Identify and Analyse Business Contracts

Submitted by sylvia.wong@up… on Fri, 04/09/2021 - 19:00
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Whether you are building a house for a homeowner, or working in the commercial sector on highrises, you need a contract between yourself and your client or subcontractor. This includes head contracts, subcontracts and sub-subcontracts (i.e. contracts between subcontractors). In Queensland for example, if any of your jobs involve domestic building work priced at over $3,300, you need to use a written contract. The contract price and other, contract-related requirements may vary from state to state.

The following are the types of contracts that you will usually encounter: 

Diagram of contract types

At the end of the module, at the Additional Resources, you can access a few examples of different contract templates.

Residential contracts

The Building Act 2004 (89B) defines a residential building work contract as contract used in any of the following cases:

  1. When you are a party to a contract carrying out residential building work
  2. When a residential building or a part of it is being sold, if the contract requires residential building work
  3. When there is an arrangement for someone to carry out residential building work.

The Building Act 2004 (89D) states that regulation may require certain documents to be attached to a residential building contract. Non-compliance is perceived as an offence.

Depending on your state or territory, this contract must comply with governing legislation that sets specific requirements that the residential contract must contain. Such legislation usually contains the following:

  • Definition of concepts
  • Exemptions and exemption assessments
  • Certifiers and government certifiers
  • Building approvals, commencement notices and building work signs
  • Construction process guidelines
  • Offences
  • Stop orders
  • Occupancies
  • Warranties and insurances
  • Inspection
  • Standard conditions
  • Auditors
  • Administrators
  • Building codes and standards
  • Other reminders guiding residential contracts 

Commercial contracts

In general, a commercial contract is a legally binding agreement between parties to do or not to do an action. The buildings involved must be used for non-residential purposes (unlike residential contracts) such as retail stores, hotels, offices, and other spaces that may be needed for private businesses.

Like residential contracts, each state or territory has legislation that would require commercial contracts to comply with specific requirements that would need to be integrated into the contract.

Subcontractor agreements

Subcontractor agreements are made between the main contractor and subcontractor, wherein a subcontractor’s services are called for specialist and specific work in the construction project on behalf of the main contractor. Subcontractors sign with the primary contractor and not the company. With this, the subcontractor does not interact much with the company. You may think of the subcontractor in the company-contractor-subcontractor relationship as a contractor under another contractor.

In a subcontractor agreement, the following must be present:

Scope of work

This includes the project title, project owner, project details, and the responsibilities of the subcontractor.

Duration of work

This includes the effectivity date, structure of the project guided by due dates or deadlines, and the project completion date.

Payment and billing

This states the amount that will be paid to the contractor, how the amount will be paid (hourly rate or flat rate), and when the amount be paid.

Status

This indicates whether or not the subcontractor is independent; it clarifies whether they pay their own taxes or not.

Non-Disclosure

Non-disclosure agreements are for projects with confidential and sensitive information.

Non-Competition

This ensures that the subcontractor does not cut the contractor out of the agreement to work directly with the business (contractor’s client).

Work for hire

This states that anything the subcontractor creates will belong to the contractor since this waives their right to ownership.

Insurance

This contains commercial general liability insurance, errors and omissions, and workers’ compensation insurance.

Prohibition of assignment

This prevents the subcontractor from hiring another subcontractor. This is to protect the project by preventing the project from having another layer of workers.

Indemnity

This ensures that the subcontractor will be liable for the quality of work they make.

Promises and warranties

This is similar to the scope of work section, but this emphasises that the subcontractor will deliver the work that is required of them and that they will deliver the modifications, if necessary.

Arbitration

This explains how disagreements will be resolved.

Termination or modification

This states the reasons or factors that can end the contract.

Jurisdiction

This identifies the laws that the contract or project will follow.

Entirety of agreement

This states that the details listed in the contract are covered by the entire agreement and those that are not cannot be assumed to be covered.

An additional layer with the subcontractor makes the project vulnerable since there will be more people involved. A subcontractor agreement is essential because it provides guidelines, deadlines, payments, and the entire plan for the project. This means that the people involved in the project understand what needs to be done and that they follow through with their duties to the contractor. Under a subcontractor agreement, subcontractors can protect themselves from unfair risks and have written and signed proof of their compliance.

Lump sum contracts

Lump sum contracts or fixed sum contracts are contracts wherein the contractor and the principal arrange a fixed price for the work that needs to be done. With this, the contractor will be hired before the project commences and will finish the project with the set price. This type of contract applies to both commercial and residential contracts.

The lump sum contract is used often for simple projects with already well-defined responsibilities for all parties. There is little room for change, and the arrangement is predictable, so all the plans must be complete, and the costs have been finalised. The principle behind this is that the company or business wants to get their money’s worth, while the contractor wants to achieve a higher level of profit from the set payment. There may be a conflict of interest, but the contract provides for clear and defined terms.

If you select this type of contract, you must seek legal advice from contract specialists to ensure that the contract will suffer less risk, since lump sum contracts give little provision for adjusting the pricing. This is true even under other circumstances that would otherwise prove disadvantageous to the contractor.

Cost plus contracts

A cost plus contract is a more flexible alternative to lump sum contracts. Under a cost plus contract, the hirer agrees to reimburse the contractor’s company for the building expenses such as the labour performed, the material purchased, and the other costs, plus additional payment that is usually stated as a percentage of the contract’s full price. The client, in turn, has the right to complete transparency of the contractor’s expenses for the project. This type of contract incurs less risk for the contractor as it allows for more flexible provisions. Also, it ensures that the contractor will make a profit out of it. In some cases, the contract will have clauses referring to a maximum price as cost-plus contracts operate under a reimbursement principle. This contract applies to both commercial and residential contracts.

It is important to remember that all agreements made with other people are not necessarily bound by law. In general, parties entering general agreements have no intention to be legally bound. Agreeing with a friend to go to Paris for a summer vacation may constitute an agreement for the two of you, but it is not one bound by law. Buying the plane tickets that will take you from Victoria to Paris, on the other hand, constitutes a legally binding agreement between you and the airline company. In the latter example, there is an intention to create legal relations because both parties accept that there can be legal consequences of breach or termination once they entered into the agreement. You may claim for damages or compensation if the company loses your luggage or causes you harm during the duration of the trip, whereas the first example cannot give you those options.

The intention of the parties to create legally binding relations indicates that the parties involved are serious about the contract and that they are ready to accept its consequences.

An intention to create legal relations is established by fact. Agreements made in a commercial context are generally created with legal intentions as compared to social or domestic arrangements.

Intention to create legal relations is required for a contract to exist. It is important that the contracting parties intend to create legal relations in order for a contract to be legally binding.

Given the possible consequences of breach and termination of the contract, contracting parties have the responsibility to study the terms, guidelines, and offences to avoid lawsuits. Other implications to having the intent to create legal relations include the following:

  • There is recourse for the wronged party to sue and file for damages, avoiding unfair circumstances and business crises.
  • The contract ceases to be just a promise without legal consequences, becoming enforceable, legal, and binding. The legal courts may step in to solve disputes.
  • A legally binding contract is a powerful one because of the fear of repercussion. This makes parties involve strive to get what they promised done and deliver the results as agreed.
Colleagues sitting at desk discussing project

Key people involved in a building project

Key people involved in any construction project include: the principal (often the client, and also referred to as the owner in some contracts), the design consultant, the (main) contractor (or builder), contract administrator (who is the superintendent in some contracts, and the architect in others), project manager (who might also be the principal or possibly the main contractor), financer (who might also be the principal), subcontractors.

The actual people involved in a building project will depend on the method of project delivery, of which there is a variety. A method of project delivery will define both the contractual obligations between the people involved, as well as the lines of communication.

Contract elements

For a legally enforceable contract to exist, an agreement (an offer and the acceptance of the offer), intention to create a legal relationship and consideration must first be established.

An offer

Diagram of contract element stage 1

A contract is formed when an offer by one party is accepted by the other party.

An offer is a proposal by one party to enter into a legally binding contract with another. It may be in writing, verbal or implied by conduct. For example, a contractor submits a tender to a client. This is an offer or quote. A quote tells your customers your terms of service and how much you’ll charge. If a customer accepts your quote, it becomes a legally binding contract.

An offer must be distinguished from mere willingness to deal or negotiate. For example:

  • X offers to paint a room for Y. Before any agreement is reached on quality, style or price, Y decides not to continue.
  • At this stage, there is no legally binding contract between X and Y because there is no definite offer for Y to accept until the essential terms of the bargain have been decided.

An offer can be made to a specific person, a class of people, or to the whole world.

An offer is a definite promise to be bound, provided the terms of the offer are accepted. This means that there must be acceptance of precisely what has been offered. For example:

  • John offered rendering services to the Smith family for $5,000. During their discussion it reveals that painting is not included in the rendering. Mr Smith states that he is happy to pay $6,000 if the house is both rendered and painted. It is then up to John to accept or reject this counter offer.

Acceptance

Diagram of acceptance

Acceptance occurs when the party answering the offer agrees to the offer by way of a statement or an act. Acceptance must be unequivocal (clear) and communicated to the offer or the law will not deem a person to have accepted an offer merely because they have not expressly rejected it.

Acceptance must be unconditional, otherwise, it amounts to a counter offer.

An intention to create a legally binding agreement 

Diagram of intention

A contract does not exist simply because there is an agreement between people. The parties to the agreement must intend to enter into a legally binding agreement. This will rarely be stated explicitly but will usually be able to be inferred from the circumstances in which the agreement was made. For example, asking your friend to contribute to the running costs of your car in exchange for giving them a lift to work every day.

Commercially based agreements are seen as including a rebuttable intention to create a legally binding agreement. However, the law presumes that domestic or social agreements are not intended to create legal relations. For example, an arrangement between siblings will not be presumed to be a legally binding contract.

A person who wants to enforce a domestic or social agreement needs to prove that the parties did intend to create a legally binding agreement.

Consideration (a price paid)

Diagram of consideration

Consideration is the price paid for the promise of the other party. The price must be something of value, although it need not be money. Consideration may be some right, interest or benefit going to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other party.

So long as consideration exists, the court will not question its adequacy, provided that it is of some value. For example, the promise to pay a nominal rent in return for the lease of a house would be good consideration. Of course, the consideration must not be illegal or impossible to perform.

There is an exception to the rule: documents under seal do not require consideration for there to be a binding contract.

Terms

Below you can see the most commonly used terms with their definition in the context of building and construction contracts. For a full list of terms, see the Glossary at the end of this module.

Term Definition
Breach of Contract When one of the contracted parties fails in their obligations under the contract.
Clauses Specific provisions or sections within a written contract. Each clause in a contract addresses a specific aspect related to the overall subject matter of the agreement.
Conciliation A dispute resolution process whereby a mediator discusses the matter with both parties and attempts to bring them together in agreement.
Contract Sum
  1. Where the client accepted a lump sum, the lump sum.
  2. Where the client accepted rates, the sum determined by calculating the products of the rates and the corresponding quantities in the bills of quantities or schedule of rates.
  3. Where the client accepted a lump sum and rates, the aggregate (average) of the sums referred to in a) and b) above.

The contract sum includes provisional sums but excludes any additions or deductions which may be required to be made under the contract.

The adjusted contract sum is as above but adjusted to take into account any additions or deductions according to the contract.

Cooling off period Number of days during which a buyer can change his or her mind and cancel a purchase agreement or return a purchased item for full refund.
Defects liability period A defects liability period is a set period of time after a construction project has been completed during which a contractor has the right to return to the site to remedy defects.
Discharge The circumstances in which the contract is brought to an end. Where a contract is discharged, each party is freed from their continuing obligations under the contract.

A contract may be discharged in one of the following ways:

  • Discharge by performance
  • Discharge by repudiatory breach
  • Discharge by anticipatory breach
  • Discharge by agreement
  • Discharge by frustration
Extension of time (EOT) This is a formal request, in writing, regarding a change in the date for completion of the project, brought about by some change in the project circumstances beyond the control of the contractor. This is permitted by the law for numerous valid reasons and depending on your contract’s time clause. Some examples of a valid reason can be:
  • Delays in the delivery of important goods.
  • The client has personally asked to start work at a later time.
  • The client has requested variations in the scope of work.
  • Unexpectedly bad weather conditions.

The contractor must be able to show sufficient evidence that the delay is caused by external factors and it is not due to underperformance.

Force Majeure An unexpected and disruptive event that may operate to excuse a party from a contract, for example, a natural disaster.
Legal Capacity
  1. A person's authority under law to engage in a particular undertaking or maintain a particular status.
  2. A person’s capacity to make reasonable judgements.
Liquidated Damages
  1. Pre-determined damages set at the time that a contract is entered into, based on a calculation of the actual loss the client is likely to incur if the contractor fails to meet the completion date.
  2. Monetary compensation.
Mediation A means of dispute resolution akin to that of conciliation.
Practical Completion
  1. The point where all building work is complete or all but completed, in accordance with the contract, and the building is reasonably fit for occupation.
  2. The stage where the work under the contract has been completed except for minor omissions and minor defects.

Usually the builder gives notice to the client or representative to give notice that practical completion is approaching. Findings are recorded and a site inspection will take place to confirm completion.

Prior to the completion of the defects liability period the builder will undertake a ‘final certificate inspection’ and list any unsatisfactory. All items listed must be rectified before a final certificate is issued. At the satisfactory completion of any required rectification work, the builder will issue the final certificate.3 4

Progress Claim Regular payments (usually fortnightly or monthly) from the client for materials delivered and work done on the site.

Progress payments are based upon measurements or estimations of work done. These measurements and the compilation of the monetary payments (calculations for payments), are usually made by the contractor and checked by the superintendent; to avoid later arguments.

It is advisable that mutual agreement be reached at each step of the procedure. The superintendent then certifies the payment due, and passes the certificate to the client for settlement.

Specification
  1. The written description of the works, or project, accompanying the drawings.
  2. An exact statement of the particular needs to be satisfied, or essential characteristics that a customer requires (in a good, material, method, process, service, system, or work) and which a vendor must deliver.

Specifications are written usually in a manner that enables both parties (and/or an independent certifier) to measure the degree of conformance.

Subcontractor A person who works under a subcontract.
Tender A sealed bid or offer document submitted in response to a request for tenders and containing detailed information on requirements and terms associated with a potential contract.
Termination for Convenience Standard clause in government contracts which gives the government the right to unilaterally terminate the contract at any time with or without giving any reason. The contractor is generally entitled to a negotiated settlement for an equitable recovery of costs and losses incurred.
Variation Changes made in writing to items or terms of the contract due to unforeseen circumstances. Variation orders are made through putting concerns into writing. This can be done by sending formally a letter containing the changes proposed. Important details that should be included are work description, its technical specifications, and any additional costs if any.

Variations must be ratified (confirmed by expressed consent) by all parties to the contract.5

Contract sections and clauses

The sections and clauses of a contract are divisions in the contract. This helps you locate information more conveniently.

With more extended contracts, aside from sections and clauses, the body will be usually divided into chapters as well. In most construction contracts, while the terms and names might differ, you will typically find the sections named in the below:

  • Definitions
  • Cost and payment
  • Extension of time
  • Document variations
  • Contract termination

Interpretation of contracts

The following are the general rules of interpretation of contracts by Australian courts:

Express terms

These are the terms that are expressly spelled out in a contract:

  • The court must give effect to the intention of the contracting parties.
  • Intention is assessed objectively.
  • The meaning of the term is to be determined similar to how a reasonable person would understand the terms to mean.

Implied terms

These are the terms that are implied or may be inferred based on the actions of the parties involved:

  • Implied terms must be based on facts, the law or customs.
  • Extrinsic evidence must be considered if language is ambiguous. (e.g. correspondence between the parties, how they acted)

Valid contracts, as a type of legal document, comes with rights, obligations, and liabilities. In the context of contract law, rights are the entitlements of each party, obligations are the duties that each party needs to fulfil, and liabilities refer to the responsibilities of each party to uphold the contract, especially their obligations. As mentioned in the introduction of this learner guide, the Australian legal system regulates construction contracts to ensure that all parties involved perform their obligations and that their rights are protected.

These rights, obligations, and liabilities come in explicit and implicit forms. The explicit rights, obligations, and liabilities are the ones that are written down in the contract. Implicit rights, obligations, and liabilities are those that exist based on the provisions of contract laws and policies. These may or may not be written on the contract.

The sections below will further discuss the rights, obligations, and liabilities that come with a contract.

Contractual rights

Contractual rights, as defined above, are the entitlements that come with the contract that you are getting into. These rights are based on agreements made with other parties, as well as the contract laws and the legislation that govern your local state/territory. Being denied of any of your rights, implicit or explicit, would be a breach of contract.

Contractual obligations

Contractual obligations are produced as one of the essential parts of a contract. In the construction industry, the foremost obligation that a contractor has is to provide the service that they have been hired for, as stated in the contract. In reciprocation, the hirer’s primary obligation is to provide payment to the contractor upon delivering the agreed-upon service following the terms of the contract. The payment for the contractor’s service will differ depending on the type of contract that the parties agreed upon, any other specific clauses that the contract may have chosen to include, and the local state/territory legislation that affects the contract and its other details.

Liabilities

Liabilities, as explained above, are the responsibilities of all parties involved in the contract to uphold the contract and their respective obligations.

For contractors, this means typically ensuring that they meet their obligations to complete the project satisfactorily. This would be met by getting necessary documentation that the project has satisfactorily reached practical completion.

Aside from these, other provisions included in the contract and the local state/territory legislation must be followed.

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While it is ideal that contracts are fully realised without any hiccups or issues, it is not uncommon for specific situations to occur wherein the contract will be breached. Most contracts, while varying in content, will have one clause or another discussing breach of contract.

When one party refuses to perform its obligation, the contract is terminated by breach. The innocent party has the opportunity to treat the contract as concluded and may sue for damages for the unperformed portion. Alternatively, the innocent party may refuse to perform any unfinished part of their obligation and the breach as a defence. The last remedy is to seek an order for specific performance if the unfinished part of the contract involves the transfer of promised property or goods. In some cases, it is possible to sue for damages as a result of the breach.

You must remember, however, that the breach does not automatically discharge the contract. Beware of refusing to perform your own contractual obligations without legal advice, or you could be the one who gets sued.

Material breach

This type of breach occurs typically for contracts made regarding a purchase or exchange of products or goods. A material breach happens when one or more essential element of the contract is not provided as guaranteed. When this breach occurs, unless specified in the contract, the contract is considered terminated, and the party who suffered from the breach will be in a position to claim damages. This type of breach usually is not written in more specific contracts.

For example, a contract is made for the purchase of construction materials including, concrete, steel and pipes for a housing project. If the contractor fails to provide the specified materials for the project, then that would be considered a material breach and the contract may be terminated.

Minor breach

Not all breaches would end in immediate termination of the contract and reparations. In cases of a minor breach, such as a few missing finishing touches, the party committing the breach, unless other processes have been specified in the contract, will have an opportunity to remedy the breach of contract.

For example, a contract was made for the purchase of windows in a building project. Contractor agreed to have windows delivered to the project site and installed. If the contractor delivers the windows and only installs some of them, this may be considered a minor breach of contract. Contractor may remedy this by installing all windows as agreed by the parties.

Anticipatory breach

An anticipatory breach is not as common as the first two types of breaches mentioned above. This type of breach involves one party stating that they will not be able to complete their obligation under the contract. This type of breach, unless stated otherwise, will still require reparations. In a construction contract, depending on the cause of the delay, an extension of time (EOT) may be applied.

For example, Company A promised Company B that they will complete the left wing of a building project by the end of the year. However, Company A realises a month before the end of the year, due to some internal affair issues, that they now have insufficient manpower to finish the wing. They may choose to back out of their promise as anticipation of the delay.

Actual breach

An actual breach is the most common way a contract is breached. This occurs when the time for one party’s obligation to be completed arrives, and their obligations under the contract have not been completed. Compensation and resolution for any other disputes will need to be done in compliance with their contract.

Similar to the example under Anticipatory Breach, if Company A continues to perform their work and fails to complete their obligation as promised by the end of the year, then that would constitute an actual breach of contract.

Tort Law

In business and other areas of life, it is not necessary to be a party to some contractual matter, or to commit some crime, to come into conflict with legal processes. There is another large body of law, known as Tort Law, which deals with wrongs done to other persons which were not necessarily intended as criminal acts. This also refers to civil wrongdoings other than those included in contractual law rules, generally by way of unreasonable behaviour.

Common examples of torts include trespassing upon land or misuse of someone else’s goods, acts of nuisance, and negligence in providing a reasonable standard of care or product which may then lead to harm to other people. It would be best if you remember that the general remedy for a breach of a tort is by an award of damages to the wronged party.

A contract, like any other type of relationship, can face numerous problems through its course. While a contract may end after successful execution, a contract may also be dissolved when frustrations and issues occur. The parties that can terminate the contract and the requirements that need to be fulfilled to terminate should be part of the terms of the agreement.

Termination refers to clauses in the contract which lays out the circumstances in which the contract may be legally ended. 

While the contract will have a section dedicated to the reasons that a contract may be terminated, there are also unforeseen factors that can occur during the duration of the contract. While these factors may not be explicitly mentioned in the contract, they can also lead to the termination of the contract. When contracting parties without fault are unable to perform their obligations due to unforeseen circumstances, this constitutes what is called a frustrated contract.

There are a variety of reasons when a contract can be terminated:

Termination by performance occurs when the contract is executed and completed without any disagreements between the parties.

Also known as force majeure, this ending by frustration refers to unforeseen events or external circumstances beyond any reasonable control of the people involved in the contract. These events must be ones that cannot be reasonably avoided, overcome, or blamed on any of the parties involved. And it does not include average commercial loss which might have been foreseeable as a reasonable possibility of happening. This cannot apply to the parties involved in the contract. However, if they have prepared appropriate provisions in the contract, should circumstances involved would occur. Additionally, if one or more of the parties involved in the contract called for the termination of the contract due to frustration for the reasons of hardships, economic instability, and inconvenience, the reasoning will not be sufficient unless stated explicitly in the contract otherwise. Lastly, should the contract be terminated in this manner, the circumstance cited should not be temporary in nature.

Another way where termination due to frustration can occur is when factors take shape that would make one or more parties performing their obligation impossible. This can come in the form of new legislation being passed, or the physical destruction of irreplaceable parts of a party’s obligation, and the like. Furthermore, the failure of an event in which the contractual relationship depended on did not occur can also be another way in which a contract can be terminated due to frustration because of impossibility.

Another situation may also occur where you still have obligations to perform, but you have both decided to terminate the contract. In this case, you would need to ‘forgive’ each other of what is left of both your duties. Termination by mutual agreement may also happen when one has completed their duties, but the other party has not. The first party can forgive the other the balance of the promised consideration. Still, that forgiveness will not cancel out the obligation to perform the original promise unless made in the form of a promise under seal.

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AS2124

The Australian Standard 2124 General Conditions of Contract6 was drafted in 1991 and has become one of the most favoured standards to use in construction contracts, despite its newer counterpart, the AS 4000 being drafted a few years later.

AS 2124 is published by Standards Australia Limited, a part of SAI Global. This standard is protected by copyright and would require a license to be purchased so that it can be used. There are numerous types of licenses available depending on what you need to use it for. You should make sure that you are purchasing the appropriate type of license for the purpose that you are using it for.

The Standard is meant to be used with additional documents that would help determine specifics in the contract. Below are some of the features that the AS 2124 contains:

  • Provisional sums: Where the design of one of the works is not sufficiently advanced to allow the contractor to pay a fixed price, the parties can then agree on a 'provisional sum.' Once the final cost is known, the price of the items can be adjusted.
  • Fixed timeframe: To ensure that the works are finished by an agreed 'date for practical completion,' the contractor is essential, otherwise liquidated damages may apply.
  • Practical completion: The contract acknowledges that the project can be used and occupied before all the works are finished, including minor works. This can be seen in the concept of 'practical completion'.

AS4000

The Australian Standard 4000-1997 General Conditions of Contract7 is the most widely used form of head contract for Australian construction projects.

AS 4000, like the Standard it supersedes, is published by Standards Australia Limited. It is also protected by copyright laws and can be in varying levels of licensing by paying for a license fee to use it. Various versions can be licensed, and like AS 2124, it is best to determine which license would be appropriate to the demands and needs of your contract.

There are numerous similarities between the AS 2124 and the AS 4000. This includes the features of the AS 2124 listed above. A few of the characteristics of the AS 4000 that distinguishes it from the AS 2124 and other standard form contracts are as follows:

  • Relief for latent conditions: The effect of a latent condition is considered a variation. Based on this Standard, the contractor can claim the costs associated with a latent condition, except those incurred more than 28 days before they gave notification of the issue.
  • No time bars: Clause 41.2 states that failure by a party to comply with a notice or claim provision shall allow the other party to seek damages for breach of contract but will not bar or invalidate the claim. Depending on the agreement that was formed, there may be exceptions to this.
  • Apportionment of concurrent delays: Where a delay is caused by a qualifying cause of delay and a non-qualifying cause of delay, the contract allows the superintendent to allocate the resulting delay following the respective causes of contribution. This is different from AS 2124 and other forms of contract where the existence of a non-qualifying cause of delay will disqualify the contractor from claiming EOT.
  • Approval of EOTs: When a delay to the contract’s request for an EOT has not received a response within 28 days of receiving it, the request will automatically be considered approved and the extension of time will be granted for the full amount that was requested.

ABIC

An Australian Building Industry Contract (ABIC) is a contract drafted for building projects where an architect administers the contract. The bodies who publish ABICs are Master Builders Australia Limited (Master Builders) and Australian Institute of Architects (Institute).

ABICs have the following features:

  • Written in plain English and have a clear, logical structure that reflects the sequence of the construction process
  • equitable allocation of virtually all project risks to one party or the other, eliminating uncertainty and many potential disputes
  • an integrated suite of versions for major, simple, and basic works, and for housing and non-housing projects
  • detailed supporting documents, including a user guide, template forms for the architect and the contractor

Different kinds of contracts may be used based on the type of project you are working on. ABIC Major Works (MW) contract is intended for major/more complex projects than SW. ABIC Simple Works (SW) contract is intended for simpler projects than MW.

Differences between the two kinds of ABIC include:

  • urgent instructions
  • separable parts to the works
  • change of type of security given by the contractor to the owner
  • provision of security for payments for off-site plant and materials
  • the provision by the owner of security to the contractor
  • dangerous or contaminated materials
  • encroachments
  • quality assurance systems
  • separate contractors (except in Queensland)
  • amendments to programs and the consequences of any amendments
  • alternative dispute resolution
  • expert determination of disputes
  • arbitration of disputes
  • contract confidentiality.

Some of the ABIC contract forms available are: 

Contract   Purpose  
ABIC MW-2008   For major works, and residential works  
ABIC MW-SC-1   Subcontract under MW form  
ABIC SW-2008   For simple works, and residential works  
ABIC SW-SC-1   Subcontract under SC form  
ABIC BW-1 2002   For basic works up to $50,000 in value.  
ABIC BW-SC-1   Subcontract under BW form  
ABIC EW-1 2003   Early works  

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