Building contract woes

Ensuring Corporate Documents' Enforceability - What to Know

13/01/2023

With the increase in the cost of building materials and delays in construction due to labour shortages and other issues, we’re getting a lot of questions about building contracts. Can your builder increase the price of a fixed-price building contract? 

In most cases, no. Although there are some exceptions including:

  • Rise and fall clauses
  • Prime costs and provision sums
  • Contract clauses or special conditions

In most cases, unless your building contract allows for it, a builder cannot pass on material and labour price increases to the owner in a fixed-price building contract.

What happens if there’s a delay in construction?

A delay is classified as a stoppage that will impact builder or contractor’s ability to complete the work in the time agreed on in the contract.

There are various reasons for building delays including weather, a shortage of staff or building materials, or financial difficulties.

Some delays are claimable under a building contract.

If an extension of time is disputed, the building contractor has options including to provide evidence (such as correspondence from suppliers) to support the claim, suspend work, or seek mediation services from the Queensland Building and Construction Commission (QBCC).

A claimable delay includes causes such as:

  • a variation requested by the owner
  • a variation requested by the builder if the need for the variation could not have been reasonably foreseen at the date of the contract
  • an act of God, fire, explosion, earthquake or civil commotion
  • an industrial dispute
  • a dispute with residents or owners of adjoining or neighbouring properties
  • anything done or not done by the owner
  • a delay in approvals
  • a delay in the supply of material chosen by the owner
  • the need for a survey or other report related to the site; or
  • the industry shutdown over three weeks from about December 22 each year, if work during this Christmas period could not have been reasonably foreseen at the date of the contract.

The QBCC is also warning some building contractors are demanding additional funds from property owners to cover increased materials and labour costs.

There may not be any contractual basis to demand payment for increased labour and material costs under a fixed price contract. The QBCC has urged property owners to seek legal advice before agreeing to or paying an increase in pricing under a fixed price contract.

Need legal advice?

As the housing and construction boom continues, along with ongoing labour and material shortages, these issues will come up more often. The commercial and contract experts here at GLG Legal can help you.

Phone our office on: (07) 3161 9555 or email: info@glglegal.com.au to make an appointment.

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