When is a written building contract required?

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When is a contract required for domestic building work in Queensland?

Written contracts are required for most domestic building work in Queensland.  Often, the contractor and the owner come into a disagreement because a written contract has not been entered into, or because it is defective.  There can be serious ramifications if the proper contracting procedure is not followed, in some cases preventing the recovery of costs.

 

The information in this page is current as at 8 January, 2024.

 

What is domestic building work?

 

Domestic building work includes most work of a building nature carried out to or around a home, including construction, renovation, repairs, and landscaping.  There is an extensive definition of “Domestic Building Work” contained in the Queensland Building and Construction Commission Act 1991, at Schedule 1B, Section 4 https://classic.austlii.edu.au/au/legis/qld/consol_act/qbacca1991487/sch1b.html

 

What form of contract is required?

 

Where the cost of work is (or is likely to be) more than $3300 (called the “Regulated Amount”), then a written contract is required.  If a contract is required and the cost of the work is or is likely to be less than $20,000 (an amount prescribed as the level 2 amount by sec 45 of the QBCC Regulation), then the contract is called a “Level 1 Regulated Contract” and has to comply with section 13 of Schedule 1B to the QBCC Act.  It has to be in written form, dated and signed by or on behalf of each of the parties, and contain the information required by section 13(3), and comply with any other requirements set out in the QBCC Regulation. 

 

If the likely cost of the work is $20,000 or more, than the contract is called a “Level 2 Regulated Contract” and it must comply with the more extensive requirements of section 14 to Schedule 1B of the QBCC Act. 

 

The Consumer Building Guide published by the QBCC (and available online https://www.qbcc.qld.gov.au/resources/guide/qbcc-consumer-building-guide-v3) must also be given to the owner before the owner signs a Level 2 Regulated Contract.

 

Incorporation of warranties

 

Whether or not set out in writing, there are a number of warranties incorporated into the Building Contract by the effect of sections 19, 20, 21 and 22 of Schedule 1B including warranties as to the suitability of materials used, compliance with legal requirements, that the work will be carried out in an appropriate and skilful way and with reasonable care and skill. 

 

If plans and specifications form part of the contract, section 23 contains a warranty by the contractor that the work will be carried out in accordance with the plans and specifications. 

 

If the work involves the construction or renovation of a home to a stage suitable for occupation, section 24 contains a warranty that the home will be suitable for occupation when the work is finished. 

 

Section 25 contains a warranty that the work will be carried out with reasonable diligence (ie in a timely way). 

 

Section 26 contains warranties – where the contract provides provisional sum or prime cost items – that the amounts have been calculated with reasonable care and skill, having regard to the information reasonably available when the contract was entered into.

 

By section 27, a subsequent owner of the property has the same rights for breach of warranty as if they were the owner, provided that when they entered into the contract to buy the property, they did not know and should not reasonably be aware of the deficiency. 

 

By section 29, claims for breach of the statutory warranties must be started within six years from the completion of the works (if it is completed) if the issue is a structural defect, or one year if it is not.  There are extensive provisions under section 29 relating to the commencement of relevant periods where the work was not completed, or where the defect was not apparent.

 

Common problems with contracting

 

Our lawyers often see fundamental issues with the format of contracting including circumstances where:

 

  1. The provisions of a contract may offend the unfair contracts provisions of the Australian Consumer Law or provisions of the QBCC Act;
  2. The wrong type of contract is used, or the guide is not provided;
  3. The contract is entered into by a company associated with the contractor, when it is the contractor who personally has the licence (leading to issues with unlicensed contracting);
  4. The contract is entered into before foundations data is obtained (required under section 31 where the work involves footings or a slab);
  5. The amounts required for deposits exceeds the amounts permitted under section 33;
  6. Provisional sums are confused with Prime cost items;
  7. No contract is entered into at all.

 

What contract should be used

 

The QBCC has contracts that can be used, together with the Consumer Guide, which are available free of charge.  The HIA and MBA also have their own forms of contracts.  Our construction lawyers can recommend additions and modifications to these contracts designed to avoid dispute and clarify the position of parties.  

 

For advice in relation to construction contracts and building matters generally, please contact our partner Justin Mathews at justinm@qbmlaw.com.au  Justin as specialist accreditation in commercial litigation and is a registered adjudicator for payment claims in construction contracts for Queensland, New South Wales and Northern Territory.  He and his team deal with construction contracts and disputes, together with licensing matters.