to the project can understand what is being delivered.

Scope Details To Spell Out

• Demolition, make-good and waste removal.
• Joinery, counters, shelving, fixtures and loose furniture.
• Electrical, data, lighting, plumbing, mechanical and fire services.
• Signage, graphics, branding, window decals and menu boards.
• Flooring, walls, ceilings, painting and finishes.
• Equipment supplied by you, the contractor or a third party.
• After-hours work, noise restrictions, lift bookings and loading dock use.
• Final cleaning, testing, commissioning and handover documents.

Variations should be in writing before the extra work begins, unless there's a genuine emergency. The clause should say:

• who can approve a variation for your business
• how the price will be calculated
• whether the completion date changes
• what happens if urgent work is needed to protect the site or comply with directions
• whether verbal approvals count, and if so, how they must be confirmed

For example, if you ask for upgraded stone benchtops and extra pendant lights, the contractor should issue a written contract amendment or variation showing the extra cost and any delay. If you approve $18,000 in extra work and a 5 business day extension, that record makes the final account much easier to settle.

What Happens If The Fitout Is Delayed?

If the fitout is delayed, the contract should tell you whether the contractor gets extra time, whether delay costs apply and what evidence is needed.

Delays are common in fitouts because many moving parts sit outside one party's control. Landlord approvals, centre access, custom joinery, authority inspections, latent site conditions and client changes can all shift the program.

Your contract should include a clear extension of time process. It should state when the contractor must notify you of a delay, what information the notice needs to include, and when you need to respond.

If you don't include this process, delay arguments can become circular. The contractor says your late approvals caused the delay. You say the contractor didn't order materials early enough. Meanwhile, rent-free periods expire and opening dates move.

Liquidated Damages And Delay Costs

Some shop fitout contract terms include liquidated damages. This is a pre-agreed daily amount payable if the contractor is late for reasons they're responsible for. It should be a genuine estimate of likely loss, not a penalty.

For example, your contract might say completion is due on 1 June and liquidated damages are $800 per day. If the contractor finishes 12 days late without an approved extension of time, the delay amount would be $9,600. If you caused 5 of those days by changing the kitchen layout, the outcome may be different.

You should also check whether the contractor can claim delay costs from you. If you delay approvals, restrict access or change the scope, the contract may allow extra time and extra money.

For payment disputes, each state and territory has security of payment legislation. For example, in NSW, the Building and Construction Industry Security of Payment Act 1999 gives strict timeframes for responding to payment claims, including a 10 business day period for a payment schedule unless the contract gives a shorter time. Other states and territories have their own Acts and timeframes, so check the rules for your project location.

What Approvals, Insurance And Safety Rules Should You Check?

You should check who is responsible for every approval, licence, insurance policy and safety obligation before work starts.

Fitouts often sit at the intersection of your lease, building rules, council requirements and construction laws. If the contract simply says the contractor will complete the fitout, that may not be enough.

Approvals

Your contract should allocate responsibility for obtaining or coordinating approvals such as:

• landlord consent and compliance with the landlord's fitout guide
• development approval or complying development approval, where needed
• building certifier approvals and occupation certificates
• fire safety, mechanical, plumbing and electrical approvals
• food business registration or approvals for hospitality premises
• signage permits and outdoor dining approvals, where relevant

The National Construction Code, Australian Standards and local council rules may affect the design, including any interior design specifications. For restaurants and cafes, health and food safety requirements can also affect flooring, sinks, ventilation, waste areas and cleanability.

Licences And Insurance

Licensing rules are state-based. Depending on the work and location, the contractor or trades may need building, electrical, plumbing, fire protection or other licences.

You should ask for current copies of relevant licences and insurance certificates before site works begin. Common policies include public liability, workers compensation, contract works insurance, professional indemnity for design services, and motor or plant cover where relevant.

Work health and safety laws also matter. Under the model Work Health and Safety laws adopted in most jurisdictions, your business and the contractor may both have duties to keep people safe, especially if your staff, customers, centre management or other trades can access the site. The contract should make site control, inductions, safe work method statements and incident reporting clear.

The Australian Consumer Law may also apply to some business purchases, including where goods or services are under $100,000. It also prohibits misleading or deceptive conduct. Since 9 November 2023, unfair contract terms in standard form small business contracts can attract penalties if the small business has fewer than 100 employees or annual turnover under $10 million.

What Should Happen At Defects, Handover And Final Payment?

At the end of the fitout, the contract should set out a clear handover process, a defects process and the conditions for final payment.

The most stressful disputes often happen at the end. You want to open. The contractor wants final payment. There are scratches, missing certificates, incomplete joinery adjustments or equipment that hasn't been commissioned.

Your contract should define practical completion. This usually means the works are complete except for minor defects that don't prevent safe and lawful use. The exact definition should match your project, because a cafe that can't legally operate due to missing approvals is very different from an office with a paint touch-up issue.

Handover Items To Require

• as-built drawings and final plans
• warranties for equipment, joinery and materials
• operation and maintenance manuals
• certificates for electrical, plumbing, fire and mechanical works
• keys, access cards, alarm details and safe codes
• training for equipment or systems, where needed
• a defects list with dates for rectification
• confirmation that subcontractors and suppliers have been paid, where appropriate

Retention can also help manage defects. For example, your contract may allow you to hold 5% of the contract price, with part released at practical completion and part released after the defects period. This is a commercial term, not a one-size-fits-all rule, so it needs to be drafted carefully.

If something goes wrong, deal with it in order. First, take photos and videos. Second, send a written notice referring to the contract clause and the defect or missing item. Third, give a reasonable deadline to fix it. Fourth, keep records of any extra costs or lost trading time. If the issue affects safety, approvals or your opening date, get help early rather than waiting until final payment is due.

Key Takeaways

• A design and construct agreement for a fitout should cover both design responsibility and construction delivery.
• Scope, exclusions and variations need to be specific, otherwise small changes can become expensive disputes.
• Delay clauses should deal with extensions of time, delay costs, liquidated damages and payment claim timeframes.
• Approvals, licences, insurance and WHS duties should be checked before anyone starts work on site.
• Handover should include certificates, warranties, manuals, defects lists and a clear final payment process.
• Templates can miss project-specific risks, especially where your lease, landlord or franchisor adds extra requirements.

If you'd like help with your design and construct agreement, commercial fitout contract review, variation process or handover terms, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.