Whilst it is clear that standard form contracts are used in Australia and that there is some familiarity with them within the building and construction industry, they are often significantly amended. Theses for this vary, but in a large part it is because of the age of the contracts with some being related two decades ago, changes in legislation, and issues that were not previously contemplated (eg COVID-19).
Professor John Sharkey AM had undertaken a survey and prepared a report in relation to the use of standard form contracts in Australia, which suggested that
- 54% of those surveyed believe that there is no current standard form capable of being used in Australia without substantial amendment;
- 68% of contracts reported upon used standard forms and of those 84% were amended from the standard form;
- Overall, AS4300-1995 was the most widely used form in Australia (used in 23% of projects using a standard form), followed by AS4000-1997 (18%), AS2124-1992 (17%) and AS4902-2000 (14%)
Some key issues that are frequently amended and negotiated between parties in standard form contracts, other than updates to legislation, include:
|Clause||Why is it amended?|
|Extension of time (EOT)||To limit to expand upon the circumstances in which a contractor is entitled to an EOT (i.e. site closures due to government restrictions, delay in delivery of materials from overseas, COVID-19 issues);
To determine which party has the benefit of the float.
|Damages (Delay / liquidated)||It is common for construction projects to be delayed, and delays can be very costly where the risk is not properly allocated.
It is of the Principals interest to ensure any delay damage payable to the contract is capped and includes a number of exclusions / conditions, while ensuring liquidated damages are sufficiently calculated to ensure that it can manage its risk and this not be capped.
Conversely, for a contractor, liquidated damages may be a means to limit their liability and they will seek that there is a cap or a lower daily rate charged. On the other hand it may try to resist a cap being imposed on delay damages.
|Variations||Subject to the scope of works, variations clause may need to be carefully amended / drafted to document:
(1) how and when a variation can be sought; and
(2) the basis of pricing for a variation
|Payment terms||to specify any pre-conditions for a payment claim;
to identify any entitlements to set-offs;
comply with any conditions of the security of payments legislation or Home Building Act (i.e. maximum deposit).
|Site conditions||It is not uncommon for the parties to come across latent conditions which may later lead to delays, variations that were not anticipated at the time of entering into a contract. It is important to document:
(1) who bears the risk of latent conditions (i.e. contamination); and
(2) what information was known to the contractor (i.e. any reports provided before the contract?).
|Security||What type of security is provided:
(1) Principals often seek unconditional / conditional bank cheques;
(2) Contractors may offer retention for better cash flow.
|Indemnity||It is common for indemnity clauses to be added / amended on construction contracts as it is in the interest of both parties to minimise their risk exposure.|