Unfair Contracts

Author: February 23, 2016

Contract Conditions

Did you know that there is legislation in Australia that protects you from unfair contracts?

Fair Contracts

The two most common house building contracts are:

  • The HIA Standard Contract.
  • The Master Builders Association Standard Contract.

Both these contracts are considered to be fair, and over the years many of the clauses will have been tested in Court.

Some people say both ‘Standard Contracts’ protect the builder too much; but I have managed construction contracts for much of my working life and feel they are both reasonable to Builder and Client.

Changes, or Additions to a ‘Standard Contract’

Any changes to a standard contract have the potential to be unfair; however the Builder has a duty to identify any changes to a ‘Standard Contract’.

One of the first things you should check before signing your build contract is whether there has been any changes to the ‘Standard Contract’ and if you are happy with the changes.

You can usually buy a copy of your State’s version of a blank ‘Standard Contract’ for less than $20 dollars to compare your contract against.

What makes a Contract Unfair

A contract term is unfair if:

  • It would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
  • It is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
  • It would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Examples of unfair conditions would be:

  • The builder unreasonably making it difficult to have an independent inspector visit the site and/or charging a fee to accommodate independent inspections.
  • Giving the builder the final right to determine the quality of their work.
  • Allowing the builder to make variations without getting client approval.

What happens when a Contract is Unfair

If you have signed a contract not realising is was unfair all is not lost.

The first step is to Contact the Australian Competition and Consumer Commission.

A finding that a contract term is unfair, and therefore void, means that the term is treated as if it never existed.

However the original contract will continue to bind the affected parties to the extent that the contract is capable of operating without the unfair term.For more information click on the ACCC link above.