‘Red flag’ clauses that builders must change in head contracts

With the BCIPA amendments now in force and a number of recent Supreme Court decisions dealing with BCIPA, the QBCC Act and construction contracts, it is essential that contractors “red flag” theses issued in head contracts

1. In any conversion of security/retention clause:

   (a)       reject any clause that allows no notice period for conversion and insist on 5 days notice as per Australian Standard;

   (b)       reject any attempt to widen the right to convert for “amounts due” to any amount that to be owing (O’Donnell Griffin case); and

   (c)       remember:

   (i)        the QBCC Act does not require 28 days notice to convert – only notice “within 28 days”; and

   (ii)       an adjudicator does not have power to order the return of an unconverted security

2. Ensure that where a termination for convenience clause exists, that there is a further reference date after termination. Otherwise you may not have any more reference dates to lodge a BCIPA claim and no claim for work carried out after the last reference date and up to the date of termination (Patrick Stevedores case).
3. Take legal advice on any preconditions on the right to lodge payment claims (i.e. statutory declarations and other documentation required to assess the claim) as preconditions of this type may be void (Leanfield case).
4. Where the principal requires a signed deed of release as a precondition to the contractor achieving PC or FC, insist that the deed is made subject to any notice of dispute (Vision Energy)
5. Resist any clause allowing the superintendent to grant EOTs at the superintendent’s absolute discretion, while being under no obligation to do so. Otherwise it will be difficult for a court or an adjudicator to overturn the decision of the superintendent to reject an EOT or delay claim (HBJV v CMC).
6. Resist any clause excluding the “prevention principle”. This would mean liquidated damages could still apply if an EOT claim is made out of time and even if the principal caused the delay (John Holland v CMA)!
7. Ensure that an EOT exists for delays by “other contractors or separate contractors” retained by the principal or tenants.
8. Insist that any warranty that the contractor will not put the principal in breach of a lease or sales contract is limited to: “in carrying out WUC will not put in breach”.
9. Amend the security clause so that at FC only the value of any remaining defects is retained and the balance of security is released.
10. Ensure that any set off clause is limited to “amount due” and not any sum that may be due or claimed to be owing (O’Donnell Griffin v Forge).
11. As a result of the Multiplex case the developer may ask as a Builder execute deeds of warranty (for latent defects) to purchasers, lessees and body corporates. Make sure any warranty is limited only to the carrying out of work in accordance with the contract documents and no wider (Multiplex & Walker Corp case).