Most informed principals consider AS 4000 to be too heavily weighted in favour of the contractor. Consequently, it is fairly normal to see AS 4000 issued with amendments or special conditions. This article summarises some of the more common amendments.
Unlike its predecessor (AS 2124), AS 4000 contains few time bars. In fact, subclause 41.2 expressly provides that:
“failure of a party to comply with the provisions of subclause 41.1 [Communication of Claims] or to communicate a claim in accordance with the relevant provision of the Contract shall, inter alia, entitle the other party to damages for breach of Contract but shall neither bar nor invalidate the claim”.
The general idea is that, unless a delay by the contractor in giving a notice causes the principal to suffer a loss, the delay should not have any adverse consequences for the contractor.
Many principals will change the contract so that a failure to give a notice in time will immediately result in the relevant claim being time barred.
Read more about the enforceability of time bars here.
Many principals will tweak the risk profile of AS 4000 by reducing the circumstances in which the contractor can claim an EOT or adjustments to the contract sum.
Typically, this will be done by:
In addition, principals will often place limits on what can be claimed. For example, many contracts will:
Since the COVID pandemic, some principals have started introducing rise and fall clauses into their contracts. A rise and fall clause is intended to reduce any risk buffer that the contractor might otherwise build into their pricing, by allowing adjustments to reflect changes in the cost of the contractor's materials and/or labour over the course of the project.
Subclause 34.5 of AS 4000 states that, if the superintendent does not respond to an EOT claim within 28 calendar days, the claim will be deemed to be approved in full. Most informed principals seek to delete this provision.
4. Insertion of a GST clause
AS 4000 was released in 1997, several years before the introduction of GST. Because of this, there is no GST clause.
Most commercial contracts will contain a provision that explains how GST is to be treated, and whether the figures in the contract are intended to include or exclude GST.
The main purpose of a GST clause is to ensure:
Some of the timeframes for giving notices in AS 4000 are relatively generous. For example, the contractor has 28 calendar days from when they should reasonably have become aware of a delay, to submit a claim for an extension of time (subclause 34.3).
Many principals will seek to reduce these timeframes, principally to ensure that they become aware of adverse circumstances at the earliest possible opportunity.
Like the GST legislation, there are various other pieces of legislation that have been passed since AS 4000 was released. There have not been any updates to AS 4000 to accommodate this.
Consequently, many principals will seek amendments to address:
Clause 34.5 of AS 4000 gives the superintendent the right to grant an EOT, even where the contractor is not entitled to one or none has been claimed. In addition, clause 20 requires the superintendent to fulfil all aspects of its role and functions reasonably and in good faith.
Read in combination, these provisions can be interpreted to mean that the superintendent can be required to grant an EOT, even where none has been claimed. In turn, this means that a claim by the principal for liquidated damages can sometimes be defeated (even where no EOT has been claimed).
To address this problem, principals will often clarify this clause to state the superintendent’s power to grant an EOT under this clause exists solely for the benefit of the principal, and that the superintendent is not under any obligation to act reasonably or to take into account the interests of the contractor when exercising it.
You can read more about unilateral EOTs here.
The laws around privity of contract mean that, if there are defects in the work which the head contractor is unwilling or unable to rectify (eg due to its insolvency), the principal may not be able to bring a claim directly against the subcontractor or supplier responsible.
To address this issue, principals will often incorporate obligations into the contract that require the head contractor to provide:
These documents are often in a prescribed form, included in a contract annexure.
This note summarises some of the more common amendments principals seek to make to AS 4000, but they are by no means the only ones.
As a principal, it is important to keep in mind that the risk profile you incorporate into your contract will typically be reflected in your pricing. Market conditions should always be taken into account in preparing a construction contract.
Although it is obviously important for principals to ensure their contracts contain adequate protections, tweaking the risk profile too far can result in unnecessary risk premiums being incorporated into contractor pricing (and in some cases, contractors not being willing to tender at all).
Want to know more about AS 4000? Our AS 4000 Contract User Guide is available here.