Contracts

In Queensland, the construction industry, including the contract formalities for domestic and commercial building work, is primarily governed by the Queensland Building and Construction Commission Act 1991 (Qld).

Building professionals and consumers who provide or obtain building services should understand their legal rights and responsibilities and ensure that negotiations for building works are documented in a complying contract.

Many building disputes involve contractual issues, whether arising from incomplete or poorly-drafted agreements, or the failure of the parties to appreciate the extent of their contractual obligations.

Domestic building contracts

Regulated domestic building contracts include level 1 contracts (for works valued at between $3,300 and $20,000), and level 2 contracts (for works valued at $20,000 and over).

A regulated building contract must be in writing, signed and dated by the parties. The contract must contain full details of all parties and the licence details of the builder, a description of the works including any plans and specifications, the price or method for calculating the price, and a prominent notice of the client’s cooling-off rights.

Clients must be provided a copy of the contract and attachments within five days of signing the documents.

A level 2 building contract must, in addition to the above, include plans and specifications in compliance with any development approvals or permits, a statement containing the statutory warranties prescribed for the works, show the fixed price on the first page of the contract schedule, and if the price is not fixed, the method used to calculate any allowances. A copy of the Consumer Building Guide which sets out key terms of the legislation, must also be provided.

A domestic building contract is fundamental in governing the terms of agreement between a builder and client. Builders and homeowners should obtain appropriate legal advice to ensure they do not sign a building agreement unless it is complete and compliant.

Commercial contracts

Commercial building contracts must be in writing and contain prescribed provisions relevant to the type of work being undertaken. The Act regulates certain contractual terms such as the giving of notices and suspension of works, sets limits for retentions and security amounts and imposes penalty interest rates for late progress payments.

Where large building projects require the parties to enter into more than one contract, it is important that they are complementary and that clauses do not conflict.

Precedent contracts should be used with care, ensuring that all relevant fields are completed and checking whether standard terms are applicable to the current project or additional clauses are required. One size does not fit all, and each project should be treated as unique in terms of contract preparation.

Many building disputes turn to an analysis of the contract – those that have been poorly-drafted with ambiguous terms may be the undoing of an otherwise valid claim. It is important that all commercial building contracts provide certainty, appropriate allocation of risk and that the parties understand their legal obligations.

Managing contracts

Contracts should be managed to ensure legal obligations are upheld and processes are in place to deal with the many components of a building project. This means understanding important terms such as those outlining processes to request an extension of time or for documenting and approving variations.

Failure to properly understand and follow the correct processes can lead the parties into dispute and add unnecessary delay and cost to the project.

Whether you are a principal, subcontractor, consultant or homeowner, a compliant building contract is essential for a successful building project and can help avoid or minimise disputes. We can assist by:

• Drafting compliant contracts to protect your interests and manage risk.
• Reviewing existing contracts to flag potential issues, unnecessary exposure to liability and negotiating terms to better protect your position.
• Explaining key terms to assist with implementing processes to deal effectively with extension of time requests, variations and payment claims under security of payments legislation.
• Assisting with enforcement of contractual provisions.
• Representing clients with respect to building disputes.

Key Contacts