AS 4000, more formally known as the Australian Standard AS 4000-1997 General Conditions of Contract, is one of the most widely used forms of head contract for construction projects in Australia.
Whereas contractors tend to regard the risk profile of AS 4000 as fairly balanced, some principals consider the contract to be weighted in favour of the contractor.
Where to get it
AS 4000 is published by Standards Australia Limited, which is part of SAI Global. It is protected by copyright and you must pay a licence fee to use it.
You can purchase a copy of the AS 4000 here.
When buying AS 4000, be sure to buy the right version. You will notice that different types of licences are available (reference version, multiple use versions, editable versions and so on). Licence fees vary, and you will need to choose the version that best suits your circumstances.
How to assemble it
As the formal title suggests, AS 4000 contains the general conditions of contract. You will need to compile the other contract documents and complete the annexure.
One thing you will need is a document to formalise your entry into a contract that contains the AS 4000 general conditions. (If you buy AS 4000, you will notice that there is nowhere to sign.)
This is normally done in one of two ways:
- a ‘formal instrument of agreement’, or
- a letter of acceptance.
Both documents serve much the same purpose, although most principals prefer a formal instrument of agreement to ensure there is no doubt about which documents are included in the contract.
You can purchase the Australian Standard Formal Instrument of Agreement (AS 4950), which is designed to be used with AS 4000, here.
The basic features of AS 4000
Some of the basic features of AS 4000 are as follows:
- Lump sum price. The contractor is required to execute the works for a fixed price and within a fixed timeframe.
- Fixed timeframe. The contractor is required to ensure the works are completed by an agreed ‘date for practical completion’, or else liquidated damages will apply.
- Practical completion. The contract acknowledges that construction projects can often be used and occupied before all works, including minor works, are completed. This is embodied in the concept of ‘practical completion’.
- Variations. The contract prescribes a process for dealing with variations. Relevantly, the contractor may not vary the works unless directed in writing.
- Extensions of time. The contractor may claim extensions of time to the date for practical completion if it is delayed by a ‘qualifying cause of delay’, such as an act or omission by the Principal. The contractor can also claim delay costs in some circumstances.
- Provisional sums. Where the design of part of the works is not sufficiently developed to enable the contractor to provide a fixed price, the parties can agree on a ‘provisional sum’ instead. The price of these items is adjusted once the final cost is known.
- Separable portions. The works can be divided into separable portions (or stages), with each of them potentially having a different access date, date for practical completion and liquidated damages rate.
Distinguishing features of AS 4000
There are a number features that set AS 4000 apart from other standard form contracts. They include:
- No time bars (for the most part). Clause 41.2 provides that a party’s failure to comply with a notice or claim requirement will entitle the other party to claim damages for a breach of contract, but will not bar or invalidate the claim. Note that there are exceptions (for example, in relation to a latent condition), and a failure by the contractor to notify a claim may nonetheless result in the contractor losing its entitlement. You can read more about time bars here.
- Apportionment of concurrent delays. Where a delay is caused by a qualifying cause of delay and a non-qualifying cause of delay, the contract allows the superintendent to apportion the resulting delay according to the respective contributing causes. This is different to AS 2124 and other forms of contract, where the existence of a concurrent non-qualifying cause of delay will disentitle the contractor from claiming an extension of time.
- Relief for latent conditions. The effect of a latent condition is a deemed variation. The contractor can claim the costs associated with a latent condition, except those incurred more than 28 days before it notified the superintendent of the issue.
- Dispute resolution. Arbitration is the default method for resolving disputes (as opposed to mediation, expert determination, resolution by a dispute board or other types of dispute resolution processes).
- Deemed approval of EOTs. If the superintendent does not respond to the contractor’s request for an extension of time within 28 days of receiving it, the request is deemed to have been approved and an extension of time will be granted for the full amount of time claimed.
Many principals will not agree to sign AS 4000 in its unamended form. Instead, they will often seek to incorporate amendments or special conditions. This is principally for three reasons.
First, AS 4000 is now more than 20 years old. Since then, various pieces of legislation have been passed that can affect the parties’ rights and obligations under the contract. Examples include legislation concerning GST, security of payment, proportionate liability, personal property security and work health and safety.
Second, and as mentioned earlier, many principals consider the risk profile of AS 4000 to be too heavily weighted in favour of the contractor. For example, principals will often incorporate time bars, remove any deemed approval provisions, and introduce clauses that will reduce the circumstances in which adjustments to the contract sum or date for practical completion can be claimed.
Third, principals will sometimes seek to use AS 4000 as the foundation for an ECI contract. (You can read more about ECI contracts here.) AS 4000 can be a good document to use for this purpose, but would require modification because it is not written as an ECI agreement.