12 October 2018

10 differences between AS 4000 and AS 2124

Both AS 2124 and its successor AS 4000 are widely used forms of construction contract in Australia. Although they have many similarities, there are some significant differences.


It is not the case that one contract is necessarily ‘better’ than the other, nor is it the case that one contract is generally more favourable to the principal (or the contractor) than the other. The only way to understand which contract is more suitable for your circumstances is to consider the differences.

1. The availability of EOTs

AS 4000 and AS 2124 deal with EOTs quite differently.

Clause 35.5 of AS 2124 includes a relatively broad list of causes of delay for which the contractor can claim an EOT. If the delay occurs on or before the date for practical completion, the contractor can claim an EOT for any event beyond its reasonable control. You can read more about qualifying causes of delay under AS 2124 here.

In contrast, AS 4000 relies on the concept of a ‘qualifying cause of delay’, the definition of which is somewhat confusing. You can read more about qualifying causes of delay under AS 4000 here.

In their unamended form, the circumstances in which the contractor can claim an EOT under AS 2124 are likely to be broader than under AS 4000. Regardless of which form is preferred, many principals will seek to narrow these causes in any event (for example, by special conditions).

The availability of delay costs is also different under AS 2124 and AS 4000. You can read about when delay costs are available for AS 2124 here, and for AS 4000 here.

2. The calculation of delay costs

Where the contractor is granted an EOT for a ‘compensable cause’ under AS 4000, clause 34.9 entitles it to claim ‘delay damages’.

In contrast, clause 36 of AS 2124 requires the principal to pay 'such extra costs as are necessarily incurred by the Contractor by reason of the delay'.

It is at least arguable that the phrase ‘delay damages’ is intended to capture more than just ‘extra costs necessarily incurred by reason of the delay’. For example, 'delay damages' may entitle the contractor to claim some types of additional overheads and/or profit (or loss of profit). For this reason, principals will often seek to amend clause 34.9 of AS 4000 to clarify (and often limit) the types of cost or loss that can be claimed.

In addition, it is not uncommon for a principal to require a daily cap on the delay costs that can be claimed (under either form of contract), so that its exposure for delay costs is not unlimited.

Regardless of which contract is used, the contractor will still need to substantiate and justify any claim for delay costs and/or delay damages.

3. The consequences of failing to communicate

Clause 41.2 of AS 4000 states that a failure to communicate a claim shall 'entitle the other party to damages for breach of contract but shall neither bar nor invalidate the claim'.

For at least some types of claim (being claims to which clause 41.2 applies), this suggests that for particular types of claims, a failure to communicate will not result in the claim being time-barred.

In contrast, various clauses in AS 2124 include express time bars. These include clauses 12 (latent conditions) and 46.1 (contractor’s prescribed notice). You can read about the enforceability of time bars here.

Regardless of which contract you are using, you will need to look to the specific clause concerned to determine whether a time bar applies.

4. The certification of liquidated damages

Pursuant to clause 35.6 of AS 2124, if the contractor fails to reach practical completion by the date for practical completion, the contractor will automatically become indebted to the principal for liquidated damages. No certification by the superintendent is required.

In contrast, clause 34.7 of AS 4000 contemplates the superintendent having to certify liquidated damages in the same circumstances. In other words, the superintendent's certification may be a prerequisite to the application of liquidated damages by the principal.

In many cases, the distinction will be academic - because the superintendent would normally certify liquidated damages where there is a delay.  However there can be cases where this can become a critical issue.

One example is where the contract is terminated before liquidated damages have been certified by the superintendent. Under AS 2124, the contractor would already be liable for liquidated damages. Under AS 4000, it may be more difficult for the contractor to apply liquidated damages if termination of the contract brings an end to the superintendent's function.


5. Interest on late progress payments

The default interest rate that attaches to late progress payments under both contracts is relatively high: 18% per annum. This can be amended by the parties and the Annexure, and usually is.

However, under AS 2124, interest is compounded at six-monthly intervals. There is no corresponding provision in AS 4000. This compounding provision can have a significant impact in the event of a protracted payment dispute, particularly where the interest rate is left unchanged at 18%.

6. The pricing of extras

There are a number of circumstances under both contracts that allow the contractor to claim additional amounts, over and above the starting contract sum. However different clauses contemplate different ways for the adjustment to be calculated. 

In many cases (under both contracts), the adjustment will:

  • be treated as a deemed variation; or
  • entitle the contractor to claim the additional cost incurred.

Again, the principal difference relates to whether the contractor is permitted to claim additional overheads and/or profit in relation to the circumstance concerned. 

Not only are there differences between AS 2124 and AS 4000 as to how specific items are to be valued, but there are also differences within each contract.

Two relevant examples are the clauses that permit claims for changes to legislative requirements and latent conditions.

Under AS 2124, changes to legislative requirements give rise to a variation (clause 14.1) and where the contractor encounters a latent condition, clause 12.3 contemplates the contractor claiming the extra cost incurred.

In contrast, under AS 4000, the adjustment for a change to legislative requirements is based on the difference in cost incurred (clause 11.2), and the effect of a latent condition is a deemed variation (clause 25.3).

7. The requirements for a notice of delay

The requirements for a notice of delay under the two contracts are different. Clause 35.5 of AS 2124 merely requires the contractor to give written notice of a possible delay and the cause.

AS 4000 requires the contractor to provide details of the delay, including an estimate of the delay.

It is also worth noting that AS 4000 requires the contractor to submit a notice of delay to the principal and the superintendent, whereas AS 2124 only requires the notice to be issued to the superintendent.

8. The apportionment of concurrent delays

Under clause 35.5 of AS 2124, if a delay is caused by multiple causes of delay and any of the causes would not entitle the contractor to claim an EOT, the contractor will not be entitled to an EOT in respect of any part of the delay.

AS 4000 deals with this differently. Specifically, clause 34.4 contemplates an apportionment being made by the superintendent. It states:

“When both non-qualifying and qualifying causes of delay overlap, the Superintendent shall apportion the resulting delay to WUC according to the respective causes’ contribution.”

9. The deemed approval of EOT claims

Both AS 4000 and AS 2124 require the superintendent to respond to an EOT claim within 28 calendar days.

However, pursuant to clause 34.5 of AS 4000, if the superintendent does not give the contractor a written direction of its assessment of the EOT within the 28 day period, the EOT will be deemed to be granted in full, as claimed.

There is no corresponding provision in AS 2124. This means if the superintendent fails to respond within the timeframe, the contractor’s only option is to issue a notice of dispute under clause 47.1 and potentially to pursue a claim in damages.

10. Payment for unfixed plant and materials

The contractor’s ability to claim payment for unfixed plant and material is more limited under AS 4000 than it is under AS 2124.

Under AS 2124, the contractor can claim for unfixed plant and material in two circumstances:

  • where the item is imported into Australia and the contractor can provide a clean on board bill of lading endorsed to the principal; or
  • if the item is listed in Annexure Part A, provided the superintendent is satisfied that the item has been paid for, properly stored, labelled and protected.

The contractor will also be able to claim (subject to satisfying conditions under clause 42.4) for other unfixed plant and material if ‘Alternative 1’ or ‘Alternative 2’ is selected in Annexure Part A.

In contrast, AS 4000 takes a more restrictive approach, whereby the principal is not obliged to make payment for unfixed plant and material unless:

  • they are listed in Annexure Part A; and
  • the contractor provides additional security; and
  • the superintendent is satisfied that the item has been paid for and properly stored, labelled and protected.

Because AS 4000 contains more pre-conditions than AS 2124, the contractor may find it easier to claim payment for unfixed plant and material under AS 2124.

Key takeaways

There is no quick way to determine which of these two contracts may be better suited to your projects. The only way to understand the differences is by conducting a detailed analysis.
In any event, most principals using either of these contracts will seek to make modifications.

Both contracts were prepared in the 1990s, and there have been a number of changes to the law since then. In addition to introducing new clauses dealing with these changes, principals will often seek to alter the risk profile and/or make changes, including changes addressing issues like those discussed above.

Consequently, your biggest issue is not likely to be whether to use AS 2124 or AS 4000. It is more likely to be in considering which amendments you might consider making (or accepting).

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About the Author

Morgan McIntosh | Associate

Morgan is a commercial lawyer whose practice is mainly focused on transactional matters in the construction space.


morgan.mcintosh@turtons.com | (02) 9229 2901

About Turtons

Turtons is a commercial law firm in Sydney with specialist expertise in privately owned construction and technology businesses.

Morgan McIntosh | Associate

Author

Morgan McIntosh | Associate

morgan.mcintosh@turtons.com

Morgan is a commercial lawyer whose practice is mainly focused on transactional matters in the construction space.


morgan.mcintosh@turtons.com | (02) 9229 2901

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