Considerations for AS 4000 contracts
AS 4000 is a type of construction contract used for construction projects in Australia that is used ancillary to a more formal legal instrument or certain documentation. As a Principal or Contractor seeking to commence a construction project, you may have come across AS 4000 (Australian Standard AS 4000-1997 General Conditions of Contract). AS 4000 is a type of construction contract used for construction projects in Australia. As it is considered to only be the general conditions of the contract, AS 4000 is intended to be used ancillary to a formal instrument of agreement or certain documentation. AS 4000 will therefore often be accompanied by AS 4950 which seeks to incorporate the terms, a private contract prepared for the parties or tender documents and a signed letter of acceptance. These ancillary documents are very important, as they will address the details of the contract such as the agreed rates or lump sum and the signatures of the parties.
When is AS 4000 commonly used?
AS 4000 is a popular choice in small scale projects. This form of construction contract is often considered to be the one with the lowest risk for contractors (conversely, there is a relatively high risk profile for principals).
Elements of AS 4000
AS 4000 is unique, and is distinguished from other standard form contracts in a number of ways;
- There are no time bars
- Delays can be apportioned on account of contributing causes
- The Contractor is entitled to claim costs for latent conditions
- The parties agree to go through arbitration in the event of a dispute
- The Contractor is entitled to assume that the superintendent has approved an extension of time (EOT) if they do not respond within 28 days of receiving the request
No time bars
Usually, construction contracts impose that if circumstances change (for example, there is a discovery of latent conditions or there are delays), contractors are permitted to claim adjustments if they notify the Principal or make the claim within a prescribed time-frame. A time bar clause restrains a contractor from making claims outside of this prescribed time frame. AS 4000 effectively removes time bars, because it does not specify that a claim will be barred if notice or claim is not made within a certain time frame.
What should be considered: Time bars are considered to be an added level of security for principals. Removing time bars increases the risk of time delays and higher costs by placing more power in the hands of the Contractor. Effectively, without a time bar clause the Contractor’s entitlements will only be reduced to reflect the loss the Principal suffers because of the delay in notification.
Apportioning concurrent delays
Under other construction contracts, a Contractor is not entitled to claim an extension of time (EOT) where there is a concurrent non-qualifying cause of delay. Under AS 4000, a Contractor is permitted to apportion delays where only one is a qualifying cause of delay and the other is a non-qualifying cause of delay. A qualifying cause of delay is defined in AS 4000 to include any act, default or omission of the Superintendent, the Principal or other contractors, consultants and agents. Inclement weather and industrial conditions before the date of practical completion are also considered to be qualifying causes of delay.
What should be considered: Apportioning concurrent delays means that there will be more scope for the Contractor to claim an EOT – even if the delay is non-qualifying (ie not agreed upon previously). Subsequently, the project may face time delays.
Latent conditions relief
AS 4000 specifies that a contractor can claim costs due to a latent condition incurred within 28 days of notifying the superintendent of the issue.
What should be considered: If latent conditions arise, the Principal may be liable to pay costs associated with the delay and remedying the problem. This includes the costs incurred by the Contractor while investigating how to deal with the latent condition.
It is possible that over the course of the project, a dispute will arise between the Principal and Contractor. AS 4000 specifies that in this instance, the parties undergo arbitration in an attempt to resolve the dispute.
What should be considered: This means that both parties will be unable to engage in other forms of dispute resolution such as mediation or expert determination (even if the Principal and the Contractor would prefer to undergo alternative processes due to specific benefits associated). Under arbitration, the parties will be bound by the decision of the arbitrator with little to no room to appeal unless there has been an error of law.
Under AS 4000, the Contractor is entitled to assume that the superintendent has approved an extension of time (EOT) if they do not respond within 28 days of receiving the request.
What should be considered: The Principal needs to make sure that the superintendent pays close attention to any communications they receive from the Contractor. If a request for extension “slips through the cracks” your project may face delays.
Can AS 4000 be amended?
Yes, AS 4000 can be amended. Most principals consider that AS 4000 favours the Contractor too heavily, and may subsequently seek to make amendments in an attempt to reduce the risk profile. There is no set list of amendments that either party can make, however the most common ones include;
- Imposing time bars: this can be put in place to ensure that a failure to give notice will bar the claim.
- Limiting the circumstances under which the Contractor can claim EOT or make adjustments: this can be put in place to ensure that there is reduced scope for additional costs or time delays.
- Removing deemed EOTs: this can be done to mitigate the risk of time delays if the superintendent does not respond within 28 days of receiving the EOT claim.
AS 4000 is a type of construction contract used for construction projects in Australia that is used ancillary to a more formal legal instrument or certain documentation. When using AS 4000, the Principal should be wary of the high risk profile the unamended form of the contract imposes on the Principal (ie, no time bars, apportionment of delays, costs for latent conditions, lack of dispute resolution choice and deemed EOT approval). Finally, risk to the Principal can be somewhat mitigated through amendments.
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