Australia: 5MF: 5 minute fix of major projects and construction news: 02

Last Updated: 22 December 2017
Article by Frazer Moss and Clare Maguire

Get your 5 Minute Fix of major projects and construction news.

ACCC targets unfair construction contract terms

Further action by the ACCC highlights that parties should pause to review the entirety of their usual small business contracting terms through the lens of section 24 of the Australian Consumer Law (ACL).

In our 5MF 01 we reported on Federal Court enforcement proceedings taken by the ACCC against JJ Richards & Sons Pty Ltd for contraventions of section 24.

The extent of the ACCC's resolve to address "unfair contract terms" in standard form contracts was apparent again last week when Perth based building company, 101 Residential Pty Ltd, amended its standard home building contract after the ACCC raised concerns that it contained unfair terms and made false or misleading representations.

In issue were clauses that:

  • sought to exclude 101 Residential from liability for damages or compensation for distress or inconvenience, or any loss of profit, loss of use or any indirect or consequential loss (liability clause); and
  • allowed 101 Residential to prevent customers from publishing unapproved information about the company, including any online reviews (non-disparagement clauses).

With respect to the liability clause, the ACCC considered the purported exclusion of liability was inconsistent with the statutory guarantees to which consumers are entitled under the ACL and on that basis, likely to constitute a false or misleading representation in breach of section 29(1)(m) of the ACL.

Perhaps more novel was the ACCC's focus on the non-disparagement clauses, ACCC Deputy Chair Dr Schaper stating "Online reviews help people make informed purchasing decisions. Consumers should be free to have their say about their experience with a business and must not face penalties for doing so".

Combustible cladding

Following from recent regulatory reforms addressing combustible cladding, a draft regulation has been released for public comment as part of the NSW Government's combustible cladding reform package. The proposed Environmental Planning and Assessment Amendment (Identification of Buildings with Combustible Cladding) Regulation 2017 proposes new registration and reporting requirements for owners of buildings with combustible external wall cladding.

The draft regulation and Explanation of Intended Effect are open for public comment until Friday 16 February 2018.

It's the word that matter - restraint on call on unconditional undertaking

The Victorian Court of Appeal decision of Dedert Corporation v United Dalby Bio-Refinery Pty Ltd [2017] VSCA 368 delivered last week is a reminder of the importance to focus on the wording of contract terms that regulate when recourse can be made to unconditional undertakings and should prompt principals entering into AS4902-2000 to consider amending clause 5.2 (recourse to security).

It can be too easy to form the view from comments made in decisions such as Fletcher Construction Australia Limited v Varnsdorf Pty Ltd [1998] 3 VR 812 and Bachmann Pty Ltd v BHP Power New Zealand Limited [1999] 1 VR 420 that the commercial purpose of the delivery of an unconditional undertaking will be sufficient to carry the day if a clause claimed to give a right to recourse is called into question. However, the majority in Dedert highlighted that aspect is only one element to take into account and, ultimately, it is the particular wording used, albeit construed in context, that will be determinative of the issue. In this case, the Court concluded that the contract did not permit recourse to a bank guarantee in respect of a claim for unliquidated damages for breach of contract.

A new Rainbow appears in London: FIDIC's second edition

The construction and engineering standard forms published by FIDIC (in English, the "International Federation of Consulting Engineers") are widely used in international construction projects and the release of the second edition of the FIDIC rainbow suite will be of interest to Australia's increasingly-internationalised engineering and construction industry.

Nearly two decades after the previous edition (known as the "first edition 1999") of the forms were released, FIDIC unveiled the second editions of the Yellow (design-build), Red (build only) and Silver (EPC) Books at its Users' Conference in London on 4 December 2017. The update was driven by a number of aims: a desire for increased clarity, transparency and certainty, including to promote dispute avoidance, and taking account of cases and commentaries which have considered the operation of the previous edition (as well as "real world" factors such as the devastating tsunamis in 2004 and 2011- "tsunami" is now expressly an event of force majeure).

The changes are extensive both in length and effect. The programming provisions have been substantially expanded, including allowing the parties to deal with concurrency in the "Special Provisions". Another substantive change of interest involves a splitting of the claims and disputes provisions (the well-known clause 20), including to clarify that a claim does not of itself raise a dispute; in turn, the claims procedure has been made more prescriptive and detailed.

NSW Procurement Board issues guidance on international procurement obligations

Government agencies must identify procurement covered by international procurement agreements and ensure they comply with requirements under those agreements. Stuart Cosgriff, Charlotte Gordon and Madeline Pywell take a look at new guidelines published by the NSW Procurement Board.


Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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