Commercial contracts and subcontracts
Contracts for commercial building work must be in writing. This includes:
- head contracts;
- Subcontracts for domestic building work; and
- all contractsfor commercial building work between developers, builders and subcontractors.
The requirement for a written commercial contract also applies to contracts for building work between a contractor and an Owner Builder Permit holder.
NOTE: Different, much more detailed requirements apply to contracts that are made directly with homeowners for domestic building work. The domestic building contract requirements, which are set out in Schedule 1B of the QBCC Act, and other general information about domestic building contracts is contained in the QBCC booklet titled Domestic Building Contracts – General information for owners and contractors (PDF).
What do I need to include in the contract?
- the scope of the work covered by the contract
- when the work is to be completed
- the amount to be paid for the work (or how the amount is to be calculated)
- details of any agreement between the parties about retentions and securities
- the name and licence number of the building contractor
- the address of the site where the work is being carried out
It is important to note that these are just the minimum requirements to satisfy the legislation. If you are developing your own subcontract instead of using one of the standard form documents produced by QBCC or a major industry association, it is recommended that you engage a solicitor to ensure it complies. You should discuss with them what additional clauses you may need to suit your particular business practices and requirements.
Avoiding payment disputes - what to look for in your contract
QBCC commercial subcontract
We have produced a commercial subcontract which is designed to be used by contractors and their subcontractors to document their commercial building agreements (including subcontracts for residential building work). This contract document has been updated in response to changes in State and Commonwealth legislation, including reforms relating to non-conforming building products and limitations on the ability of parties to terminate a contract in circumstances where the other party is experiencing financial difficulties.
This subcontract, which is fair and balanced to both parties, includes all the necessary forms and notices required to implement the building agreement after signing. This single subcontract may be used to record agreements of any value.
Warning against using old or interstate subcontracts
Recent changes to relevant Commonwealth and State legislation can make it inappropriate or even dangerous, legally, to use older contracts (especially those dated prior to July 2018) or contracts produced in a different jurisdiction (e.g. contracts from a different State or even from overseas).
One example of such a legislative change which affects contract terms is the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Cth) ("the Act"). This Act, which applies to all contracts entered after 1 July 2018, limits the ability of a contracting party to immediately terminate a contract because the other party is experiencing financial difficulties and taking steps to avoid bankruptcy or (in the case of a company) liquidation. QBCC strongly recommends that, before signing, contractors seek legal advice regarding the termination clauses of any contract they intend to use for building work, especially if the contract is dated prior to July 2018.
Termination of any contract is a significant step which should not be taken without prior legal advice from an experienced lawyer.
Does the contract have to be in writing before commencing work?
The QBCC Act requires that commercial contracts for building work valued at over $10,000 must be in writing before work starts. If the building work is valued at $10,000 or less, the contract must be in writing before the work is completed.
When is a contract not required?
Generally, work valued at up to $3,300 is not classed as building work and therefore doesn't require a written contract (although QBCC still reccommends that you record your agreement in writing), However, work of any value involving plumbing, drainage, gas fitting, design drafting, completed building inspections, site classification, fire protection and pest controlling must be recorded in a written contract.
What if I don’t comply?
If you don't put a contract in writing, or you enter into a contract that doesn't contain the requirements stated in the QBCC Act, you commit an offence. QBCC may prosecute or take disciplinary action and you could accrue demerit points.
Notice of end of defects liability period
There are new legislative requirements relating to retentions and securities and imposing a statutory defects liability period. If under a building contract:
- a retention amount may be withheld; or
- a security may be held after practical completion for the rectification of any defects in the building work,
then any retention amounts or security must be released 12 months after practical completion if the contract does not specify a defects liability period. It is now an offence to not release retention amounts without reasonable excuse.
Also, there is a new requirement that contractors must give a Notice of End of Defects Liability Form (PDF) to subcontractors advising them of the impending end of the defects liability period. This notice must be given within 10 business days before the end of the defects liability period or within 5 business days after receiving a notice if the defect liability period is linked to another building contract. This requirement does not apply to a contracting party who enters into a building contract as a principal. It is an offence to fail to provide this form.
If you are unsure of your contractual rights or obligations you should obtain legal advice from a solicitor with experience in building contracts.