Australia: A Contractor’s Duty to Warn of Design Defects

Last Updated: 16 August 2006
Article by Justin O’Callaghan and Andrew Kelly

Design obligations do not necessarily spring to a contractor’s mind when engaged in a build-only contract. However, the trend of legal decisions in Australia and overseas indicates that these are issues contractors should be aware of.

Build-only construction contracts, such as AS4000, do not impose design responsibility on contractors and the principal retains control over the design of a project. Due to this risk allocation, contractors often attach minimal significance to design issues and any responsibility for design that may arise under a buildonly contract.

Despite this, a failure by a contractor to properly consider design issues, even in a build-only contracting scenario, can have significant legal ramifications. Although there is limited Australian case law on point, the trend of Australian courts and their overseas counterparts is to impose on contractors a duty to warn of design defects in certain circumstances.

What the courts have said

Courts have recognised that contractors may be liable for failing to warn of design defects in a number of situations:

1. Contractual obligation

A duty to warn will arise where:

  • a contractor has a contractual responsibility to advise of any unacceptable risks; and
  • has actual knowledge of a risk;
  • that knowledge is greater than that of others connected with the site; and
  • the contractor fails to notify that risk.

For example, if a contractor is aware that a particular material specified in the design is highly flammable, in circumstances where fire may pose a risk to the project the contractor should formally notify this risk to all parties involved in the project.

2. Adopting a duty in the circumstance

Where a contractor either expressly or impliedly undertakes to exercise the skill and care of an ordinarily competent contractor and completes the works knowing that the works are obviously dangerous. In this situation, a subcontractor has been held liable despite complying with the engineer’s instructions and design and despite consulting both the head contractor and the engineer on the perceived design problems and dangers. The courts have indicated that what is required is more than mere discussion of these risks, and that a contractor should take further and more formal steps to warn of the perceived dangers and perhaps ultimately refuse to carry out the works.

3. Special knowledge of defects in construction

Where a contractor knows that because of a given issue or defect, the work cannot be completed without resulting damage. For example, if a contractor knows that a site has not been properly compacted prior to starting construction, then it should formally warn all parties of this.

4. Belief that design is defective

Where a contractor believes a defect in the design exists. This requires more than doubt as to the correctness of the design, but less than actual knowledge of the design defect.

What you, as a contractor, can do to manage this risk

The old saying ‘let sleeping dogs lie’ certainly does not apply to construction contracts. The most important step you can take is to acknowledge risk and allocate it as best and as clearly as possible at the start of the project.

Be proactive. If obvious or dangerous design issues are identified, formally bring these to the attention of all parties as soon as possible. Safety should not be compromised, and if the works are dangerous, then you should take formal steps to notify the relevant parties.

Never rely on a principal’s, head contractor’s or architect’s industry experience. If you perceive an obvious or dangerous problem take steps to formally notify it. Keep everyone in the loop and do not assume that other parties will already be aware of the risk. Follow up to ensure corrective action is taken.

Notify all parties involved in the project when you notify perceived problems. This way everyone is aware of the issues.

How Phillips Fox can help you

When courts interpret contracts they attempt to give effect to the intention of the parties at the time of entering the agreement. This is why it is important to review your contracts to ensure that they accord with what you are bargaining to do and the risks that you are prepared to accept. Do not fall into the trap of believing that because a contract is in ‘standard form’, its allocation of risk will be fair or appropriate.

Certainty in drafting helps to minimise and properly allocate risks under contracts and this is where Phillips Fox can assist you. We recognise that it is far more satisfactory commercially to allocate risks with certainty at the start of a project, than to engage in expensive and protracted litigation to resolve uncertainties at a later stage.

Being proactive and ensuring that a contract clearly and appropriately allocates risk at the start of a job can save you time and money and help avoid situations where you may be found liable for risks that you did not contemplate accepting, such as design obligations under build-only construction contracts.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.