Construction Contract

Legal issues related to buying land, houses, condos in the LOS. Anything about contracts. Finance related, such as getting a mortgage, buying property from the bank, etc.

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Construction Contract

Postby hkexpat » Thu Jul 06, 2006 6:44 am

Does anybody have a copy of a typical construction contract that they have used in Thailand? I am not interested in the general stuff, but the details on payments, inspections, performance, schedule, technical spec. etc.

HKexpat
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Re: Construction Contract

Postby johnleepbs » Wed Jul 12, 2006 12:19 am

hkexpat wrote:Does anybody have a copy of a typical construction contract that they have used in Thailand? I am not interested in the general stuff, but the details on payments, inspections, performance, schedule, technical spec. etc.

HKexpat


Is a "typical" construction contract what you want, because what a "typical" builder will try to get you to agree to is appalling, geared towards them and offers little protection for yourself. They will say this is "normal" in Thailand, usually with a smile. Not So.

It will talk about payments mainly....... if you want to see one or two of these I have some examples I was offered. I refused to sign and agree to them.

Get one drawn up by a lawyer of your choice, that is fair to both sides. Ensure it refers specifically to the plans you have, and the Bill of Quantities you have (you do, don't you?? specifying the exact materials to be used?) and a timescale including penalties (typically 0.1% per day) for late completion. It should also specify who will sign off each stage is satisfactory.
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Contract

Postby hkexpat » Wed Jul 12, 2006 9:08 am

John,

I would very much appreciate taking a look at what you have. Can you email to me at hkexpat2001@yahoo.com

The BOQ and Materials is not a problem. I am designing this using a software package at it figures out the BOQ and BOM automatically. I plan to use this as 'yard stick' against build estimates when I get to that stage.

Any other advice - greatly appreciated.

Thanks.

HKexpat
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Re: Contract

Postby johnleepbs » Wed Jul 12, 2006 11:35 am

hkexpat wrote:John,

I would very much appreciate taking a look at what you have. Can you email to me at hkexpat2001@yahoo.com

The BOQ and Materials is not a problem. I am designing this using a software package at it figures out the BOQ and BOM automatically. I plan to use this as 'yard stick' against build estimates when I get to that stage.

Any other advice - greatly appreciated.

Thanks.

HKexpat


No problem, I have sent one of the "typical" contracts (roughly translated) to your email. I am sure you will agree its hopeless but I had similar offered to me by 3 different builders. The one I actually agreed to is, of course, in Thai but I can scan it next week and send it to you if it helps (I am in the UK at the moment, but back in Thailand next Tuesday)

Regards
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making a contract

Postby jazzman » Wed Dec 06, 2006 10:03 pm

Where I live, in a fairly remote part of isaan, building a house seems to be quite an informal affair, and several other farangs have had a similar experience. I let it be known around the village that I was looking for builders and several teams turned up to offer their services. I showed them my own (professional) plans. Some, professing to be a 'company' would only build a house of similar size and description from their own catalogue.
Instead of naming a price for the labour, they all asked me how much I was prepared to pay. i had done my homework - there is a tradition here that the labour is calculated at 43% of the value of the Bill of Quantities.
The entire cost of materials + labour works out at approximately half the price of a turn-key solution from a building developer, but of course, you do need to know at a little bit about building houses or at least what you can learn from DIY books and web sites.
I provided them with a very simple contract which stipulated three payments: 1. At the start of work. 2. When the roof is tiled. 3. (the largest chunk) on completion.
The contract basically stipulates that they will work to my drawings and specs; that I will be responsible for purchase and delivery of all materials; that I do not provide tools or pay for plant hire, but I pay for expendables (saw blades, paint brushes, welding electrodes, etc.). And that I will visit the site daily to make quality controls.
I included for a 'clean work' bonus (completion time is not an issue), and tied them down to a guarantee for workmanship, labour only. There is an option to build the swimming pool, a sala, four bungalows and a minimart, and to lay roadways and landscape the gardens if i am satisfied with the work on the main house.
They have built a smart wooden hut and they sleep on site. My wife often takes them food in the evening.
Here in Isaan, a good interpersonal relationship with your builders is imperative. if you upset them, they may just clear off and not finish the job (they are not so hot on the financial aspect, they all own rice fields.). It would be very difficult to find a new team to come and pick up the pieces.
If you don't have room (or sufficient security) on your land to take complete deliveries, it is necessary to keep up the flow of materials, as the builders have a fixed routine: they just will not work on preparing some other part of the project while waiting for a large delivery for the phase they are working on. They will just take a day or two off and say "Call us when it has arrived."
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deposits

Postby chorizo » Sat Apr 14, 2007 1:19 pm

What is the usual for a deposit at signing of contract ? My contractor wanted 20% but i think this is way high. 10 % sounds more reasonable ? He thinks this is ok. Maybe i should have said 5%.........
My Thai wife does not want to give anything...her Thai ex builds houses and got 300,000 plus on deposit (not from us) and left the area...
We have 5 payments..10,20, 25, 25, 20 % with 50,000 being held for 3 months. Contract guaratees some for a year. Contract in English and Thai.
I also will have copy of Contractor ID plus al workers.
Am i on the right road ?
Thanks ,
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deposits

Postby chorizo » Sat Apr 14, 2007 1:20 pm

What is the usual for a deposit at signing of contract ? My contractor wanted 20% but i think this is way high. 10 % sounds more reasonable ? He thinks this is ok. Maybe i should have said 5%.........
My Thai wife does not want to give anything...her Thai ex builds houses and got 300,000 plus on deposit (not from us) and left the area...
We have 5 payments..10,20, 25, 25, 20 % with 50,000 being held for 3 months. Contract guaratees some for a year. Contract in English and Thai.
I also will have copy of Contractor ID plus al workers.
Am i on the right road ?
Thanks ,
Chorizo
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Postby jazzman » Sat Apr 14, 2007 3:19 pm

Hi Chorizo,

If you have made a labour-only deal with a team you got together yourself, the foreman will take responsibility of engaging himself on the contract. It will always remain his prerogative to bring in extra labour as required, for example, plumber, renderers, plasteres, roofers, electricians etc., who will only be part of the project for a short time. He will pay them from the deposit and payment schedule you agree on. You will get used toà the workers bringing their wives to mic cement, grouting and even some of the brickwork. At weekends they may even bring their children along to help. There would be no point in screaming about 'child exploitation' this is their country and their culture - besides which, even Jazzman worked on building sites after school from the age of 10.

The entire cost of labour for Jazzman's house was only 200,000 - see the documentation of the full project here: http://coolthaihouse.com/cthpics/thumbnails.php?album=6
to get an idea of the ratio of labour costs.
I would suggest recalculating your labour cost before you do anything else - if someone is paying 300,000 deposit they must be building to a labour budget of 1 mio baht, so the total cost of the house would be about 2 mio. :? but definitely not more than that.

Jazzman's house was quoted at 1.6 million
by a building company for a turn-key solution but has only cost a total of around 600,000 baht without any compromise on quality or materials.

Jazzman's payment schedule was really simple and was in fact suggested by the builders themselves:

Deposit: 60,000
Completion of roof: 60,000
Handover: 80,000

So you can see that the deposit was roughly 33.3%. Perfectly in order, because they have to go and buy their tools, and organise plant hire with this, plus the fact that they have probably spent all the money from the last job they did.

Jazzman added to this an incentive bonus of 10,000 if the work is carried out satisfactorily. This was a pure psychological move because it avoids having to deduct from the agreed sum if anything is not satisfactory. One just doesn't pay the bonus - or part of it.

Jazzman has also paid about 8,000 baht more for extra work which was not on the schedule - mostly decorative stuff. This was paid immediately on completion of each extra job.

Work started on 14 November 2006 with a team of five. The house was completed on Thursday 12 April, just a couple of days ago, and there have been a total of about 30 non-working days during this period. But there is a lot of cleaning up and retouching of paintwork etc;, to be done which could take another three or four days. Because they had worked hard to try to complete before Songkran - Jazzman's guess is they needed the money for the holiday - but didn't quite make it, Jazzman paid them 30,000 of the remaining 80,000 and they will get the rest when they have come back after the holiday and cleaned up. The bonus will be withheld for 6 months as an incentive to be sure they come back to fix anything.

All things considered, this has been, for Thailand, quite a successful and satisfactory build. I hope this answers your questions, and for anyone else picking this thread up here, Jazzman can safely recommend this team for any jobs in a 200 km radius of Udon Thani.
How to build a $20,000 / £14,000 house and a $???? MOTEL Updated 21 March 09 - with BOQ and costs
Don't let this happen in YOUR house.
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Re: Construction Contract

Postby thomas.fontaine » Sun Aug 10, 2008 12:59 pm

I am on my way to close a deal with a local Builder for the construction of 200m2 house in Khon Kaen. A turnkey contract, with some material we will buy ourselves (roof tiles, parquet and flooring, windows and doors, bathrooms and kitchen features, few architectural details like wooden handrails...). My wife is I should say, since Builder does not speak a word of english and the contract will be in thai language only. I told her to focus on:

1. Scope of work. Have a clear and detailed list in the contract of what we are buying (including bolts and accessories for the roofing) + a signed set of drawings, including electricity details (number of plugs, switches and lights...). Everything else not mentioned in this list and shown in the drawings is understood to be for the builder.

2. Payment schedule. Try to achieve a neutral cash flow to avoid risk of loosing money if the builder leave the Site, as it can happen sometime. For the moment, we have defined 8 completion milestones: 5% down payment at contract signature, 10% for the piling, 10% for the 1st floor, 20% for the second floor, 10% for the roof structure and the walls, 10% for the roof, 20% for plaster, parquet,floor tiles, doors, windows an plumbing, 15% for outside stairs, electricity, painting and cleaning of the Site.

3. Guarantee of the work after completion of the house. I need to think about this one.

4. Schedule. Stipulate a start and completion date in the Contract with an associated liquidated damages per week.


I don't really intend to have a long and complicated contract. I think those 4 clauses are good enough, at least I hope.

Do I miss something major here that needs to be covered in the contract?
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Re: Construction Contract

Postby thaifly » Sun Aug 10, 2008 2:04 pm

gidday thomas ...its the thaifly from mae rim....clause 2 .......yes that a dicey one...guarantee...how long??...our plumbing packed it in 6 months after completion of all work...i feel the guarantee would have to be a issue between you and the builder on what and how long????...will he come back and repair faulty work in the time frame agreed by both of you .....do you hold say 5 % to cover this????...i would say so ....as once they have the money in thier sky rocket generally its bye bye....over red rover....... i had no cover on the above and had to pay the expenses to fix the faulty plumbing...but in saying that it was a very minor matter to me as all the other work was 1 st class and i always say you cant win every round building in thailand.....and i would keep 10
% on cleaning up the site milestone...as i said in a earlier post to day good luck to you and your shelia ring ring ring .. THE BELL HAS RANG FOR THE FIRST ROUND....ITS A BELL OF A GIDDAY TO ALL ITS THE THAIFLY FROM MAE RIM
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Re: Construction Contract

Postby thaifly » Sun Aug 10, 2008 2:09 pm

GIDDAY THOMAS ...SORRY M Y POSTING. should have said ....clause 3.....and 20%...for cleaning up site milestone...thaifly
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Re: Construction Contract

Postby thomas.fontaine » Sun Aug 10, 2008 5:36 pm

OK, thanks for the advise. Can I reasonably ask a local Builder to accept a retention of say 5% until the end of the agreed guarantee period? Period would have to be very short, something like 2 months may be...Is there any other way to get some kind of guarantee that the guy will come back to fix something wrong, if any?
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Re: Construction Contract

Postby dozer » Sun Aug 10, 2008 6:46 pm

10% on cleaning up the site milestone...
Great idea. I never thought of putting this one in the contract. Normally all the trash gets buried with another round of dirt or the like, which is not the way to do it. So my question to Thaifly..... did they actually clean it up?
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Re: Construction Contract

Postby Nawty » Sun Aug 10, 2008 7:04 pm

They cleaned up our house...3 times in fact.

You know at the end of the day, they seem to not give a rats arse about contracts.

I have had all sorts of agreements and clauses and penalties and wax on wax off kinda s**t and it all goes out the window.

At the end of the day they also know that thai courts are not so great and long and drawn out processes. So with the thai mentality to think about today and tomorrow only....you are pushing s**t uphill every day.

A friend just told me yesterday of a friend of his that had this you bewt contract, good for all parties, very fair on the builder, penalties but also very good bonus systems in place.

Well, they signed it and got the pilings done and then nothing more for 3 months....schedule out the window, you bewt contract out the window, bonus' out the window.

What I have kind of figured is to get the job done for the right price, then keep some balance for differing periods depending on the job and the contractor. Then pay it when all is settled at the time. Then if you need to get them back to do a repair, you will have some cash up your sleeve and if they do not come back, be prepared to fix it yourself.

Nobody here will agree to letting you keep 10 or 20% for extended periods of 6 or 12 months....thats a lot of cash they need for their cashflow and living the lifestyle of today and tomorrow.
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Re: Construction Contract

Postby thaifly » Wed Aug 13, 2008 12:00 pm

dozer wrote:
10% on cleaning up the site milestone...
Great idea. I never thought of putting this one in the contract. Normally all the trash gets buried with another round of dirt or the like, which is not the way to do it. So my question to Thaifly..... did they actually clean it up?
gidday dozer...its the thai fly from mae rim... DID THEY ACTUALL CLEAN IT UP???? yes cobber.....but i never hhad it in our contract..when making final pay ment in full... I GET IN MY SHELIAS LUG BIG TIME... no payment in full until the site is cleaned up to our satis faction...they soon get the message....however dozer ....my comments..cleaning up site milestone..i feel holds a lot of merit.... and you agree with me as we both have experience on the s**t they can leave on a site...they are far from the cleanest of contractors...a percentage fee would not be in order as nawty rightly pointed in his post...but how would a couple thousand baht held back????...over to you....its A LOUD SHIRT OF A GIDDAY....its the thaifly from mae rim
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