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Chris The Lawyer
Chris The Lawyer, Lawyer
Category: New Zealand Law
Satisfied Customers: 22176
Experience:  37 years qualified as a lawyer; LLB, MMgt and FAMINZ.
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Could you pleaae clarify this issue for me, Under the

Customer Question

Could you pleaae clarify this issue for me, Under the contstruction
JA: What state are you in? It matters because laws vary by location.
Customer: Under the construction contracts act, do variations to the original contract attract retention payments?
JA: Has anything been filed or reported?
Customer: We are at the completion of works stage, I understand that retention's are part of the main contractual agreement ,but my query is the main contractor has added retention's to non contractual variations.
JA: Anything else you want the lawyer to know before I connect you?
Customer: not at this stage thanks
Submitted: 1 month ago.
Category: New Zealand Law
Expert:  Chris The Lawyer replied 1 month ago.

I am reading this now

Customer: replied 1 month ago.
Are you still with me ?
Expert:  Chris The Lawyer replied 1 month ago.

Under the recent amendment To the Construction Contracts Act part 2A creates a trust regime but this is not in force yet. So the answer is in your contract documents. Which form of contract are you using?

Expert:  Chris The Lawyer replied 1 month ago.

Are the variations accepted or are they being negotiated?

Customer: replied 1 month ago.
It is as a subcontractor (electrical) on a construction site
Expert:  Chris The Lawyer replied 1 month ago.

Normally all payments under a payment claim are subject to retention. So if the payment for the variation was included in the payment claim, and the contract provides for retentions, the whole of the payment claim including the variations will be subject to the retention provision. That is, provided your contract actually says there are retentions. You have not sighted the exact contract, but the standard form contracts generally do provide for retentions on larger jobs

Customer: replied 1 month ago.
The variations have been accepted by the main contractor and a variation order has been received to complete the work. But the main contractor insists on applying retention payments. Effectively this work is separate from the main contract and is a separate request to do work. It is effectively a quote job for services
Expert:  Chris The Lawyer replied 1 month ago.

The issue will be whether your contract provides for retentions, or whether they are just applying this, because they want to. If there is no provision for retentions, you could respond with a schedule objecting to the deduction of the retentions, provided that you are within the time to lodge the schedule (20 working days)

Customer: replied 1 month ago.
Chris I understand the retention payments due on construction contract. Why should retention so be paid on variation work. If this was work covered under the contract fine , but by definition it is a variation to the contract
Expert:  Chris The Lawyer replied 1 month ago.

A variation to the contract incorporates the same terms and conditions as the contract, except of course for the specific items added as an extra from the contract. This means that if they are entitled to deduct retentions for the progress payments, the same applies to variations

Customer: replied 1 month ago.
Ok I understand your advise but find the retention issue overly complicated and unfriendly towards subcontractor, essentially they have our money to attract and collect interest .
Expert:  Chris The Lawyer replied 1 month ago.

You will find that this gets even more complicated once the new retention regime comes into force, but the upside will be that they are obliged to hold the money on trust, whereas under the present system, if they go broke before the retention money is paid out, it can be lost in the insolvency. So the new system under part 2A of the act will give you better protection, although not necessarily better cash flow

Customer: replied 1 month ago.
Expert:  Chris The Lawyer replied 1 month ago.

You can rate the answer when you are ready

Customer: replied 1 month ago.
Chris , either I did not make the reason for my Enquiries clear or you preferred to operate behind the "letter of the law" , briefly the issue was and is that main contractors manipulate the "intention "of the retention payments to their financial advantage often financially crippling smaller sub contracting businesses by utilising these held funds for their personal desire.
The question I had was " the agreed variation work , that by definition is not part of the original contract , In fact is effectively a separate job is being manipulated by the main contractor by adding a retention component. Basically this is immoral and dishonest ,
So To rate your performance ; yes you recited chapter and verse , you did not answer the question but clouded it by reference to an act that is still under review. I feel you hide behind legalese and differed any positive responses. Dissapointed
Expert:  Chris The Lawyer replied 1 month ago.
It's about how a contract is interpreted. The principle contract must also govern the variations, and so if that contract provides for variations, then the law says it must apply to variations. I am not favouring the big guys, just telling you how contract interpretation works. If I told you what you want to read, but which as legally incorrect you would have cause for complaint. The variation only changes the quantities and additional work, but the other terms of the contract still apply. It's a variation, not a separate job. The morality of what they do is not a legal issue.

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