The use of industry standard contracts in the building and
construction sector is widespread. For example, the Housing
Industry Association and the Master Builders Association have each
developed a suite of industry standard contracts for use by
builders, subcontractors and home owners. However, industry
standards should now be used with caution and reviewed against the
backdrop of the new 'unfair contract' provisions contained
within the Trade Practices Act.
What the 'unfair contract' provisions mean for home
The amendments to the Act highlight that industry standard
contracts do not mean that both parties are on equal footing. The
amendments mean that contractual terms that overtly favour builders
must be removed to ensure that 'mum and dad home owners'
are not disadvantaged by blanket provisions.
Summary of the amendments
Under the new regime, a term of a building contract will be void
if it is 'unfair' and is found in a standard form
The building contract must be wholly or predominately for
personal or domestic use - commercial building contracts will not
be subject to the new laws.
Standard form contracts
In determining whether a contract is a 'standard form
contract', the court will consider:
the bargaining power of the parties;
any discussions between the parties before the contract was
the opportunities for the parties to negotiate the terms of the
whether the contract takes into account the specific
characteristics of the parties.
Although there is a strong presumption that an industry standard
building contract is a 'standard form contract' for the
purposes of the Act, this issue is yet to come before a court for
A term of a building contract will be 'unfair' if
would cause a significant imbalance in the parties' rights
and obligations arising under the contract;
is not reasonably necessary to protect the legitimate interests
of the party who would be advantaged by the terms; and
would cause detriment to a party if it were to be applied or
Further, a court must take into account the extent to which the
term is transparent (eg in plain language and legible) and the
contract as a whole.
What to look out for
When presented with an industry standard building contract, both
parties need to be aware of clauses that give the builder the
Unilateral rights (eg a term which permits only the builder to
terminate the contract)
Non-reciprocal rights (eg a term which allows the builder to
vary the contract price, without giving the home owner a right to
Limiting rights (eg a term which limits either party's
right to sue the other party)
If terms in the contract exist which reflect any of the rights
mentioned above, the contract may be in breach of the provisions of
the Act, which will be an issue for both the home owner and the
How we can help
Before signing an industry standard building contract, please
feel free to contact HopgoodGanim's Construction,
Infrastructure and Major Projects team. We can help you by:
reviewing the contract,
providing advice on terms which may be considered unfair;
recommending amendments to the contract to place both parties
on equal footing and to ensure proper compliance with the new
'unfair contract provisions'.
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