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Construction LawPart OneBasics of Contract LawAS-2124Australian Standard Contract for Building ContractMost known and most detailedStandards AustraliaFormation of ContractsContract is an enforceable bargain between partiesRisk of DisputesFailure to comply with the lawRisk in ConstructionLimitation of liabilityIntellectual propertyParticularly in relation to design and architecture workInsurancePublic liability insurancePreferred payment structureRight to be paid for work which is implied by lawContraction FormationOfferAcceptanceConsiderationIntention to create legal relationsCapacitySound mindPrivityWho are the partiesTermsCertainty of termsOfferStatement containing proposed contract termsDemonstrates an intention be boundIntention to be boundMade to an individual or the world?Offer needs to be expressly clear in construction contracts – its vital to construction Falkin v WilliamsUnilateralWithout a recipient partyIndividualTwo parties are bound by each otherCarbolic Smoke BallNo offer to a particular personIf there was, Mrs Carlill had failed to notify her acceptanceHeld:Valid offer which had been acceptance‘Why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward to perform the condition?’Critical that they deposited $1000 in bank – showed intention to be boundWould a reasonable person in the position of the offeree think that the offer was intended and that it should be accepted?Invitation to TreatExample – request for tenderSimply an invitation to treatInclude express clauseNo offerReserve right to bargain with you or competitorsWe will tell you whether there is an acceptanceA request for an offer – not an offer that is capable of being acceptedAuctions are an exampleDuration of OffersGenerally, offers may be revoked prior to acceptanceSome exceptionsMust be communication of revocationOffer terminated by rejectionLaw of estoppelsIf they can show that they acted to their detriment on the basis of the representation then can be denied from revoking offerAcceptanceNecessity for acceptanceAcceptance must conform to the offerAcceptance can be inferred from conductWho may accept? Depends on form of offerAcceptance must be unequivocalCan be inferred from the conduct of a partyWhite Trucks v RileyHeld that an offeree had accepted an offer without signing it – by ordering the materials for the fulfilment of the contractCounter OfferRequest for additional/different term is not acceptance (counter-offer)Battle of the FormsWhat is the battle of the forms?Uncertainty about who was making an offer and who was accepting itInconsistent methods adopted by the courts for resolving thisButler Machine Tool Co v Ex-Cell-O CorpPage 19 of NotesButler selling machine. Would only accept order on its terms and conditionsBuyer responded requesting purchase to be on their terms and conditions, which contained a tear off sheetButler returned the tear-off sheet with letter re-iterating its own termsButler attempted to rely on one of its own terms to obtain a price variationDispute over paymentCourt. Buyers response with tear-off sheet was not an acceptance, but a counter offerHeld: Butler accepted when it signed & returned tear-off sheet. Butlers letter merely incorporated price & identify of the machine that was to be sold, but none of Butlers termsPrice adjustment was not part of the contract on this basisAt subcontract level – this happens all the time.GeneratorsFences, CranesBattle of the Forms‘Last shot’ approach (Butler Machine Tool)‘Higher Status’ approach (Tranmotors v Robertson)Document which has the ‘highest status’ will prevailParties under numerous transactions in the pastJust using suppliers invoice that both were familiar withPurchaser issued an order using its new termsSupplier responded with own termsWhat would an objective person say ?‘Synthesis’ approach (Vroon v Fosters)Reasonable implications in all the circumstancesContract and some terms could be extracted where no acceptance of an offer could be established or even inferredManifestation of mutual accent could be impliedIntention to be boundHeld: Court constructed contract themselves – by determining what the parties intentions wereNo contract reachedThere was no intention to be bound at allUnless the evidence can establish this sufficientlyRefer to lettersIntentionWhy do they say you are committed?Why do you say you are not?EtcGoodman v CospacMeadow Lea ordered glass bottles from CospacCospac provided timetable with terms & conditionsMeadow Lea placed an order containing its terms and conditionsLater established that glass bottles faultyMeadow Lea terminatedCospac asserted that this was wrongfulNSW Supreme Court applied ‘synthesis approach’Seems that the ‘synthesis approach’ is preferred in AustraliaContract had been formed incorporated all of Cospac terms and conditionsMeadow Lea had wrongful repudiated by terminating for production failure – not an event that would warrant or justify terminationRepudiated – you attempted to renounce the contract improperlyCubitt Builders casePage 26Acceptance by conduct Example of ‘last shot’ approachConsiderationConsideration must be sufficient, but need not be adequatePast consideration is no considerationPromise to perform an existing legal dutyConsideration must move from the promiseQuid pro quoSomething for somethingPromise to Build and Promise to Pay = sufficiency of consideration‘Agreements to agree’ are not bindingAustralis Media v Telstra‘a Joint Venture Agreement shall be entered into between the Joint Venturers regulating such matters as term, purpose, capital, contributions ... and other matters’Intention to create legal relationsMust be a common intention to be ‘immediately bound’May be express or impliedDeemed to exist in commercial situationsMay be expressly excludedIf no intention to create an immediately binding agreement – there is no dealCan be a binding contract where nothing signed – so long as the intention to be bound is evidentMasters v CameronCases may belong to one of three classesFinality on all terms, intention to be bound, but want to re-state terms in fuller or more precise wayFinality on all terms etc, but performance conditional on execution of a formal documentNo intention to make a concluded bargain until formal contract executedBaulkham Hills Private Hospital v G R Securities‘Fourth class of contract’Parties content to be bound immediately by their agreed terms, but also agree to make a further contract, in substitution for the first, containing additional termsGraham Evans v Stencraft Page 47Made an offer for a specified scope of work and time to build dockside for StencraftStencraft gave them a letter of acceptance – enclosed AS2124 – submit to further amendmentEvans sent in an uncompetitive tender for another project.AS2124 – want to change risk allocation‘Conditions on which the acceptance of your price was made’Page 56 Para [38]Held: Graham Evans wonSimilar as Exam questionsBaulkin Hills at [44]From this case - Draft contract is now provided with tenderedWell written tender “Tender must conform to tender documents however if you want to provide a non-complying tender then we reserve the right to comply with a non-complying tender’Case StudyOfferFormal instrument of agreementPrice agreedTime agreedAcceptanceDeveloper sends Builder a letter and confirm our acceptanceIntention to create legal relationsYesEstoppelPossibleCapacity and Privity>18Sound MindCapacity and Privity Doctrine of ‘Privity of contract’Only parties to a contract are legally bound by itNon-contractual doctrines available to third partiesPurpose of Deeds of Collateral WarrantyContract between Victorian State Government and John Holland to build a railwayJohn Holland sub-contract out work to specialist contractorsJH are responsible for sub-contractorsSub-contractors must sign a separate deed by which it makes promises to usIf JH disappears, then can directly sue Sub-Contractors and in this way can have a direct contractual relationship with sub-contractorsTermsMust be certainty as to the essential termsPartiesSubject matterConsideration/priceOther terms that may be considered essentialTerm/length of contractGoverning lawLimitation of liability for breachExpress terms can be ascertained from express written (or oral) agreementImplied terms are incorporated by operation of law to supplement or mollify the bargainStatuteCustom or usageImplication from factImplied by lawTerms implied from fact mustBe reasonable and equitableBe necessary to give ‘business efficacy’ to the contractBe so obvious that ‘it goes without saying’Not contradict any express termB.P. Refinery (Westernport) v Shire of HastingsTerms implied at lawCannot hinder or prevent performanceMust co-operate whenever reasonably necessaryMust act honestly and in good faithTerms implied by StatuteDorter & SharkeyS74 TPA Refer to handoutS74(2) –Must do it with due care and skillREFER to in EXAMGood FaithCourts (especially in NSW) have been prepared to find implied term of good faithRenard Constructions v Minister for Public Works Aiton Australia v TransfieldHughes Aircraft Systems v Airservices AustraliaPublic TendersTender process contractsImplied term of good faith or fair dealing in all such contractsSubjective and ‘slippery’ ideaEsso Australia Resources v Southern Pacific Petroleum (VIC)Commercial contracts do not have implied duty that parties will act in good faithScope to imply on an ad hoc basis to protect vulnerable partiesTerms implied at law Contractor will perform work in proper and workmanlike mannerContractor will complete within reasonable timeCannot extend time – as outside of ‘reasonable’ is not a sufficient time.Principal will pay a reasonable priceHorton v JonesPrincipal will provide sufficient access to Site (construction implied)Commonwealth v Austin AustraliaDesigner will exercise reasonable skill and careVoli v Inglewood Shire CouncilArchitect is a professional and will exercise reasonable care and skillS74Incorporated of terms and documentsSeveral ways in which terms can be incorporated into a contractSignatureNoticeBy Course of DealingBy ReferenceCarob Industries v SimtoTerms and conditions of the head contractInterpretation of contractsLarge body of law on interpreting contracts and termsAmbiguities, inconsistencies, silence, mistakeLawyers often asked to advice on interpretation of key interpretationIf words are clear and unambiguous, then Court will not attempt to construeTerms and words must be read in light of the contract as a wholeExpressio univs est exclusion alteriusEjusdem generisParticular words are followed by general words‘General fit out work including sanding, painting and joinery’i.e. particular words define general conceptUnlocks ambiguityContra proferentemExpress term in a contract will be construed directly from the person relying on itParole Evidence RuleExtrinsic evidence of intention inadmissibleExceptPrior negotiations to explain ambiguityOral evidence to attack written contractBreach of ContractParty who fails to comply with a contractual obligation will be in breachIf breach causes the other party to suffer a loss, it can recover damagesInnocent party must proveDuty – relevant term of the contractBreach – how the term was breachedCausation – that the breach was the cause of the innocent partys loss and not something elseLoss or damageCausationIt is a question of fact as to whether A’s breach caused Bs lossCourt will usually ask whether the damage would not have occurred ‘but for A’s’ breachDamagesDamages are ‘compensatory’, not punitiveDamages are intended to putting the person back into the position they should have beenIntended to place innocent party in the same position as if breach had not occurredThe ruling principleRobinson v HarmanThe plaintiff is, so far as many can do it, to be placed in the same situation as if the contract had been performed’Hadley v BaxendaleAward of damages should fall into one of the two categoriesFirst Limb - Damages that may fairly and reasonably be considered to arise naturally from the breachSecond Limb - Damages that parties know or ought to have known, at time of entering contract, was likely result of a breachDamages for defective building workIn cases of defective building work, innocent party entitled to damages to ‘demolish and replace’ but only if necessary and reasonable.Bellgrove v EldridgeContract for construction of a houseContractor claimed final paymentOwner counterclaimed for damages – substantial departure from specifications – concrete foundationsContractor argued foundations could be ‘underpinned’Held: Court not satisfied that underpinning would be successful.Departure so substantial that only remedy was to place owner in same position as if contract had been performedThat meant demolishing house & restrictingHigh Court agreedGeneral presumption in favour of ‘reinstatement damages’. But must beNecessary to produce conformity; andA reasonable course to adoptIf not reasonable, the ‘true measure of damages will be’The diminution in value ... if any, product by the ... defective workmanshipExampleHouse has been built perfectively EXPECT instead of pink tiles they are black tilesBreach of contractDiminution in the value of your home – INSTEAD of the cost of ripping out the tiles and replacing themRuxley Electronics v ForsythContractor agreed to building swimming poolSpecification: 7’6 deep at the deep endFinish pool was only 6’9 deep at the deep endPool was perfect in all other respectsOwner claimed damages equivalent to cost of demolishing and replacingEvidenceNo doubt that owner had made clear his requirement 7’9 deepNo doubt that was very annoyedDemolition & reconstruction would cost $21KDiminution value was $0Court: Demo & reconstruction would be ‘wholly disproportionate’ to any benefit which would be obtained2.5K for loss of amenity and $750 for general inconvenienceRelevance of the plaintiffs intention as to the proceeds of the judgementBelgrove – Irrelevant (Australia binding)Ruxley – Relevant. Principal has failed to prove any loss. (UK is not binding)Cant be misrepresentation – as no ‘intention’ to mislead or deceiveAlucraft Pty Ltd v Grocon LtdAlucraft engaged by Grocon. Subcontract to supply & install aluminium windows & doorsGrocon claimed for defective workAlucraft admitted defects but said ‘no damage’Four years since became aware. No retification work. Final certification. Suffered no loss.Evidence that Grocon had no intention of carrying out rectification workCourt agreed there was breach of contract. Cited Bellgrove v EldridgeRisk that Grocon would be asked to rectify was remoteClaimed costs of $35K discounted to produce damages figure of $5KScott Carver Pty Ltd v SAS Trustee CorporationDefects in a building which owner later soldEvidence that no diminution of valueBut also evidence that the purchase price was reduced by an amount said to be the cost of rectifying the defects (to preserve the owners cause of action against the builder, architect, suppliers)Trial judge awarded damages calculated by reference to cost of rectifying defects (Bellgrove)Appeal. Appellant argued cost of rectification not appropriate if evidence that no diminution in value and that work will not be carried out (no loss)Held: trial judges decision was correctRectification DamagesRectification damages can be recovered where the owner may or may not carry out the rectification, so long as it would be reasonable to do so.However, if ‘substantial certainty’ that rectification will not happen, result may be differentSale of the property does of itself not displace the Bellgrove measure of damages (upheld in Director of War Service Homes v Harris)Tarbcorp Holdings v Bowen InvestmentsLessee – Tabcorp. Lessor - BowenRe-statement of the Bellgrove principlesLeased buildingLessee did work on the foyer without permissionMrs Bergamin (owner) arrived for a meeting to discuss ‘proposed changes’Work already underwaySan Francisco green granite. Canberra grey granite. Sequence matched crown-cut American cherry!Owner Sue breach of the lease covenantTrial judge – reinstatement damages only if you can prove a special interest in reinstatement. Nominal damages only - $1000High Court disagreed - $1.38mTabCorp argument that ‘diminution in value’ was the appropriate measure dismissed.Bellgrove was the applicable principle.REFER pages 115, 118Where there is no contractSometimes an existing commercial relationship may have no contract underpinning it at all.Sometimes there may be a contract which is unenforceableWhat recourse does a party have against the other if it suffers loss or damage on the strength of that relationship?Law of restitution may come to the aid of such a partyPavey & Matthews Limited v Paul relief whereNo valid and binding contractParty A conferred benefit on Party B and Party B has not been paid as agreedBenefit conferred was not conferred as a giftBenefit accepted by Part B at expense of Party AMistake - Where contract void due to mistakeWhere contract exists but rendered unenforceable by statuteAbsence of considerationQuantum meruit – a fair price for the work that was doneValuation can be difficult & no single methodCommercial rates for similar work (Laserbore v Morrison Biggs)Prices agreed in unsuccessful contract negotitations (potentially a cap for bidders) (Way v Latilla)Prices in associated contracts (Banque Paribas v Veneglass)Export opinionBrenner v First Artists ManagementCourts task is not to assess damages for breach of contract but to ascertain what is fair and reasonable compensation for the benefit of the services performed, and accepted actually or constructively by the recipient.Good discussion of the various ways in which a quantum meruit may be valued.RepudiationWhere contract exists, but wrongly repudiated by owner, builder has two alternative claims:A claim pursuant to the contractA restitutionary claim for a quantum meruit Kane Constructions Pty Ltd v Sopov Para 865 of CJ DecisionCan be windfall for a contractorWhereas ‘variations’ would have been valued pursuant to pre-agreed, competitive rates, a quantum meruit entitlement may be valued at (higher) rates.Part TwoOverviewDispute resolutionLitigation and arbitrationEnforceability of ADR clausesGood faithWhy do we need to talk about disputes in ‘Principles of Construction Law’?Construction projects = $Disputes can spiral out of control quicklyConstruction disputes common, complexSMK Cabinets v Hili Modern Electrics at 291LitigationJudge - binding on questions of fact and law.Traditionally slowest, most formal & expensiveArbitrationArbitration agreements are bindingCan be less formal, faster & cheaper but not alwaysUsually a single clause in a building contractPrivate arbitrator: can be non-lawyerAbility dispense without a hearingTraditionally less formal, cheaper and faster than litigationDecision not publicMediationConfidential, quick and cheapRight mediator = snapshot of trialCareful preparation needed for complex disputeExpert DeterminationCan be binding on questions of fact‘Independent industry expert’Expert conclaveGroup of experts from both parties get together and try and reach a resolutionCan agree on a non-binding processGood indication of how evidence will look at trialRisk of admissions by inexperienced expertCan be Court appointed as wellLitigation & arbitrationTwo main forums referred to in AS2124Refer Volume 2 pp 194-200LitigationCourts: usually judge without juryExchange of pleadingsDiscoveryWritten reasons for decision (made public in litigation)Historically slow and expensiveAS2124Page 40 of AS2124Dispute ResolutionStandard Dispute Resolution – Notice of Dispute47.1‘Notwithstanding the existence of a dispute’Infers that must continuing work even when attempting to resolve a disputeBreach of Clause 47 – results in a stayRecognise ‘Arbitration Agreement’Agreement to refer present or future disputes to arbitrationUsually in dispute resolution clause (such as Clause 47 in AS2124)Court will ‘stay’ court proceedings if parties have agreed to arbitrateNo jurisdiction to hear this dispute as it should be heard by an arbitratorParty who wants a ‘stay’ of Court proceedings must act quickly – s53, Commercial Arbitration Act 1984 (Vic)Alternative Dispute Resolution (ADR) ProceduresIt is compulsory to follow dispute resolution procedure?ADRHigh Level MeetingNegotiate ‘in good faith’MediationParties often tempted to skip these procedures and head straight to court or arbitrationCourt wont order ‘specific performance’ of ADR because difficult to supervise.Elizabeth Bay Developments v Boral If wording of ADR clause specific enough to enable parties to follow the process, Court will stay proceedings to enforce clauseHeld: ADR clause which is very difficult to enforce ‘attempt’ and ‘commit’Mediation agreement uncertain.Aiton Australia v TransfieldADR clause to be enforceable, it should be expressed as a condition precedent to formal proceedings.Process must be certain, and not subject to agreementMethod for choosing & paying mediator should be clearClause should make clear when ADR process ended‘Good faith’ obligationsDifferent views on whether requirement to negotiate ‘in good faith’ will be enforcedCoal Cliff Collieries v Sijehama Pty LtdCourt refused to enforce ‘negotiate in good faith requirement’No identifiable criteria to assess complianceAiton Australia v TransfieldAlthough good faith is difficult to define, this alone is not a bar to enforcing such an agreement‘courts should strive to give effect to the expressed agreements and expectations of notwithstanding ... areas of uncertainty and ... that particular terms have been omitted or not fully worked out’Best practice – adhere to ADR clause where it is reasonably certain and capable of being followed.Benefit of compliance: promotes early resolutionUnit 3Risk on construction projectsTimeCostInterest Rate RiskMarket Movement RiskPoor performanceDefective workTimeLate completionBuilder – promised to complete by a fixed date and be liable in damages. Typically, liquidated to a fixed rate.DamagesDelay costsCostIncreased costs to completeVariationsPoor performanceRisk of incompetence or insufficient resourcesFailing to proceed diligentlyDefective workPatent (obvious) defectsLatent (non-obvious) defectsScopingCertainty of subject matterIncomplete drawingsInconsistency between drawings and specificationRisk of poor scoping in fast-track projectsOrder of PreferenceTypically, can be problems because put specifications before contract etcVariationsWhat are ‘variations’?Changes to agreed scope of workWhat about work not referred to expresslyDorter & Sharkey ‘necessary works’Para [850] – who has responsibility where everything is not finalised perfectivelyWalker v Randwick Municipal CouncilContract for construction of concrete retaining wallContract required the builder – Walker – to do and perform ‘the whole of the works required’ on the wallRequired removal of sandbankPlan showing that the sandbank was 6ft wide and was not incorporated in the contract and was not referred to expressly or widelySandbank was 12ft wall and Randwick Municipal sued Walker for ‘whole of the works’Builder was stuck with extra cost of wallWhat if the plan had been incorporated into the Contract?Courts rarely conclude that the scope is defined exclusively in the technical contract documents. Reality is that this is uncommon.Williams v FitzmauriceSpecification didn’t refer to the floors of the houseMistake in the plans – builder said that floors were extraCourt: Floors were ‘inferred’ in the contract and the ‘whole of the material mentioned or otherwise’Courts will look for work that is indispensably necessary to achieve the contract resultDorter & SharkeyLump sum contractsFixed lump sum price specified in the documents‘all work described here and shown in the Drawings, including but not limited to ...’Highly relevant in ‘design & construct’ contracts because contractor undertakes to produce a building that is fit for purpose‘Fit for purpose in every possible way’Brief of requirements typically outlines what is required by principal‘Design & construct’ – all risk is held with the builderAS 4300-1995Design & Construct project –Builder is to do both design & constructGreater risk about variation in design‘shall ... produce the Design Documents to accord with the Principals Project Requirements ...’‘shall ... complete the work under the Contract in accordance with the Design Documents so that the Works, when completed, shall be fit for the intended purpose’The Power to VaryAll standard from building contracts contain a power to vary the workBeware the contract that does notStandard form contracts normally give wide powerRisk of no power to vary > power to vary since then no room to moveNeed a pricing control mechanism to determine what price is ‘reasonable’AS2124 – Clause 40[40.1] – Wide scoping powerContractor shall not vary the work under the Contract except as directed by the SuperintendentImport aspect as cant rack up costs unless instructedUsually variations directed by Superintendent on behalf of PrincipalOften strict procedures and time bars‘Contract shall not vary ... except in accordance with written instructions’‘... no entitlement to payment whatsoever unless ... in accordance with this clause ...’Infers ‘must be in writing’ for the contractWhat if there is a disagreement about whether an item of work is a ‘variation’?Contractor must comply with directorsMust proceed ‘regularly and diligently’ with the worksClause 33.1‘due expectation and delay’Clause 47.1‘notwithstanding existence of a dispute’Invidious position for contract –‘Not pay’ but at the same time must ‘get on with the work’Molloy v Liebe – see p376-380Contract who was commissioned to build a theatreDisagreement as to whether requests had been made by the owner where ‘truly extras or variations’ or just ‘scope work’Contractor maintained they were ‘extras’ and expected to get paidProceeded with the work – and then refused to give an instruction that this was a variationPrivy Council: Implied promise to pay for the work when the work was truly needed.Restitution – in equity – provides payment.Limitations on the power to varyExpress limitations can be found in standard form contractsClause 40 – AS2124Some limitations implied at lawImplied limitations ‘must bear some relationship to the work that is to be varied’ – Blue Circle v Holland DredgingDredging of a channel in ScotlandContract required that sediment was to be decided laterThe sediment was to be used as a bird sanctuaryThis was a alleged by superintendent variationHeld: Construction of the island was not a variation – it was completely outside the scope of the contract.Value as quantum meruitCannot omit to give work to othersCarr v BerrimanConfirmed in Commissioner for Main Roads v Reid & StuartContract for construction of Rawinga RoadwayUnderestimated amount of soil neededHad to import material from outside the site‘If sufficient topsoil cannot be obtained within the right of way, then the engineer can direct the contractor in writing to obtain the topsoil in other locations’Superintendent though he could omit any part of the work under the contract – directed a variation – got another person to importHeld: wrong the engineer to assume that another could import, original contractor should have this rightCant deprive the other party of the benefit of the contractCannot omit so much as to deprive contractor of benefit of the contractContracts often displace or alter the limitations implied at common lawTypical contractual limitationsCannot vary works after practical completedAS2124 – Clause 40 – omissionsLiability to pay for extra workOften compliance with variation procedure is a ‘condition precedent’ to payment entitlementUnless Superintendent has directed a variation in writing prior to variation being executed, Contractor shall not be to claim EOT or payment ...Failure to obtain prior, written direction can mean invalid claimUpdate Constructions v Rozelle Child Care Centre‘..the Builder shall forthwith notify the Proprietor and obtain his instructions before proceeding with any consequent variation for the Works shall be dealt with in accordance with Clause 8 of these Conditions’Architect (Principals Agent) authorised Contractor to carry out ‘extra’ workBuilder did not deliver the notice under clause 16(e) but claimed payment for extra workProprietor denied obligation to payCourt: Principal cannot without paymentContractors claim succeededProprietor was stoppedContractor was entitled to believe that he would be compensatedEquitable remedy to a contractTrimis v MinaContractor claimed for variations. Not in writingContractor argued that, despite non-compliance, it should be paidQuantum meruit claimRestituionary claim must prove certain things at v.Court rejected Contractors claimContractor failed to prove:Owners knew extra work was being doneExtra work was outside Contract PriceContractor expected to be paid extra for the workProvisions of contract enforcedWhen disagreement as to whether it is a variation or scope work, must the Contractor proceed? Contractor must comply with directions and must proceed ‘expeditiously to complete worksContract to does not forego the right to later claim paymentMolly v LiebeGood discussion of ‘implied promise to pay’Keating – refer pg 218-221 of notes‘Best Practice’ – reach written agreement up-front if possibleAS2124 – Clause 40.5Principal shall pay or allow the Contractor ...Specific rate or prices stated in ContractRates in BoQ or Schedule of RatesIf neither (a) nor (b) applies, reasonable rates or pricesSuperintendent has the power to determine what is ‘reasonable’ExampleContractor claims variation: extra excavationContract: 100,000m3 @ $2.50/m3 - $250KPrincipal – 4 excavators x 10 working days x $200/hour = $80KBoth parties argue that their rates and prices are ‘reasonable’UK courts have considered that a ‘fair valuation’ means Contractors actual and reasonable costs plus marginDeduction for proven inefficiency?If principal can show inefficiency, then can deductBrenner v First Artists ManagementWhere contract requires ‘reasonable rate’, contractor is to be reimbursed its ‘reasonable costs’Where no contract exists, Court will fix payment on basis of the ‘value of the benefit of contractors services’Doesn’t include opportunity costs – i.e. loss of other jobsCostain & Tarmac v Zanen DredgingMain contractor ordered subcontractor to do extra workOrdered as a variationCourt found work was not within scope of subcontract so not a variation Payment on a quantum meruit basisSubcontractor paid its costs plus share of Main Contractors profitsBest Practice: Up-front agreement on costWhere dispute arises, most likely outcome is‘Cost plus margin’ where work is within general scope of contract and contractor is entitled to ‘reasonable rates or prices’Possibly a share of profit where work is so far removed from original scope that it is not a ‘variation’PaymentsPayment in Construction ContractsThe right of paymentContract mechanismsRight to payment depends onContract TermsStatute (in the form of security of payment legislation)Parties are free to agree on their payment mechanism, although the usual mechanisms are:Lump sum contractContracts other than a lump sum Schedule of ratesRates for each taskCost plusPaid what it actually costs to do the job, plus mark up of 5% or 10%Problem – proving what it costs to do the work.Claim for reasonable amount/quantum meruitLump Sum ContractsA lump sum contract is a contract to complete the whole of the work for a lump sumExample – Contract to build house for $200KIf completed in every detail, then paid $200KWhat if the work is incomplete?Entire ContractsSubstantial PerformanceDoctrine of Entire ContractsDoctrine – entire performance by one party is a condition precedent to the liability of the other party to payContracts right to payment depends on the complete performanceCutter v PowellSailor worked for entire voyage and died at very end of voyageEstate sued for payment of wagesHeld: Entire contract because it was not performed, not payment to EstateQuestions of constructions of works of contractClear wordsLump sum = ‘an entire contract?’If right to instalments = not ‘entire contract’Security of Payments now creates such a right – a right to monthly progress payments (even if the contract doesn’t say so)Payment by InstalmentWhere there is an enforceable right to instalments – not an entire contractDue to the importance of cash flow, most lump sum contracts require payment in instalmentsAlmost all ‘construction contracts’ are now instalment contracts due to the effect of Security of Payment legislationSubstantial PerformanceWhat is substantial performance?Where completion achieved for all ‘practical purposes’ but is not absoluteAS2124 – definition of ‘practical completion’Page 6 – AS2124 – At 15 Discussion and cases – Dorter & Sharkey [9-590]Doctrine: Principal may not refuse to pay lump sum because there are only minor defects and omissionsWhere substantial completion has occurred the Principal must pay contract price subject to deduction by way of set-off/CounterClaim for defective workHoenig v IsaacsQuantum MeruitReasonable amount may be payable in some circumstances, although not if contract prescribed an agreed amountCircumstances where quantum meruit may be payableAgreement to pay a reasonable sumNo price fixedWork outside of the contractWork under a void/unenforceable contractWhere contract repudiatedKane v SopovTypical payment mechanismAS2124 –Clause 3 – Nature of ContractClause 4 – Bill of QuantitiesClause 42 – Certificates and PaymentPreconditions to claiming AS2124 – Clause 42.1Superintendent obligation to certify only where evidence and information providedSet-offWhat is set-off?Common law right to ‘even the ledger’Can be altered by contractSet-off in practiceAS2124 – Clause 42.10Limits the right of set-offOften amended2nd para = certificate4th para = obligation to payOverlap with Security of Payment legislationCourts have been careful to enforce a provision which discloses intention that certificate be paid in fullNo right to set-off unless contract makes it clearNotes: Refer to page 228 regarding Witholding against CertificatesBlue Chip Pty Ltd v Concrete Constructions Group Pty LtdContractor delivered progress claimCertified in fullPrincipal later sought to deduct or set-off an amount for liquidated damagesNo express or implied term allowing the Principal to do thisWhat is certified is intended to be paid?What should the principal have done?Discussion in Rodighiero articleDefectsDefective WorkContractor obliged to carry out work free of defectsFailure to do so constitutes breach of contractImplied obligation to perform work in ‘proper and workmanlike manner’Usually express obligationsClause 30.3 – AS2124Suing for debt is easierClause 4.1(e) – AS4300‘... execute and complete the works ... so that ... when completed ... shallBe fit for their stated purposesComply with all requirements of the ContractWhat is a defect?Standards Australia contracts do not define ‘defect’Objective considerations‘a shortcoming or failure; a fault, blemish, flaw, imperfection in a person or thing’Must also have regard to nature and purpose of contractExample‘...any defect, shrinkage outside the tolerances permitted in the Project Brief, omission or fault or failure to confirm with the requirement of the drawings and specifications and design documentation’Fertile ground for disputesMust be determined in the circumstances of the specific contract/projectClassification of DefectsConstruction/workmanship defectsFailure to construct in accordance with plans and specificationDesign defectsFailure to design the Works in the manner required by the PrincipalFailure to achieve ‘fitness for purpose’ obligation?Contractual ProceduresAS2124 – Clause 30.3Superintendent has power to direct:Remove from siteDemolishReconstructNot to deliver material or work to SitePrincipal may have work carried out by othersMay direct a variation due to the defective work or materialMay result in ‘negative’ adjustment to Contract priceMay ‘accept’ defective work with negative adjustmentSuperintendent determines what is ‘reasonable’Defects Liability Period (DLP)Commences at Practical CompletionUsually ranges from 3 to 24 months depending on the projectAS2124 – Clause 37Page 30 – positive obligation ‘shall rectify’Superintendent has the power to rectify defectsContractor must rectify defects or omissions ‘soon as possible after Practical Completion’Superintendent may direct Contractor rectify before expiry of DLPIf not rectified within time stipulated, Principal may rectify and recover costs as debtSuperintendent often has discretion to fix new DLP for specific defectsExpiry of DLP does not mean Contractor ‘off the hook’Final Certificate issues after expiry of DLPFinal certificate is works are on the recordAS2124 – Clause 42.8(b) – provides ‘pro-contractor’ clause for patent defects but doesn’t cover latent defects.‘Evidence’ that Works have been completed in accordance with contract except in the case ofFraudAny defect not apparent at end of the DLP or could not have been disclosed upon reasonable inspectionLimitation of actionsLimitations of Actions Act (1958) VicBreach of Contract – 6 years from date of breach; orFor negligence – 6 years from when ‘damage known or manifested’S134 – Building Act 1993 (Vic)Occupancy Permanency is achieved at Practical Completion‘Despite anything to the contract in the LA Act ... building action cannot be brought more than ten years after the date of issue of the occupancy permit in respect of the building work ...’10 years is the maximum ‘long stop’ period. i.e. restricts to 10 years.Gutterage Hatchage and Davidson v Someone (look up supreme Court case) – GHD caseExplains concept of ‘manifest’Second Reading SpeechThis will provide property owners with additional protection in terms of years beyond the very short number of years that now exists. Thurston v Campbell‘long stop’ theory does less violence to plain EnglishBut ‘replacement theory’ the ‘correct one’ because of second reading speechPaget v JLT Workers Compensation Services Pty LtdWorkers compensation legislation – always identical issue arose – Supreme Court of Victoria‘Despite anything to the contrary’ additional restriction which applies.Remedy for defective workConstruction defectsBreach of contractDamagesDamages compensatory. Place claimant in same position as if breach had never occurred.Usual measure of damages is the amount necessary to rectify to give Principal the building it bargained for unless it is not a ‘reasonable course’ to adoptBellgrove EldridgeDuty to WarnDesigner and builder have duty to warn Principal of design defects if they become apparent during constructionEquitable Debenture v William MossRequires more than ‘mere doubt’ about correctness, but not actual knowledge of errorsVic Univ of Manchester v Wilson & WomersleyCGA Brown Limited v Carr & AnorBuilder was given designs by OwnerCalled for ‘new flat roof’ across home extensionInsufficient ‘fall’ in the roofBuilder only discovered after completing constructionCourt: designer negligent. But builder also negligent for failing to detect inadequate design.Depends on ‘obviousness’ realistically‘if required’ – i.e. perhaps argument that this infers ‘told’Superintendent IntroductionMost contracts for large or sophisticated projects have a ‘superintendent’Responsible forIssuing instructions on behalf of principalAssessing and certifying claims for paymentDifficult job Paid by PrincipalRequired to act ‘honest & fairly’ or ‘reasonably’ when assessing Contractor claimsStatus of SuperintendentNot a party to the contract – a ‘creature of the contract’Status determined by the contractAgent of the PrincipalIndependent certifierWhat is the difference?Position in UKIt has not been settled ... that an architect acting under the ordinary building contract is the employers agent throughout notwithstanding that in the administration of the contract he has to act in a fair and professional mannerPosition in AustraliaSuch an architect may be an agent of his or her client to some extent but will also virtually by definition, bring to bear a professional skill a hallmark of which is independence of action and independence of judgementAbigroup v Peninsula BalmainSpecific ResponsibilitiesCertifying paying claimsDirecting variationsAssessing and valuing variationsAssessing ‘latent conditions’ claimsAssessing quantities in ‘rates’ contractsCertifying ‘practical completion’Approval of subcontractorsDirecting ‘provisional sum’ workAssessing extension of time claimsThe major standard form contractsAS2124 – page 21 – Clause 23AS4000 – pg 237 of NotesABIC MW-1 2003The major standard form contracts PC-1 – clause 3.1‘The Contract Administrator will carry out all its other functions under the Contract as the agent of the Owner (and not as an independent certifier, assessor or valuer)Obligations as independent certifier‘Discretion must be governed by interests of each party as it appears from the terms of the contract’Perini v Cth‘Exercising some skill or function in independent way and not as employers agent’Abigroup v Peninsula BalmainMust have regard to aims of contractOnly exercise powers given by contractMust exercise discretion in the interests of both partiesInterference with SuperintendentPerini Corp v Cth of AustraliaSuperintendent employee of Govt deptContractors EOT claims rejected on departmental policy grounds‘...vested with duties which oblige him to act fairly and justly and with skill to both parties..’Held: Implied term that Commonwealth would not interfere when exercising role as certifierAbigroup v Peninsula BalmainPrincipal engaged external consultant as SuperintendentConsultancy agreement required Superintendent to act as a Principals agent ‘in all matters related to the project’Abigroup (builder) engaged under AS2124Abigroup disputed Superintendents assessments of its claims. Said there had been ‘misrepresentation’An architect will ‘bring to bear a professional skill a hallmark of which is independence of action and ... judgement’Held: The ‘agency’ relationship required Superintendent to act in best interests of PrincipalAbigroup would never have entered into the Contract had it known the true nature of the relationshipKane Constructions v SopovContractor claimed Principal had interfered with Superintendents assessmentsSuperintendent prevaricated and delayed – hoping that disputes would resolves themselvesHeld: Superintendent had failed to act ‘competently or independently’Some ‘indicia of interference’Allows judgement to be influencedIs directed by one partyActs as ‘mediator’Considers principals assent necessaryLiability of SuperintendentTo Principal:Consulting professionals owe duty to use ‘reasonable care and skill’Terms of consultancy agreementEmployee Superintendents may exceed authorityTo Contractor:No ‘Privity of contract’Contractors cause of action is usually against PrincipalCourt or arbitrator may substitute decisionJohn Holland v Majorca ProjectsNo duty of care owed by the superintendent to the contractorCreating a contractual liabilityTripartite deedsUndertakes contractual obligations to both partiesCan be sued for breachDifficult to prove breachTimeConcept of ‘time’ is fundamental in building projectsPrincipal wants projected completedContractor wants to work unimpeded and finish asapImplied Term: completion with a ‘reasonable time’Usually express provision for an actual date or period for completionTerminologyPractical CompletionDate for Practical CompletionDate of Practical CompletionLiquidated Damages (LD)Extension of Time (EOT)Late completionWhat are a Principals remedies for late completion?Breach of contractDamagesIf contract silent – ‘general’ or ‘unliquidated’ damagesPrincipal has to prove themA principals damages for late completion can be difficult to proveLoss of rentFinance costsInterestsDamages ‘up the line’ (example)Claims from proposed tenantsHadley v BaxendaleLimb 2 - Breach in reasonable contemplation of the partiesProving that loss was incurred is difficultThus, contracts usually provide for ‘liquidated damages’Agreed rate up frontUsually an amount per dayMust be a ‘genuine pre-estimate’ of lossDamages must not ‘punish’ – that is – they must only be compensatoryCommencementSpecific date or mechanism for calculating period by which Practical Completion to be achievedProvides certainty re-time for completionAS2124 – Clause 35.1ProgressContractor must ‘proceed’ with the work ‘regularly and diligently’AS2124 – Clause 3.1, 33.1Separate and distinct from obligation to complete the workSubstantial BreachFailure is a substantial breach entitling Principal to terminateClause 44.2ProgrammingSophisticated disciplineGantt Chart – exampleSometimes program is a ‘contract document’Clause 33.2May direct the furnishing of a program to superintendentRisk of ‘departure’ – obligation not to do soObligation to CompleteExpress obligation to bring the work to ‘Practical Completion’ by the Date for Practical CompletionAS2124 – Clause 35.2Liquidated Damages for late completionContractor undertakes to pay agreed or ‘liquidated’ sum for any periodUsually a daily or weekly rateIncentive for contractor to complete when it promised it wouldCompensation to principalSometimes LD’s are ‘capped’AS2124 – Clauses 35.6 & 35.7LD’s regime usually exhaustiveCellulose Acetate v Widnes FoundryRate of $20 per week over 30 weeksUpheld by a Court – even though actual damages – were far in excessTemloc v ErrillHad “$ nil”Mutual intention nothing payable for late completionSilent Vector Pty Ltd v SquarciniIf the Contractor fails to reach Practical Completion by the Date for Practical Completion, the Contractor shall be indebted to the Principal for liquidated at the rate stated in the Annexure for every day...’ – per day N/AHeld: Clause would not apply at allDeduction/payment of LD’s in practice‘shall pay or allow’‘shall be included ...’Superintendent may include allowance for LD’s in a payment certificateSometimes principal has right of ‘set-off’Not all delays are the Contractor’s ‘fault’Principal – caused delaysContractor – caused delays‘Neutral’ delaysNot all delays are the Contractors ‘Fault’Principal – caused delaysLate provision of informationAccess to siteOther contractorsVariationsLate instructionsDelays by Superintendent and others for whom Principal responsibleContractor – caused delaysLate commencementSlow progressPoor co-ordination of subcontractorsRectification of sub-standard or defective work‘Neutral’ delaysInclement weatherIndustrial action‘Latent’ site conditionsChanges in lawChanges in quantitiesSupply of goodsRisk of delay allocated between Principal & ContractorRisk allocation will have impact on:PriceTime for completionContractors price increases if asked to assume risk of delaysWhy? Because contractor must pay LD’s if late completionContractor entitled to ‘extension of time’ for qualifying causes of delayExtension of time = relief from liquidated(Timeline Example)Need mechanism for extending timeExtensions of time are a contractual mechanismQualifying cause of delayNotice of delayEOT applicationSuperintendent assessmentEOT/no EOTAdjusted Date for Practical Completion?AS2124 – 35.5Delaying eventNoticeClaimAssessment occurs the ContractorSuperintendents discretionTime bar –AS2124 – Clause 35.5 ... and within 28 days ‘after the delay’ occurs the Contractor gives the Superintendent a written claim for an extension of time.‘occurs’ – objective. The Contractor must have known.Or a test of reasonable personQLD v MultiplexAvoiding liquidated damagesLate completion can mean heavy financial loss for ContractorsContractors wont hesitate to challenge application of LD’sTwo avenues:Using contractual mechanisms to extend timeAttacking validity of the clause itselfContractual mechanismsDelivery of EOT claims on timeEOT claims wrongly assessed (or not at all)Practical Completion certified too lateExampleAttacking the LD’s clauseContractors have often argued that the LD’s clause itself is void for uncertainty or unenforceable as a ‘penalty’However, Courts reluctant to interfere:Freedom of contractApprove ‘agreed procedures’LD clauses are construed strictlyContra proferentemAgainst the partyWhere the clause is a penalty?LDs must be a ‘genuine pre-estimate’ of loss likely to flow from late completionJudge at date of contractDunlop Pneumatic Tyre Co v New Garage CoDescription is not conclusivePenalty – payment ‘in terrorem’Imposed as a deterrentDepends on construction of contract in context of each casePenalty if ‘extravagant and unconscionable’ in comparison with greatest loss that could conceivably be proved to have followed the breachPresumption of penalty if single lump sum payable for one or more event, where some are ‘serious’ and others ‘trifling’May still be a genuine pre-estimate even if precise pre-estimation impossible.Philips Hong Kong v Attorney General of Hong KongContract ITservices‘Key dates’ to enable other contractors to continue unimpededLD’s if late on any ‘key date’Additional, LD’s if whole services not complete by specified date.Philips asked the Court to order clause a ‘penalty’Offered several hypothetical ‘scenarios’ in which LD’s could exceed the Governments likely actual damagesPossibly of ‘double-compensation’Court: ‘no oppression’. Different losses arose from different failures.Ringrow v BP AustraliaIf its merely ‘lacking in proportion’ this does not amount to a penalty The damages must be ‘so unconscionable or oppressive that their nature is penal rather than compensatory’Degree of disproportion maybe relevantNature of relationships may be relevant to ‘unconscionability’Tasmania v Leighton ContractorsLeighton constructing roads for the StateDelays. LDs of $8,000 per dayLeighton argued ‘penalty’State received Cth fundingNot exposed to capital costsEssentially, no real lossCourt: Primary judge agreed. ‘Totally disproportionate to the likely actual costs anticipated to be incurred’Full Court disagreed. Penalty argument first raised on Day 1 of trialNeeds to be judged objectively looking at all circumstances, bargaining position, etcPotentially incurred costs, public utility, loss of amenity, diversion of resources, future dealings with CommonwealthLeightons argument that State could have suffered ‘no loss’ was rejectedPublic utility does not itself disentitle the State or public authority from seeking ... compensation for loss of components of which are incalculable ...’Where there has been an ‘act of prevention’Why do we have liquidated damages clauses?Where Principal itself prevents Contractor from completing on time, it cannot benefit from its own breach of contractPeak Construction (Liverpool) v McKinney Foundation Peak was head contractor. Engaged McKinney to construct foundationsDelays in sub-contract work caused by defects in foundationsNo power to extend timeThis caused delay under head contractCourt: part of delay caused by Principal and there was no power to Superintendent in the contract to extend time from Principal – caused delayIf no contractual mechanism for extending the date for practical completion due to Principal-caused delays, a LD’s mechanism cannot operation because impossible to establish the date from LD’s should be calculated‘Peak principle’Became known as the ‘Peak principle’ or ‘prevention principle’Where it applies, Date for Practical Completion inoperableNo liquidated damagesObligation to complete within ‘reasonable time’Prevention principle now rare in practice. Catered for in most contractsAS2124, Clause 35.5(b)Superintendent has the power to grant EOT Contractor has the power to apply the EOTTurner Corporation v Co-ordinated Industries Pty Ltd‘the fact that principal may have caused the delay simply means that an allowance should, therefore, be made in accordance with EOT’ mechanismEOT clause contained a time barPrincipal-caused delays belays but Contractor time-barred from claiming EOTContract argued prevention principleCourt: disagreedGaymark Investments v Walter ConstructionClause 35.4 – give the Superintendent a unilateral power to extend time was deleted from the standard form contractReplaced with Special ConditionStrict time bar on delivering on EOT claim. Also, Contractors entitlement conditional on it having submitted a timely claim.But no express power given to the Superintendent to grant an EOT. Only a right given to Wlater to claim an EOTWalter was delayed, but time-barred from delivering an EOT claimGaymark sought to apply LDs for late completionWalter relied on the ‘prevention principle’. Delays were caused by Principal. No express power given to the Superintendent to extend time for these delays.Gaymark argued ‘Walter could have applied for EOT but it failed to. There is no room for the prevention principle hereTurner v AustotelCourt: In the absence of strict compliance with Special Condition 19 and where Walter has been actually delayed by an act, omission or breach for which Gaymark is responsible there is no provision for an extension of time because clause 35.4 which contains a provision which would allow for this has been deletedAn award of LDs in favour of Gaymark would be ‘unmeritorious’Decision criticised in Australia and UKAdrian Baran article – pg 296 notesHamish Lal – p281Avoiding the ‘time-bar’Peninsula Balmain v AbigroupAS2124Referee found that Superintendent should acting honestly and fairly have granted ROTs unilaterallyAlso relevant: Evidence that notice requirements were ‘on hold’ for relevant periodCourt: Unilateral power to extend time is one capable of being exercised in the interests both of the owner and the builderIf no timely claim made & time has elapsed, may be reason for refusing to exercise discretion. Not the casse here.CAppeal:‘unilateral power ... capable of being exercised in the interests of both owner and builder ...’Herbery Bay (JD)Pty Ltd v Civil Mining and Construction Pty LtdClause giving Superintendent a unilateral power to extend time was deleted. Contract instead provided35.5ARefer Notes35.5BRefer notesCourt:In this contract however, the parties have substituted different terms and the express intention was to confer on a power the Superintendent without imposing any obligation as to the exercise of that power ... the relevant clauses appear to have been drafted with peninsula Balmain in mind. In my view, there is no tenable construction of cl 35.5A by which the Superintendent could be said to be under any obligation and in particular an obligation to extend time if it would be fair to do so.See Notes Pg 350Where clause invalid for uncertaintyIncapable of being given meaningLeads to imprecise result, many results, or no resultKemp v RoseSummaryPenaltyAct of preventionAvoiding the time barVoid for uncertaintyPrincipal remedy where LD’s unenforceable?General damagesFinola O’Farrell – Notes page 243If penalty, general damages may be ‘capped’ at LDs rateIf act of prevention – position may well be sameIf void for uncertainty – general damages unlimitedDelay CostsTime = moneyContractors lose money when delayedOnsite-overheadsShe/fence/binSite mangerForemanScaffoldingDelay caused by PrincipalBreach of contractDamagesVariation CostsNeutral DelaysUsually contractors riskRisk often allocated in written contractsCodify Contractors right and limit Principals exposure to damages claimAS2124Distinguishes between Principal-caused delay and othersRequires EOT to have been grantedPrincipal-caused =’such extra costs’Other delays = liquidated amountSometime flat rate agreed for all delaysFloatPeriod of time in a construction program between the date when the contractor expects to complete the Works and the date by which it must complete the worksWho owns the float?Glenlion Construction Limited v Guinness TrustNo positive duty upon the Principal to assist the Contractor to complete earlier than the contractual completion dateAustralian position – Nicholas Brown articles (notes p.246)‘Contract owns the float’?Example – AS2124-1992 – clause 35.5Clause 35.5 – FloatEntitlement to ‘float’ or that part of the contractors program which might be some spare time. ****WILL BE ON EXAM****Notices and Time BarsOverviewNoticesMethod for giving noticesRemedies for non-complianceTime barsDefences to time barsNoticesCommon notices under most contractsVariationsClause 40EOTsLatent conditionsDisputesClause 47‘show cause’ and terminationClause 46ClaimsNotices can determine rights and liabilitiesMethod for giving NoticesMost contracts stipulate manner for giving noticesCritical to understand contractual requirementsFailure to comply may mean invalid noticeAS2124 – Clause 7Care should be taken when choosing method for service of notices in a contractWhen is service effective?What if recipient away?Is email practical or risky?Remedies for non-complianceWhat is principals remember if Contractor fails to give required notice?AS2124 – Clause 12.2 (latent conditions)Not a good example of a time bar clauseRequire to serve a noticeFail to service a noticeNotices under AS ContractsClause 46Notice requirementMust be given within 28 days of ‘reasonable awareness’‘Shall not be liable’Telling you the position that will be if the notice is not servedFailure to notify invalidates the claim‘Time bar’Time barFailure to notify invalidates the claimJennings Constructions v BirtContractor shall not be liable upon any claim by Sub-contractor ... unless ... lodged in writing ... not later than 14 days after ... occurrence of events ...Birt submitted late claimCourt: Compliance mandatory. Claim failed.Considered ‘condition precedent’Time bars render a late claim invalidQueensland v Multiplex‘if the contractor is ... delayed ... and within 28 days after the delay occurs the contractors gives ... a written claim for an extension of time ... shall be entitled to an extension of time ...’1st Instance – Trial judge agreed at first instance that was not time barredCourt of Appeal: ‘After the delay’ occurs means ‘after the delay first occurs’Multiplex was time-barredSimilar results in other casesRise and Rise of Timebar Clauses – Refer to the Notes****TIMEBAR ON EXAM**** Defences to TimebarsPeninsula Balmain v AbigroupNotes pg 45Similar EOT clause to Multiplex caseAlso a clause permitting Superintendent o grant EOT ‘for any reason’Contractor failed to claim EOT in timeCourt: Superintendent acting ‘honestly and fairly’ should have exercised power to grant EOTWaiverParty may waive right to rely on strict observance by other party not notice provisionsWaiver can be express or inferredBeware ‘no waiver’ clausesEstoppelDefence – not as common as waiverKind of secondary argument in a claimPrincipal waived rights in relation to time provisionsSome representation made and the other party relies on it to their detrimentPrincipal may represent to Contractor that strict compliance with notice provisions required. Representation may be express or inferred from conductContractor relies on representation to its detriments (i.e. submits or continues to submit late claims)Then Principal seeks to rely on ‘time-bar’ to stop themPrincipal can be ‘estopped’ from relying on its contractual rightsBGD v VicUrbanBoth waiver and estoppelSecurity for performanceTerminologyPerformance bondsPerformance guaranteesRetention moniesOn demand guaranteesLetters of credit?A document issued by a bank at the buyer's request in favor of the seller, promising to pay an agreed amount of money upon receipt by the bank of conforming documents with a specified time.The Autonomy PrincipleA surety’s obligation under a performance bond is independent of the underlying contract between a grantor and beneficiaryWood Hall Pty Ltd v Pipeline AuthorityVirtually promissory notes payable on demandA promissory note, referred to as a note payable in accounting, is a contract where one party (the maker or issuer) makes an unconditional promise in writing to pay a sum of money to the other (the payee), either at a fixed or determinable future time or on demand of the payee, under specific ...‘hands off’ approach by the CourtsGiving effect to unconditional obligation in a performance bond which is independent of the underlying contract between the grantor and beneficiaryExceptionsNegative stipulations (or covenants)FraudStatutory Unconscionability Negative StipulationsThe NSW PositionPearson Bridge v SRA‘If the principal becomes entitled to exercise all or any of its rights under the contract in respect of the security, the principal may convert the security’The Victorian PositionBachmann v BHP‘A party shall not convert into money security that does not consist of money until the party becomes entitled to exercise a right under the Contract in respect of this security.’Clause 5.5 of the Contract – not dissimilar to Pearson Bridge‘The Purchaser may deduct from monies otherwise due to the Supplier, any monies from the Supplier to the Purchase and if those monies are insufficient, the Purchase can have recourse to the security under the Contract’Clause 22.4 – principal has security and can take that security.Court – its clear this was contemplated and allowed itAn irreconcilable divide?Ultra Refurbishing & Construction Pty Ltd v John Goubran & Associates Pty LtdSimilar clause to Pearson Bridge –Distinguish between use of ‘whenever’ instead of ‘if’ as avoid finding a negative stipulationHughes Bros Pty Ltd v Telede Pty Ltd‘whenever .. may be entitled’ is not the same as ‘is entitled’Reed Construction Services Pty Ltd v Kheng Seng (Australia) Pty Ltd‘shall be entitled’ required more than ‘may be entitled’One for VictoriansApproach in Bachmann is focussed on giving effect to the intention of the parties‘may be entitled’ interpreted as ‘is entitled’Who should be out of pocket in the event of a dispute?Parties have agreed under contract as to who is out of pocket as to a dispute. Principal is entitled to call on the security before the dispute is resolvedIf found against them, then must pay it back.Contractor usually providing security for contractor obligations under the contractEntitlementFletcher Construction v VansdorfContextual construction process‘unconditional’ nature of performance bondsTrade usageIntended risk allocationDistinction between rights against a beneficiary versus rights against the surety‘It is likely the parties intended that the security should be available to meet any bona fide claim by the owner. If they intended that the availability of the security should be deferred until final resolution ... they should have so provided ... no implication may be made which is inconsistent with an agreed allocation of risk’The fraud exception in the USASztejnIntentional fraud – either as to the performance bond or in the underlying contractEgregious or gross fraudThe fraud exception in the UKBolivinter Royal SA v Chase Manhatten BankNarrower reading than the USABeneficiarys fraudulent presentation of a performance bond to the suretySurety cannot be injuncted unless it is aware of the fraudFraud in AustraliaHortico Australia Pty Ltd v Engery Equipment Co Need to show intent by the beneficiary to the obtain money by deceitRecognition of ‘gross unconscionability’ as a fatuehr exception to the Autonomy PrincipleStatutory unconscionability – ****&IN EXAM, DISCUSS THESE CASES****Olex Focas v SkodaexportNo equitable notion of unconscionability short of fraudAs the majority of the monies advanced under the mobilization guarantee had been repaid to Skodaexport and the contract provided a mechanism for partial repayment, call on the whole sum was unconscionableCall on performance guarantees were allowed –even though deliberately contributed to unduly pressure Olex into accepting lower paymentIntent was for Olex to be out of pocket in the event of a dispute giving rise to calls on the performance guaranteesCourt: If there is unconscionable is so bad, effects contractors entitlement to have recourse to the performance bond.It’s moved further than this – this was only recognised in this case. Refer 2 later cases.Boral Formwork v ActionmakersBoral and Action Makers in contract for supply of scaffolding equipmentBoral provided irrevocable letter of credit to ActionAction called on letter of credit in circumstances where it was aware that the sum sough was in excess of its entitlements as a result of its defective worksHeld this was ‘sufficiently special’ circumstances to bar the call on the security – much more than merely attempting to apply commercial pressureThe autonomy Principle was over-ridden by s51AC of the TPAClough Engineering v Oil and NaturalMore restrictive construction of unconscionabilityONG able to call on performance bonds even if there were ongoing disputesClough clearly intended to be out of pocket if a dispute aroseReiterated the importance of bonds in international tradeStatutory UnconscionabilityIncreasing important now the monetary threshold under the TPA for unconscionability have been removedDecisions such as Clough have reinforced reluctance by the Courts to extend notions of unconscionability beyond cases tantamount to fraudWhat should be the standard ?A flexible standard – vulnerability?Actual fraud?Drafting and Standard FormsEntitlement to call on a performance bondRecourse to detail with monties from that callImmediate right to callNotice as a condition precedentWhat happens on terminationContractors DO want notice Owners DO NOT want noticeAS2124UnamendedIncludes express preconditions to having recourse to security including notice of intention to callSecurity held on trust unless beneficiary is government bodyPC-1No express preconditions to a callIntended that there is no negative covenantsFurther ReadingRefer notesTermination - **** ON EXAM ****What is termination?Where on party brings a contract to an endCommon law right to terminateOften, contract will modify or expand the common law right to terminateRelevant in context of constructionConsequences of wrongful termination/repudation severeCan give a contractor the right to claim payment on a quantum meruit basisA right not exercised lightlyBreach of a ‘condition’WarrantyConditionCondition = where precise or literal compliance necessary or where substantial performance essentialOscar Chess v WilliamsCommon law right to terminateDistinction between conditions & warranties unsatisfactoryUse of the word ‘condition’ in a contract not determinativeHigh Court of Australia developed test of ‘essentiality’Tramways Advertising v Luna ParkContract required Tramways to put trams with advertisement boards on tracks for 8 hours per day‘we guarantee’ boards for at least 8 hours per dayContract also referred to trams being on track for an average of 8 hours per dayLuna park complained that boards were not on tracks at least 8 hours per daySaid it was not bound by the contract because of Tramways failure to performTramways argued that performance satisfactory if boards were on tracks for average of 8 hours per dayCourt: displaying boards for only an average of 8 hours per day was serious breach that justified termination by Luna ParkThe ‘guarantee’ clause was a condition (not a warranty) breach of which entitled Luna Park to terminateExamplePrincipal believes contractor breaches via repudiation when hasn’tWrongful termination – its terminated regardlessPayment on a quantum meruit basisEssentiality of term depends on intention of parties objectively ascertainedWould A have entered into contract except on B’s assurance of strict compliance?Koompahtoo Local Aboriginal Council v Sanpine Pty LtdHigh Court confirmed correctness of approach in TramwaysEssential terms Intermediate Term – sufficiently serious breach may give riseNon-essential – breach not repudiationGenerally: Being late does not amount to serious breach to allow terminationOnly where ‘time is of the essence’Question of degreeTermination for failure to make progress paymentsTermination for failure to make progress paymentsBreach of an instalment obligation not sufficient – Maple Flock v Universal FurnitureNeed to establish frequency of breach in context of contractRepudiationWhere A repudiates contractual obligations, B may terminateEvincing an intention no longer to be bound by obligationsCan arise in a number of waysParty says it will not performParty demonstrates that it cannot performMaintains an erroneous interpretation of contractCommits many, constant breaches with cumulative effectIf you evince and intention to not be bound, and have no grounds for doing it – you yourself have repudiated and are liable for wrongful termination.Doctrine of Election and waiverInnocent party always has the election – continue or bring to an endMay elect to treat conduct as repudiatory and bring it to an endMay, by behaviour, treat contract as valid and on footWilling and able to performInnocent party must be ‘ready, willing and able to perform’Foran v WightEquity – ‘clean hands’Contractors remedy for repudiationSue for damages (and all that which entails)Claim on a quantum meruit basisFrustrationNo fault terminationTaylor v CaldwellContract for hire of a hallHall burnt downContract ‘frustrated’ and at an endParties absolved from performanceAn event which excuse parties form performance or makes performance impossibleNot an event which is a type of risk that is contemplated expressly or impliedlyContractual Rights to TerminateAS2124 – Clauses 44.2 and 44.7Termination for convenienceConsequencesFollowing the contractual procedure may be criticalConsequences of TerminationContract is at an end from moment of terminationRights and obligations that have accrued and bindingFuture rights and obligations dischargedDoctrine of ‘survival’Clauses that were intended to ‘survive’ a termination will survive Disputes resolution clausesIntellectual property (designs etc)Construction Risk Allocation in ContractsSuccessful Project OutlinesA successful project is one which:Meets budget and timing requirementsMeeting project specific requirementsSatisfies statutory/probity/accountability requirementsObtains the best outcome for the Principal and the stakeholdersThe Contractor makes money Reduces riskTools for successful construction projectProperly scope the projectPrepare suitable documentation Choose the appropriate delivery methodDeterminate appropriate project/construction risk allocationClearly set out the parties rights and responsibilitiesConstraints on achieving a successful projectFundingInternal resourcingLate consideration of project delivery issuesRushing to commence work when documentation not completeInadequate consideration of riskPolitical pressuresConsequences of a poor construction projectProject over budget (effectively become ‘cost plus’)Project lateDefective works/poor qualityDisputesRisk and Risk allocationWhat is Risk?Risk is the chance of an event occurring which would cause actual project circumstances to differ from those assumed when forecasting project benefit and cost.Page 2.45, Page 23 – Vol 1Approaches to Risk AllocationTheoretical ApproachA party should bear a construction risk whereThe risk is within the partys controlThe party can transfer the risk e.g. through insurance, and it is most economically beneficial to deal with the risk in this fashionThe preponderant economic benefit of controlling the risk lies with the party in questionTo place the risk upon the party in question is in the interests of efficiency, including planning, incentive and innovationIf the risk eventuates, the loss falls on that party in the first instance and itis not practicable, or there is no reason under the above principles to cause expense and uncertainty by attempting to transfer the loss to another.The ‘No Dispute’ ReportThe principal should not ask a contractor to price an unquantifiable risk that is in control of the PrincipalThe Principal may ask the contractor to manage and control a neutral riskClear identification of the obligation and/or risk is essential in any method of risk allocation. This then lessens the likelihood of disputes.Risk allocation is driven by:Client philosophyContractors philosophyMarketFinanciersLawyersRisk allocation considerationsRetained riskRisk ‘take back’ – intentional and unintentionalRisks over which no party has no controlRisk sharingRisk mitigation strategiesRole of insurancePhases of RiskTenderNegotiationConstructionOperationsTransfer of assetRisk and AS2124Latent conditionsParties share riskDanger of TPA claims relating to geotechnical and other site reportsTime/delaysExtensions of time – Clause 35Notice requirementsActual delayUnilateral power to extend timeConcurrent delaysLiquidated DamagesLiquidated damages (LDs) – Clause 35.5Liquidated damages or penaltyGenuine pre-estimate of lossImplications of LDs being a penaltyDelay costsDelay Costs – Clause 36Entitlement to costs?No complete codeInadequate designClause 8.1What is inadequate design documentation?Lump Sum Construction Contract – Principal bears all riskRisk of discrepancies sharedInadequate design exposes the Principal to:Additional costsDamage for misleading or deceptive conductBill of quantities inaccurateBill of quantities – Clause 4Difference between Bill of Quantities and Schedule of RatesThe principal takes risk of errors in Bill of QuantitiesBill of Quantities – Calculate the quantities of building materials and priced per volume etc.Statutory requirements changeClause 14Contractor must comply with statutory requirementsThe Principal takes risk of statutory requirements altering after date of tenderCare of worksContractor responsible for works until 4pm on Date of Practical CompletionContractor must reinstate damage except where ‘Expected Risk’Delivery Methods – ****EXAM – COMMENT ON MOST APPROPRIATE DELIVERY METHOD****Determining the right project delivery methodTimingIs there time to fully design?Are there early works required?Does the contractor need to be involved in the documentation?ScopeIs there certainty of scope?Is the contractor taking maintenance/operations obligations?Novel engineer solution requiredComplexityWorks on other persons landPlanning issuesNative titleCompulsory acquisitionUnknown site conditionsPaymentLump sumGMP/WMPGuaranteed maximum priceCost PlusIncentivePain share/gain shareMethods of procurementConsultancy agreementsConstruct Only ContractsDesign and Construct ContractsConstruction management contractManaging contractor contractsPPP – Public/Private PartnershipsBOO/BOOTBOO – Build, Own, OperateBOOT – Build, Own, Operate, TransferDesign, Build, Finance, Operate/MaintainEPC/EPCMEPC – Engineer, Procure & ConstructEngineering/Design/Procure of Equipment/ConstructUsually a plantEPCM – Engineer, Procure, Construct & ManagePartnering/AlliancingDevelopment agreements‘Construct Only’ contracts – SEE DIAGRAMSeparate contract with consultantsDesigner engaged before contractorContractor constructs in accordance with plans and specificationsThe principal responsible for designAdvantagesNd volume of documentationDesign progressed: Contractor can tender more accuratelyTendering costs reducedLarger tender pool: more competitiveRisk of variations should be reducedPrincipal retains control of designPrincipal retains control of qualityDisadvantagesRequired and ‘lead time’ can delay the projectComplexity and volume of documentation can lead to errors/omissionsContractor and Designer blame one anotherPrescriptive design can lessen opportunity for innovation and efficiencesDesign & Construct – REFER DIAGRAMIf engaged before contractor, designer novated to contractorNovated – delegate responsibility to another partyContractor responsible for developing designAdvantagesSingle point responsibility Ability to ‘fast track’ the projectDisadvantagesThe principal has little control over the evolution of the designSmaller pool of ContractorsPerhaps higher cost?PPP/BOOTS– REFER DIAGRAM (not examinable)Public/Private PartnershipsModel for private sector involvement in development public infrastructureUse of private sector funding/expertise/management to deliver public sector projectsSPV – Special Purpose VehicleBasis in privatisation policiesUK under ThatcherNCP in AustraliaDistinguish PPP’s from traditional approachTraditional – public sector responsible for design, construction, financing, operation/maintenancePPP – responsibility/risk for design, construction finance, operation/maintenance on private sectorAdvantagesEarlier project deliveryRisk transfer to private sectorEnhanced efficiency through competitionWhole of life approachEnhancing private sector innovationDisadvantagesCosts of bidsAdvisersCost of timeParticularly high in an immature marketLack of deal flow in immature market restricts interestLength of procurement processLump Sum Contract – or not?Fixed Lump Sum ContractsCan use both as re-measurement contractsOften used a lump sum contractsIn theory, contractor takes the risk of ultimate price, however.Potential cost adjustmentsErrors in Bill – Clause 3.3 of AS2124Discrepancies in contract documents – Clause 8.1 of AS2124Provisional Sums – Clause 11 of AS2124 Latent Conditions – Clause 12 of AS2124Change in Law – Clause 14 of AS2124Minerals, fossils and relics – Clause 27.5 of AS2124Survey marks/setting out – Clause 28 of AS2124Defective materials or clause – Clause 30 of AS2124Cost of testing – Clause 31.7 of AS2124Direction re order of works – Clause 33.1 of AS2124Costs of suspension – Clause 34.4 of AS2124Delay Costs – Clause 36 of AS2124Variations – Clause 40 of AS2124Damages for breach of contractDamages under StatuteFormation of Construction ContractsContract Documents & TerminologyPartiesPrincipal/EmployerContractorArchitectEngineerSuperintendentQuantity surveyorConsultantsProject managerClerk of worksPrincipals/employers agents/representative – appoint a representativeSubcontractorsSuppliersDocumentsAS2124 – Not a complete contractAlso need an instrument of agreement specifying the parties, what constitutes the contract, entire understanding clause, execution clauseTender/invitation to tenderAgreement/instrument of agreementConditions of ContractPlans/drawingsBill of quantitiesSpecificationsSchedule of RatesWhat is a tender?An invitation to tender is an ‘invitation to treat’The response to the tender invitation constitutes the ‘offer’Acceptance of the tender constitutes a binding contractTender - The Contractors offer to carry out works is called a tender. It must be definite and unambiguous in its terms if its acceptance is to conclude an agreement enforceable by the law as a contract.Request for Tender (RFT)Ambiguous acceptancePeter Lind & Co Ltd v Mersey Docks & Harbour BoardContractor submitted alternative tenders for construction of freight terminal – one ‘fixed price’ and one was a ‘cost plus’Board purported ‘your tender’ but did not specify which oneContractor did work and claimed on quantum meruitHeld no concluded contract and entitled to payment on quantum meruitTenders and EstimatesConstruction industry – contracts, subcontractors suppliers, consultantsQuotations and estimates are commonNormally, an estimate will be held to be firm offer Crowshaw v Pritchard and RenwickWhat is not a tender?Expression of interestNot an offerMere provision of informationCosts of tenderingCosts of tendering generally borne by contractorPossible exceptionsAdditional services at employers requestSubstantial preparatory work at employers requestCan tender process be a contract?Normally no contract before tender is accepted but in some circumstances invitation to tender (and response) may create contractual obligations.Blackpool (English C of A – 1990)Hughes Aircraft (FC of Appeal – 1997)Blackpool caseBlackpool and Flyde Aero Club Ltd v Blackpool Borough CouncilTendered submitted tender that complied with RFT in all respectsCouncil mistakenly thought tender received lateHeld: Pre-tender contractual obligation to at least consider the tender despite express term that Council is not bound to accept any part of any tenderCouncil standing orders on tenders would become part of the contractAnalogous to VGPB or internal policiesCourt held that contractual obligation to consider the tender.Hughes Aircraft CaseHughes Aircraft System International v Airservices AustraliaTwo tenderers for air traffic control systemRFT contained 4 weighted criteraPrice (2nd most important)Australian industry (4th most important)Hughes – Cheapest priceThompson – most Australian contentThompson wonThere was a pre-tender process contract (participation in the tender process was the consideration) which:Required the evaluations of tenders in accordance with the methodology prescribed in the Request for TenderPre-contractual obligation owed to fairly accept and asses tender documentsImplied a term of ‘fair dealing’ – that tender evaluation would be conducted fairly and in a manner that afforded equal opportunity for Hughes and ThompsonHeld: breached term of fair dealing because it:Took account of Thompson material submitted after date (including price reduction). Hughes not provided with same opportunity.Failed to ensure strict confidential of tender documents (permitted disclosure of Hughes tender info to Thompson)Allowed a board member to have improper interests in Thomson and the Thomson bidImplication of term of fair dealing is consistent with behaviour expected of a public body using public fundsWhat is a Tender Process Contract?A contract governing the manner in which the tender is conducted, as distinct from the ultimate contract for which tenders are being soughtThe principal terms of the process contract are contained in the Request for TenderCourts have historically sympathised with tenderer. May be gradual shift towards outcomes which favour the invitee.When will a TPC arise?Not automaticallyDepends on intention of partiesExpress or intention may be inferredCan be contracted out ofInconsistent RFTCubic Transportation Systems v NSWTender process for selection of ticketing system supplier for Sydney public transport systemFollowed Hughes caseDespite NSW Government reserving broad powers to vary RFT:Changed term of specifications in RFT during the tender process so one tendered disadvantaged – this may be breach of process contractCould not exercise unfairlyHeld: Implied term of good faith requires that invitee take into account interest of tenderersProcedural Fairness ensure that each party has equal opportunity and that there is no biasCourt disagreed with policy basis for implying a term of fair dealing in Hughes – policy argument may not apply in commercial situationPratt Contractors v Transit NZPratt submitted tender to Transit for road contractTransit had internal manuals for tender evaluation – consistent with Competitive pricing Procedures required by Transit NZ Act 1989 (NZ)Tender considered both price and non-price attributes (e.g. relevant experience, technical skills, resources)Tender evaluated by Tender Evaluation Team (TET) of 3 members – 2 had been involved with Pratt’s previous failed projectsTerms of Request for TenderLowest tender won’t necessarily be acceptedTender shall be valued according to Competitive Pricing PrinciplesIn first rounder of tender evaluations:Pratt had lowest price but failed on technical skills and ‘resources’ – being ‘financial’ resourcesTransit rejected all tenders and re-advertisedFinal report of TET included reference to Pratt’s past reputationSecond round of tender evaluation:Pratt submitted higher price (to deflect concerns re-low balling)Financials were not included in considering ‘resources’ criteria Pratt passed on technical skills but failed on relevant experiencePratt Lost TenderHeld: RFT gave rise to pre-award process contractRFT didn’t incorporate internal manuals – these were for administrative purposes only – Transit could consider Pratts financials as part of ‘resources’ criteria Found implied duty of good faithTET can consist of people who have had previous dealings with Pratt – can give honest evaluation based on experience. No conflict of interestNo breach of express or implied terms of process contract. Even if there was breach – this would not have caused Pratts failure.State Transit Authority of NSW v Aust Jockey ClubSTA initiated tender process for sale of land used as busway at Royal Randwick racecourseMinister authorised STA to negotiate with AJC on conditions that AJC continue to use busway for racecourse purposesNegotiation unsuccessful. STA entered agreement with third party tendered.No contract arises till tender is acceptedUnsuccessful tendered not entitled to redressOfferor had absolute discretion to accept/reject, extend closing date, negotiate with any tenderer at any time.Held: No pre-award process contract. Merely invitation to treatTight drafting of conditions ensured invitee was ‘master of situation’ and had no obligation to follow nay processCase law developmentsNo ‘trade custom’ that the lowest bid must be accepted (Elgin Constructions)Council cannot make decision based on un-stated selection criteria (Chinook, Kencor)Incorporation of manualsMay avoid creating pre-award process contract through careful drafting of RFTProcess contract may require assessment of tender in accordance with RFTRFT unlikely to incorporate internal procedural manuals, but probably includes procedures or policies referred toDuty of good faith by invitee may be impliedDuty of good faith requires each tenderer to be afford equal opportunityPossible action by tendersEstoppelPromise made pre-tender may give rise to lossReliance on terms of the tender to detrimentCourts may intervene to stopNegligenceFailure to properly empty the Tender BoxAccidentally considering tender submitted after closingProviding information that is deficient or defective – requiring re-tenderingNot independently considering price and non-price attributes when RFT requires thisCourts may be reluctant to extend a duty of care given the possible impact on trade and commerceTenderers vulnerability remains crucial for claims of pure economic loss. Has P carried out sufficient due diligence? How large an investment is the project for tendere? (Woolcock v CDG)Trade Practices Act 1974S52 of TPA prohibits conduct that is misleading and deceptive or is likely to mislead or deceiveHughes – fats supported claim for misleading and deceptive conductRepresentation was that the tender would be run in accordance with stated processReality – operated in quite a different wayTenderers remediesInjunction to stop invitee entering contract with successful tenderer (Cubic)DamagesCost of tender processLoss of profit for the life of the projectHow to minimise riskContract Drafting Tight drafting of RFTDocument TrialHave a clear, transparent trial – tender documentation may be accessible via discoveryBe wary of pre-contractual representationsComply with evaluation criteriaMake criteria objective if possibleConsider advisability of weight criteriaPrecision and contra proferentum (against the party)Tendering and the Local Government Act 1989Statutory RequirementsS186(1) – Before a Council enters into a contract for the purchase of goods or services or for the carrying out of works, to the value of $100,000 ... or more, it must – (a) give public notice of the purpose of the contract and invite tenders from any person wishing to undertake the contract; orGive public notice of the purpose of the contract or the project to which the contract relates and invite expressions of interest from any person interested in undertaking the contract or all, or any part of, the project.When s186(1) does not apply – section s186(5)‘public notice’ defined in section 3Incorporation of DocumentsReference in a contractual document being subject to conditions ‘available on request’ and brought to notice of other party sufficient to incorporateSpecific general conditions of contract Smith v South Wales Switchgear LtdTerms of standard form contracts can be incorporated by referenceE.g. exchange of letters between parties incorporating JCT form Killby & Gayford ltd v Selincourt LtdTerms can be incorporated by a course of dealing or on basis of common understanding British Crane High Ltd v Ipswich Plant HireLetters of IntentLetter of IntentLetter of ComfortTerms SheetEarly Works AgreementOutlineParties negotiating/tendering for a contractParties wish to use a document that is not a contract on its faceDocument may contain detailed undertakingsRisk for Contractor and PrincipalWhy use one?Principal not willing/able to enter into a formal contractEarly works need to be undertaken‘Fast-track’ projectsPreferred PositionPreferred position is always to have a formal contract which providesCertainty of price/responsibilitiesComprehensive scope of worksProvisions for dispute resolution/terminationRisks of Entering letter of IntentRisk of Principal in issuing letter of intentLess incentive for contractor to finalise negotiations for contractUncertainty as to whether letter is binding at allMay bind Principal to appoint Contractor formallyMay be regarded as unlimited authority to ContractorIssues arising out of letters of IntentHas contract been formed?Is there an ancillary/preliminary contract to perform works until subsequent execution of the contract?What are the contractors right if the Principal declines to proceed?Do letters of intent have contractual effect?Common scenario: One party considers the document to contain binding obligations, the other denies thisWhether a letter of intent has contractual force will be ascertained by determining the objective intentions of the partiesCompletion of ContractMust agree on all essential termsCan be a contract even if one important clause to be discussed and agreedMitsui Babock Energy Ltd v John Browning Engineering LtdWill not be complete if ‘Subject to Contract’But a tender and acceptance may amount to a contract event if acceptance refers to formal contract to be drawn upWhere work commenced before contract concluded but parties agree later, agreed terms will have retrospective effectTrollope Colls Ltd v Atomic Power Construction LtdStandard Form ContractsIntroduction to Standard FormWide use of standard form contractsLong history of usage – UK and AustraliaStandard forms used widely around the worldStandard Form ContractsStandards AustraliaAS2124 ConstructAS4300AS4000 DesignAS4902Design & ConstructAS4122 ConsultantRAIA and MBA – ABICMW-1 – Major worksSWB – 2 – Simple Building WorksFIDIC – Red book, yellow book, silver bookMBA and HIA – DBC Act compliant domestic building contract‘Bespoke’ construction contractsWhere no standard form available e.g. managing contractor, EPCWhere standard form unsuitable‘Pass down’ of terms of ‘upstream’ contractBOOT, Concession DBFMPreference of Principal or contractorPerformance of the ContractDesignMaterials and workmanship – Clause 30Kable v HutchinsonDesign & ConstructRisk TakebackAllocate risk for design to the contractorContractor riskRisk changed back to Principal – risk take-back – by the conduct and behaviour of the parties‘Risk take-back’ exampleAS2124 – Nothing in contract refers to designClause 8.1 – ambiguities under that Principal takes the risk Progress and completion Clause 33 and 35 – Implied warranty Clause 33Indemnities and insuranceClauses 17Contractor could cause some loss to principal Contractor is indemnifying the principal for a range of thingsWhen not standard form, indemnities go further than thatClause 18, 19, 20 & 21Clause 18Making good faulty designManfactuers Mutual v Queensland Government RailwayInsurance Joint names in Principal and ContractorAmount of the InsurancePublic Liability InsuranceClaims from Third partiesPer event policy Principal must approve the policyClause 19 Principal responsible for the PolicyResponsible to pay the insuranceClause 20Insurance of employeesMost meet statutory and common law requirementsClause 21More proceduralOne party have to provide evidence of insurance to other partyDefects LiabilityClause 30 & 37Defects liability period –If there is omission – practical completion – this is just an obligation in the contract. Other Remedy - statute of limitations – Limitations of Actions Act – 12 month defect liability – 6 years from the date of the causeStarts on the date of practical completionUp to the parties to agree 12 Months for larger contractorsPrincipal has the right to has the right to get the work carried out by others – debt due – draw on security, Clause 5Any works or rectification by the contractor – cannot intrude on people living theirClause 30 – Materials of worksCertain areas where the superintendent has variation notices etcNotify that they accept the worksClause 30 is a more general powerSecurity and RetentionClause 5.5 – Principal can called on the security20 DaysIn order for the principal to call upon the security – they must have an entitlement to call on the securityi.e. Clause 42.10 – ‘may deduct from moneys due to from the Contractor any money due from the Contractor to the Principal otherwise than under the Contract and if those moneys are inefficient, the Principal, may subject to Clause 5.5, have recourse to rention moneys and if they are insufficient, then to securityClause 30.3 – Same as aboveDon’t need to express refer to security but need to join multiple clausesIf a defect occurs 5 years after the final certificate the only recourse is to sue for breach of contract.Must provide contractor opportunity to remedy the defect otherwise can get another contractor to fix and then sue original contractor for breachProcurement of Construction ProjectsWhat is ‘Tort’?Breach of duty imposed by lawContrast breach of duty imposed by agreementBreach gives right to sue for unliquidated damagesTypes of TortNegligenceTrespassNuisanceProcuring a breach of contractSue a third party to breach2 people in a contract – principal and head contractorFinancier behind the scenes to principalFinancier can terminate the right to the principal and this would breach the principals contractTortuous InterferenceDefamation Deceit/FraudElementsElementsD owed P a duty to take reasonable careD breached that duty by failing to take reasonable careD’s breach caused P injury or damageThe injury/damage was not ‘too remote’ a consequence of the breach of dutyWhat is a duty of care?Control mechanismControls the circumstances in which a person can be held liable for own careless actionsContract and TortDuty of care can be owed inTort ContractSuing in both Tort & Contract per Astley v Austrust LtdDifferences between contract and tortElementsLimitation periodsContract – date of contract breachTort – date suffered the damageCan be timebarred under the contract but then sue in Torti.e. cracked walls appear 7 years after building. Contract expired, but can sue in TortTests for remotenessDefenceExistence of duty in contract does not preclude duty in tortTerms of the contract exclude or modify a contractLimitation of liability clauseBy contract, limiting liability through all other aspectsContracts can limit tortuous dutyTerms of contract can exclude/modify tortuous dutyLimitation of liabilityLiability of nominated subcontractors to the PrincipalJunior Books v VeitchiLiability of subcontractors generally to the PrincipalMurphy v Brentwood District CouncilMust be nominated subcontractor by the principal – if not then there is not a duty to the principalClause 10 AS2124Liability of the Superintendent to the head contractorJohn Holland v Majorca Projects Pty LtdPrincipal is liable to head contractor and not that of superintendentHead Contractor should be suing Principal and superintendentPleading causes of actionAquatec-Maxcon Pty Ltd v Minson Nacap Pty LtdDont come to Court wasting time by pleading different causes of actionType of DamageImportance of distinguishing between:Physical loss/damage/injuryPure economic lossPure Economic LossDefect rectification costsAdditional maintenance costsLoss of profitDiminution in market valueRecognised in Hedley Bryne v HellerEnglish ApproachAnns v Merton London Borrough Council2 stage testProximityNo policy reasons why there shouldn’t be a dutyCaparo Industries Plc v Doickman3 stage testHarm must be reasonably foreseeableRelationship of proximityFair, just and reasonable in all of the circumstancesAustralian ApproachProximityIncremental approachSalient featuresVulnerabilityWas the plaintiff vulnerable to your actions ? Could they have done anything to protect themselves ?ControlAssumption of risk/known relianceDegree of foreseeabilityKnowledgePolicy FactorsIndeterminate liabilityUltramares Corp v ToucheAutonomy of the individualRegulate your own behaviour and deals and we Court dose not want to interfereBryan v MaloneyResidential premisesSubsequent purchaser sued builder because there were cracks in foundationsLatent defects: crackingCourt found that there was a duty of careDamage was foreseeable and the relationship between the builder and subsequent purchaser possess similar proximity to the relationship between builder and first ownerPrincipal & SubcontractClause 9.4 – Head contractor responsible for sub-contractorsWoolcockBuilding was constructed in 1987. The Plaintiff brought it in 1992 and noticed defects in 1994. Plaintiff sued the engineers for pure economic loss.The majority distinguished Bryan v Maloney and held there was no duty of careP not vulnerable because:Could have sought warranty that building was free from defectsCould have required assignment of rights against third partiesCould have undertaken detailed investigations into conditions of foundationsRealistic? Probably notAs it stands...Residential – there probably is a duty of care – Bryan v MaloneyCommercial – probably not a duty of care – WoolcockProportionate Liability – Part IVAA of Wrongs ActAllocate liability as to what is justTrespassThe Contractor without permissionCauses part of the Works to intrude on adjoining landLPJ Investments Pty Ltd v Howard Chia InvestmentsBuilding scaffolding which went into building next to it ‘airspace’Held: TrespassCauses crane to trespass in adjoining airspaceBendal Pty Ltd v Mirvac Project Pty LtdGoing into premises of adjoining building airspaceHeld: TrespassPlacing rock anchors under adjoining propertyDi Napoli v New Breach Apartments Pty LtdGoing into underground of nearby buildingHeld: TrespassTrespass and Protection WorkBuilding Act 1993 (Vic)S84 – Serve notice on adjoining landownerS84 – Adjoining owner may disagreeS87 – Building surveyor makes determinationPrima Facie trespass which is covered under statuteS98 – Owner must compensate adjoining ownerBuilding Regulations 2006 (Vic)Regulation 602: Building surveyor can require the performance of protection work at any timeRegulation 603: ExceptionsProcurement of Construction ContractsBackground to legislationPayment disputes – endemic in construction industryPay when/if paid clausesDelayed payment – abuse of contractInsolvency of subcontractorsUnited Kingdom1983 – Review of procurement & contractual arrangements in construction industry1994 – Sir Michael Latham releases the ‘Latham Report’1996 – Housing Grants Construction and Regeneration Act 1996 (UK)AustraliaBuilding and Construction Industry Security of Payment Act 1999 (NSW)Building and Construction Industry Security of Payment Act 2002 (Vic)NSW amending Act 2002Victoria amending Act 2006Legislation in most other StatesSecurity of Payment in VictoriaPurpose of the Act‘... to provide for entitlements to progress payments for .. construction work or ... related goods and services’Prohibition of ‘pay when paid’ clause‘fast and dirty’ dispute resolution processAdjudication‘Pay now ... fight later’ regimeWhat is a construction contract?ConstructionFit-outMaintenancePaintingDemolitionEngineeringLandscapingElectricalHire of plant and equipment Design, architecture etcExcluded ContractsWorks outside VictoriaA domestic building contract, other than where the owner is in the business of building residencesDOESNT apply to Mum and Dad developersConsideration payable calculated otherwise then by reference to value of the work carried outOil, gas and mining contractsWho can claim under the Act?The following parties to ‘construction contracts’ can make progress claims under the Act:Contractors against PrincipalArchitects/engineers against PrincipalSubcontractors against head contractorsSuppliers of materials against purchasersPayment ClaimsPayment claims must:Identify the construction workIndicate claimed amountState that it is made under the Act‘This is a claim made under the Building and Construction Industry Security of Payment Act 2002 (Vic)Right to progress payment ‘on and from each reference dateReference date determined by contract or every 20 business daysLeighton v Campbelltown Catholic ClubThree month time limitPayment claim for a progress payment may be served only withinThe period determined by contract; orThe period of 3 months after the ‘reference date’Excluded AmountAn ‘excluded amount’ must not be ‘taken into account’ when calculating the amount the claimant is entitled toExcluded amounts are amounts relating to:Variations that not ‘claimable variations’Latent conditionsTime-related costsChanges in regulatory requirementsClaims for damagesClaims arising at law other than under the contractWhat are ‘claimable variations’?Very convoluted mechanismTwo different classes of claimable variationsFirst Class: Parties agree that variation carried out, method for valuation, claimant entitled to be paid etc but for some reason are in disputeSecond Class: Work has been carried outThe respondent (Principal) must have requested/directed work the respondent and claimant disagree on:Whether work constitutes a variation orClaimant is entitled to payment orTime for paymentANDFinancial requirements are metFinancial requirements: contract sum at the date of the contract is signed:<150K; or>$150K and < $5,000,000 AND the total amount of claims for such variations does not exceed 10%> $5 mil AND contract does not contain a dispute mechanismHypothetical Example (refer notes)Subcontractor 1Final Payment Claim of Subcontractor 1Includes $260K for dispute variations$3.26 milLast payment claim for $1 million comprisingValue of work during payment period: $760KDisputed variation rechanges to window glazing: $20KDisputed variation rechanges to titles: $19KDamages for breach of contract in that Superintendent failed to grant a ‘reasonable’ extension of time due to inclement weather $201K>$150K and <$5 Mil$299 for dipuste is $300K. 10% of Subcontract Sum is $300K. Permissible.Subcontractor 1, cannot however, claim $201K since it is an ‘excluded amount’ due toTime-related cost; andDamages for breach of contractSubcontractor 2Previously claimed for $2.5 milNo claims for disputed variationsLast payment claim for $88K comprising:Value of work during payment period: $0.5Disputed variation re cladding: $310KVariation to insert rainwater tanks to comply with legal requirement introduced half-way through the project - $75K>$150K and $<5 MilCannot claim disputed variation for $310K because this is over 10% of the Subcontract SumMay not be able to claim second variation if the Head Contractor does not agree that it is entitled to payment Subcontractor 3Previously claimed $2 milIncludes $200K for disputed variationsLast payment claim is for $2.4 comprisingValue of work during payment period is $1.2 mil4 claims at $30K>$150K and <$5MilCan claim 3 of the 4 disputed variations, but the 4th disputed variations will take it over 10% of the Contract Sum – since $200K for disputed variations had previously been claimedImplications for Head ContractorSubcontractor 1 can claim $299KSubcontractor 3 can claim $290KHead Contractor has a contract valued over $5million – which contains a dispute resolution clause so it cannot claim $589K in disputed variations under its final statutory payment claimStatutory Right to PaymentThe Respondent must issue ‘payment schedule’Within 10 business days after claim is servedWhich identifies the claim to which it relatesWhich indicates the ‘scheduled amount’(if the ‘scheduled amount’ is less than the ‘claimed amount’) which sets out the respondent reasons for withholding payment; andWhich identifies any amount the respondent alleges is an ‘excluded amount’If the Respondent fails to issue payment schedule within 10 Business Days, it becomes liable to pay the full ‘claimed amount’Statutory right exists alongside contractual payment mechanismClaimant can go to adjudication if ‘scheduled amount’ is less than the ‘claimed amount’AdjudicationWhat is adjudication?Statutory form of dispute resolution – doesn’t override contract - complements itThe Act provides for adjudication when the scheduled amount is disputed or not paidAlternative process to going to courtThird party (Adjudicator) appointed to determine the disputeDealt with ‘on the papers’Most common issues of set off, variationsProcessClaimant Claim – 5 days for claimPayment ScheduleAdjudication ApplicationAdjudication Response (respondent response) – 5 daysBinding Decision – within 10 daysClaimant may apply for adjudication within 5 days of payment scheduleApplication to be made to ‘authorised nominating authority’Dualcorp v Remo Constructions Pty LtdCant keep adjudicating the same claims over and overIf don’t like the decision, toughAdjudicator issues notice of acceptanceRespondent may lodge adjudication response within earlier of 5 business days of application/2 business days of adjudicators acceptanceA late response will not be considered Written decision ‘expeditiously’Adjudicator may:Request further submissionsSet deadlinesCall a conferenceCarry out an inspectionCorrect a mistakeAdjudicator must determine amount of progress (if any) and date on which it was dueMay only considerThe ActThe ContractThe claim, schedule & submissionsReview ProcedureRight to review an adjudicators determination where:Initial adjudicators determination exceed $100KIt is alleged that the initial adjudicator wrongly determined whether an amount was an ‘excluded amount’Undisputed amounts have been paid; andDisputed amounts have been paid into trust.Claimant can suspend the Works (After giving 3 days business notice) where the respondent fails to:Issue payment schedule within time and fails to pay claimed amount;Pay the claimant in accordance with the payment schedule; orPay any adjudicated amountLegislation doesn’t contemplate that there are third partiesRecent casesGrocon Constructors v Planit Cocciardi Joint Venture (No 2)Contractor had a payment claim directly to principalPrincipal didn’t respond within 10 daysBad luckBitannia v ParklineImplied given notice to principalHadn’t actually done thisS52 of TPA represented to Principal had made claim to superintendentMisleading and Deceptive – security of payment is a state actConflict – Commonwealth act prevailsCan allege misleading and deceptive.Building Industry Regulation in Victoria – Building Act & RegulationOverviewLegislative PowersLegislation governing the building industry in VictoriaBodies created by Building Act and Powers and FunctionsBuilding StandardsBuilding Surveyors & building permitsProtection of adjoining propertyBuilding practitioner registration and disciplinary powersEnforcementRequirements for domestic building contractsBuilding industry security of paymentLegislative powers in relation to the building industryPowers of Victorian ParliamentResidual PowerPowers of Federal ParliamentRegulations in relation to commonwealth placesAirports etcVictorian Statute/RulesBuilding Act 1993Building Regulations 2006Domestic Building Contracts Act 1995Building and Construction Industry Security of Payment Act 2002Architects ActConstruction Industry Long Service Leave ActBuilding ActDeveloped from Model Building ActPurpose and objects (section 1 & 4)Standards for ConstructionObject of the ActEnhance amenity/protect health & safetyBuilding and occupancy permitsRegulate building practitionersBodies established by Building ActBuilding Commission – s193 (see s196 for function)Plumbing Industry Commission – see s221ZZRBuilding Practitioners Board – s183If representing a builder – must be registered.Building Appeals Board – s166Building Advisory Council – s206Building Regulation Advisory Committee – s209 (see s211 for function)Structure of the Building ActParts and Divisions SchedulesRegulation making powersProcedures for building and occupancy permitsMembership and procedure of boardsTransitional provisionsRegulations are made under Act – see 7 and Schedule 1Made by Executive/Governor-in-CouncilAll regulations ‘sunset’ every 10 years (sunset clause)Subordinate Legislative Act 1984Technical standards are contained in Building Code of AustraliaAdoption of BCABuilding Code of Australia produced by Australia Building Codes BoardNot, by itself, legislationMust be adopted into State and Territory legislationS9 Building Act allows incorporation by reference in RegulationsRegulation s109 Building Regulations adopts BCA – forms part of RegulationsMost national – some State variations remainS217 – Expressly binds the CrownBuilding CodePerformance badCan choose to comply with deemed-to-satisfy provisionsApplication of provisions – Part AOMinisterial Orders and GuidelinesHave legislative characterMinisters insurance ordersBuilding practitioner insurance – s135Insurance for domestic building work – s137AAMinisters GuidelinesFees and building survey functions – s188Design & string – s188ABuilding Surveyors – Part 6Act provides for private building surveyors and municipal building surveyors Appointment of PBS – s76Application for building permit to municipal or private building surveyor – s17See definition of ‘municipal’ and ‘private building surveyor’Must be satisfied building work will comply – s24(1)Building PermitsSection 16Permits required before commencement of workWork must comply 5 possible offencesExempted work (under $5K & not structural and not heritage), some fences, small class 10a buildings, installation of smoke alarmsGo to Regulations to find relevant exemptionsFunction of building permitsCompliance with minimum building standards – s16(1)Consistency with planning permits – s24(1)Consumer protectionEnsure registered building practitioners or certified owner-builderLast resort insurance for >$12KInformation for building permitsApplication for building permitInclude name & details for building practitioners engaged or to be engaged in work (prescribed information – Form 1)Drawings, specifications, allotment details, statements of use – regulation 301, 302Building permit levy – s201Inspection of building worksNotification of RBS after completion of each mandatory notification stage – s33RBS must cause work to be inspected and may inspect at any time – s34 & 35Inspection powers & directionsOccupancy permits and certificates of final inspectionOccupancy permit if required by building permit – s39Must not issue unless ‘suitable for occupation’ – not evidence of compliance – s44 & s46Certificate of final inspection of OP not required – s38Certificate of complianceRBS may rely on certificate by a prescribed registered building practitioner that proposed building work or building work complies – s238, regulation 15.5RBS immunity – s128Legal obligations of building surveyorsToomey v Solaros Concrete Construction Pty LtdPage 607 – Facts on 612Duty of care owned by building surveyors/councilsMoorabool Shire Council v Taitapanui VicNotes - Page 625Builder owed a duty of are to a subsequent purchaserApplied Maloney principle and did owe a duty of care to the subsequent purchaserProtection of adjoining propertyPart 7 changes common law position – trespass, nuisance, negligence‘Protection work’ before and during carry out building work if requiredNotice to adjoining owner – s84Adjoining owners obligation to respond – s85Time limit on building actionsLatent defect claims & 6 year limit Defect which is not ‘discoverable’ have up to 10 years to sueIf find a latent defect 9 ? years after building constructed, then have ? year otherwise loose action.S134 – 10 year long stop dateDate of which the damage ‘ was or should have been discovered’Definition of ‘building action’ and ‘building work’Building practitioner registrationAct applies to categories of ‘building practitioner’ as defined in s3Regulation prescribe classesOnly ‘natural persons’ can be registered s169(1)No companiesCorporations and partnerships – s176(e) and (4)Offences in s176 underpin requirement for registration – s176(2)BPB FunctionsAdminister registration systemSupervise and monitor conduct and ability to practice of RBPs Issue owner builder certificatesMake recommendations on qualifications – s183BPB disciplinary powersBoard may hold inquiries into conduct and ability to practice – s179 & 180Grounds for inquiry are board – s179(1)Fines, suspension or cancellation of registrationEnforcementNotice and orders by MDS/RBSEmergency order – s102/103‘Show cause’ notice – s106Building order – s111Stop work order – s112Offence not to comply – s118EnforcementProceedings for offences – s241Offences under Act and RegulationsInfringement notices – s225Powers of entry, auditing and search warrantsBuilding Appeals BoardFunctions and jurisdiction of Board – Part 10Building and occupancy permitsProtection workNotice & orders appeals from BPBBuilding regulationsDomestic Building Contracts ActDomestic Building Contract ActsHistory – consumer protectionPurpose – section 1Regulate contracts for the carrying out of domestic building workResolution of domestic disputesRequire builders to be covered by insurancePhase out HGFObjections – s4Compels builders to complyKey TermsDomestic build contract‘means a contract to carry out, or to arrange or manage the carrying out of, domestic building work other than a contract between a builder and a sub-contractor.Major Domestic Building Contract – contract price > $5,000Domestic building work means any work referred to in section 5 that is not excluded from the operation of this Act by section 6Section 5 – Building work to which Act appliesS5(1) – ‘water supply and drainage to the home’Home - ‘home means any residential premises’ Includes homes attached to shops etc etcCoverage of ActErection or construction of homes – houses, flats, apartmentsAny associated worksHigh-rise residential apartments (Except insurance > 3 storey)Renovations, alterations, extensions, improvementsCertain works carried out in conjunctionsSite work and plansWinslow Constructors Pty Ltd v Mt Holden Estates Pty LtdDeveloper entered in contract with Winslow Constructors AS2124Constructing housing estateOnly infrastructure and not housesMt Holden Estates wanted to get out of contract by stating it didn’t comply with Domestic building requirementsDeputy President held – that under s5 – ‘the work being carried out’ was domestic building workThe contract did need to complyVCAT had jurisdiction to hear the disputeAppealed to Supreme Court of AppealInterpretation was incorrectOperation of Domestic Contracts Act didn’t applyWas not a sufficient nexus to that being built on the landHeld: Winslow succeedDomestic Building Contract RequirementsWill be a ‘domestic building contract’ even if non-compliance with ActRequirements of Act apply to any ‘domestic building contract’ or ‘major domestic building contract’Statutory WarrantiesWarranties concerning all domestic building work – s8Warranties run with building – subsequent purchasers have benefit – s9Owner can sue for breach of warrantiesIf off the plan –Its between builder and developeri.e. Central Equity and MultiplexConsumer buys from Central EquitySues Central EquityProvisions purporting to contract out void – s10Major domestic building contractBuilder must be registered – s29Not registration cannot be a companySo instead gets around this by stating – ‘a director of company’ or ‘partner in partnership etc’Builder must provide foundations data – s30Contract must in writing and include Full termsDetailed descriptionsNames & AddressesRegistration numberStart & Finish DateInsurance detailsWarranties – s31Major Domestic Building ContractCooling-off period – s34 & 35Allowance for delays – weekends, holidays, RDO’s, etc – s32Details of primes cost items & provisional – s22 & 23Limits on deposits – s115% <$20KRestrictions on cost plus contract – s13Variations – s37 & s38Limits on progress payments – s40Domestic Building DisputesArbitration prohibited – s14Actions in Supreme Court, Country Court, Magistrates Court must be stayed – s57VCAT responsible for disputesDomestic building disputes – s53Powers of the Tribunal – s53Insurance claim disputes – s59A-62VCATs jurisdictionBuilding Industry Regulation in VictoriaInsurance – requirement for registrationApplication by natural person for registrationIf applicant required to have insurance, requires proof thatApplicant is covered; orBuilder engaged in domestic building work, applicant is eligible to be coveredBuilders – domestic building workMinisters power to make insurance order – s135 Building ActAdditional powers for orders for domestic building work – s137AInsurance must be by a designated insurer – s137AAOffencesCarry out domestic building work without insurance – s136(2)Claim to be insured when not insured – s137Domestic Building Insurance Ministerial OrderApplies when contract price >$12KMust indemnify for loss or damage – clause 8Non-completionDefective workBreach of statutory warrantiesQuality below requiredBreaches of TP actAdditional cover – see clause 9Domestic Building Insurance Ministerial OrderBUT policy may provide that indemnities only apply if builder DIES, BECOMES INSOLVENT OR DISAPPEARSPolicy to CoverActs and omissions of all persons engaged by builder – clause 10Subsequent purchases – clause 11Non-structural defects for 2 yearsAll other loss or damage for 6 years – clause 12Exemption for multi-storey residential – regulation 1808Other building practitionersBuilding surveyor, inspector, quality, surveyor, engineer, draftspersonProfessional indemnity insurance$1 million / $1.5 million for any one claimCan be a policy held by company or partnershipCommercial BuildersStructural defects insurance with limitationsLimit of cover – lesser ofTwice the turnover of insured for commercial building work or $1 million; or$10 million ................
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