• Internal Code :
  • Subject Code : SRQ763
  • University : Deakin University
  • Subject Name : Legal Risk Management

Construction Contracts Australia

Table of Contents

  1. Introduction
  2. Right for purpose contracts
  3. Risks and complexities
  4. Case laws
  5. Other kinds of contract in construction project
  6. Limitations
  7. Recommendations
  8. Conclusion
  9. Reference List

Introduction

Contracts form one of the essential aspects in the construction industry. They are formed between the client and the contractor. As a result, the rights and obligations of the parties to the contracts are defined and agreed upon based on the relevant clauses (Shaar, et al., 2017). The main purpose of the essay is to present an overview of the construction contracts in Australia. The right for purpose contracts with regard to the addressing of various kinds of risks involved in different kinds of construction projects would also be discussed and demonstrated accordingly. It would be exemplified by appropriate scenarios. The limitations and restrictions of such construction contracts would also be described with reference to the reduction of the maximizing of the interests of one party to the contract thereby pushing the other party to the contract into a disadvantageous position. Such limitations and restrictions would also imply the reduction in terms of conflict of interest amongst the parties to the contract. These limitations and restrictions would be pertaining to the aspects of the contract which include design and construction. As a result, an effective and efficient analysis would be made thereby leading to the desired outcomes. Finally, an appropriate conclusion would be provided.

Right for purpose contracts

The elements determining the validity of a business contract include offer and acceptance, consideration, capacity to enter and a legal enforceability by a court of competent jurisdiction. In a construction contract, the aspects as aforesaid would help in the addressing of risks in a proper and appropriate manner. These aspects are governed by the principles established by the common law of England and Wales and applicable in Australia as it is under the common law jurisdiction. In addition to a client and a contractor, the parties in a construction contract may also include subcontractor and the experts who may provide consultation services as instructed by the client (Bailey, 2016). The breach of any clause of a construction contract would involve stringencies in the form of termination of contract and the imposition of penalties over the party engaged in the practices related to the breach and contravention of the contract. The Australian Architecture, Engineering and Construction industry is governed by various kinds of contracts based on the specified standards in which they need to be drafted and executed accordingly. It would help in the understanding of the legalities involved in the design and construction projects in Australia in a proper and appropriate manner. These contracts also imply the objectives as to the various kinds of construction projects and the guidelines involved accordingly.

Risks and complexities

The major risks in construction projects include damages of the equipment involved, health and safety risks thereby resulting in accidents, injuries and even death, complexities in the clauses drafted in construction contracts and the deplorable working conditions. As a result, it is extremely important to draft contracts in such a manner so that the risks can be avoided and mitigated accordingly along with the appropriate remedial measures to be provided to the aggrieved party (Mok, Shen and Yang, 2015). The complexities involved in a construction projects vary as per the size of the project with regard to the area of the residential property and the features to be included in the residential property as per the clauses of the construction contract.

However, the complexities must be avoided by taking appropriate steps and measures. The construction methods also involve risks and complexities as far as the designs are concerned (Evans, 2017). Additionally, the risks may also involve the procurement of tender in government construction contracts thereby implying the bureaucratic hurdles. The damages caused by naturally occurring events such as Act of God must be mitigated accordingly.

Case Laws

In the case of Brighton Australia Pty Ltd v. Multiplex Construction Pty Ltd, Brighton Australia Pty Ltd filed a summons against Multiplex Construction Pty Ltd at the Supreme Court of New South Wales on grounds of damages and misleading representations of the subcontracts in accordance with Section 18 of the Australian Consumer Law. In this case, it was held by the Victorian Supreme Court of Appeal that such an activity related to cheating and deception is not in the interest of fairness. As a result, Brighton Australia Pty Ltd can make a statement of claim against Multiplex Construction Pty Ltd with regard to remedy as per Section 236 of the Australian Consumer Law.

In the case of Mann v. Patterson Constructions Pty Ltd, Mann entered into a contract with Patterson Constructions Pty Ltd for the purpose of the construction of two town houses on the each being double storeyed. The price would be amounting to nine hundred seventy one thousand dollars which would include liquidated damages of five hundred dollars per week. . In this case, it was held by the Victorian Supreme Court of Appeal that the claims with regard to quantum meruit cannot be precluded as per Section 38 of the Domestic Building Contracts Act of 1995.

In the case of Stepanoski v Aslan, Mr. and Mrs. Stepanoski entered into a Cost Plus Contract with Mr. Jamal Aslan. Sometime later, Mr. and Mrs. Stepanoski entered into a Lump Sum Contract, popularly known as Home Building Contract for the carrying out of work where the expenses exceeded five thousand dollars. It was backdated to the date in which the Cost Plus Contract was executed. In this case, it was held by the Supreme Court of New South Wales that the Cost Plus Contract would not be binding over the parties as a Lump Sum Contract with the same terms and conditions has been signed and backdated accordingly.
In the case of The Owners Strata Plan No. 66375 v King, the appellant The Owners Strata Plan No. 66375 filed a suit against the respondents The Kings on grounds of breaches in accordance with Section 18 B of the Home Building Act of 1989 of New South Wales. In this case, it was held by the New South Wales Court of Appeal that the actual contract between the developer and the builder needs to be considered in order to determine the notional contract between the developer and the next owner of the residential property.

In the case of Wollongong Coal Limited v Gujarat NRE India Pty Ltd, a statutory demand was served upon Wollongong Coal Limited under Section 459 E of the Corporations Act of 2001 with regard to debt as far as payment in construction contracts is concerned. In this case, it was held by the Federal Court of Australia that if such a statutory demand is supported by an affidavit and the debt is not provided with minute details, Sub-section 1 (a) or (b) of Section 459 J of the Corporations Act of 2001 would provide the rationale to set aside the statutory demand.

It is implied from the aforesaid cases that the key thing related to construction contracts is equity and fairness to be maintained amongst the parties to the contract in order to carry out various kinds of construction projects in a proper and appropriate manner. The unfair terms of the contract are to be identified at the earliest and be removed accordingly. The clauses must imply the rights and obligations of the parties to the contract in an effective and efficient manner without any major ambiguity (Klee, 2015). It would help in the completion of construction projects qualitatively and timely.

Other kinds of contract in construction project

Besides the laws governing construction contracts, the laws governing employment contracts may also be applicable in case of a construction company engaging its workers to carry out the construction work as demanded by the client. In such aspects, the relationship between the employer and employee has to be taken into account accordingly for the purpose of the execution and enforcement of the employment contract in a proper and appropriate manner. It would result in the fostering of an amicable relationship between the employer and employee thereby resulting in a comprehensive solution in relation to the construction project.

Limitations

The limitations in a construction contract pertaining to Australian standards imply the restriction of a party to the contract to refrain from acting in such a manner that the situation of the other party to the contract is exploited (Rumane, 2017). It implies that such kinds of opportunistic behavior must be restricted and prevented by drafting proper and appropriate clauses in construction contracts in the interest of equity and fairness amongst the parties. The financial aspects such scenarios must be outlined properly and incorporated into the contract in a meticulous manner so as to reduce any kind of possibility with regard to the arising of disputes. The clauses must be drafted in a simplified manner so that they are understood by the parties without any major hindrances and impediments. Legal consultation must be provided to both the parties to the contract in an effective and efficient manner with regard to the remedies available to them on grounds of breach of the contract by either of them. The traditional fixed price design bid built in projects must involve the collaboration of the parties involved in the design and construction activities pertaining to the project. Such collaboration must not involve any kind of conflict of interest pertaining to behavior of any of the parties which is opportunistic or adversarial in nature (Burr, 2016). The clauses of the construction contracts must exclusively define that any kind of opportunistic or adversarial behavior by a party to the contract involving traditional fixed price design bid built in projects would attract stringencies which may involve the termination of the contract and the imposition of penalties accordingly with regard to the costs disbursed.

Recommendations

It is recommended that the contracts involving construction projects must be drafted in such a manner so that the clauses involve fairness without any major complexity or ambiguity amongst the parties. The Australian guidelines with regard to the construction contracts must be followed accordingly so that the legal frameworks governing such kinds of contracts are capitulated upon in the desired manner. In case of international construction projects, the guidelines as per FIDIC and NEC may also be helpful in providing an incredible platform to imply the legalities of the contracts involving construction projects at the international level. The incorporation of an arbitration clause in construction contracts would help in the parties to seek remedial measures by the virtue of alternative dispute resolution, most probably arbitration. The laws with regard to arbitration would apply as per the jurisdiction of the respective Australian state with regard to the location where the construction project is being undertaken. It would help in the resolution of the dispute between the parties in a proper and effective manner without having to undergo the hurdles of litigation in courts in terms of time and finances as far as the procedure of the respective court of competent jurisdiction is concerned.

Conclusion

As observed from the aforesaid discourse, it can be concluded by stating that the concept of right for purpose contracts pertaining to construction projects has been justified and is appropriate. The aforesaid discourse has also presented the case laws pertaining to construction contracts thereby depicting the scenarios where the relevant laws are applicable in case of the respective construction projects. The risks and complexities involved in construction projects along with the various kinds of construction methods have also been dealt with accordingly and the rationale behind mitigation of such risks has also been explained taking account of the causes. The recommendations and suggestions have also been provided accordingly with regard to the elimination of complexities and ambiguities involved in construction contracts so that the clauses of such contracts are understood by both the parties in a proper and appropriate manner. The recommendations and suggestions also imply the incorporation of an arbitration clause in such construction contracts so as to derive and appropriate solution at the earliest with regard to the resolution and settlement of disputes as far as addressing of the issues amongst the parties to the dispute are concerned. To roll up, the discourse has analyzed the aspect of construction projects in terms of business contracts.

Reference

ListBailey, J., 2016.Construction Law Volume II. 8th ed. Abingdon informa law from Routledge.
Burr, A., 2016.Delay and disruption in construction contracts. 5th ed. Abingdon Informa Law from Routledge.
Evans, P., 2017. The building and construction industry code of conduct (WA).Brief,44(6), p.22.
Klee, L., 2015.International construction contract law(No. s 1). 6th ed. New Jersey Wiley-Blackwell.
Mok, K.Y., Shen, G.Q. and Yang, J., 2015. Stakeholder management studies in mega construction projects A review and future directions.International Journal of Project Management,33(2), pp.446-457.
Rumane, A.R., 2017.Quality management in construction projects. 4th ed. Florida CRC Press.
Shaar, K.Z., Assaf, S.A., Bambang, T., Babsail, M. and Fattah, A.A.E., 2017. Designconstruction interface problems in large building construction projects.International Journal of Construction Management,17(3), pp.238-250.
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