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What is an AS 4300 Contract?

August 15, 2023   Philip EvangelouRaymond Chbib

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    Being a sole trader does not necessarily mean you have to operate your business alone. In short, yes – as a sole trader you are permitted to hire employees. As an employer you must comply with the legal obligations that any other employer has.

    Being an employer in Australia consists of various responsibilities and there are certain minimum standards that must be met if you hire employees to work for your business. Some of these working standards include providing employees with work entitlements such as annual leave, superannuation and minimum wage. 

    More specifically, as an employer your sole trader company must meet the following requirements. 

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    AS 4300 is a widely used standard form contract typical in commercial construction. Usually, it is intended to be used for the following types of contract:

    • design and construct,
    • design development and construction, and
    • design, novate and construct 

    AS 4300 is usually a lump-sum contract. However, there is also a modified version that uses an early contractor involvement (‘ECI’) arrangement.  

    AS 4300 contract is protected by copyright so you must pay a licence fee to use it. There are also different versions and various types of licenses available.

    Key Elements of AS 4300

    AS 4300 contracts are complex, but the key components of the contract include:

    Lump sum price The contractor is obliged to carry out the project for a fixed price. 
    Fixed timeframe  The contractor ensures the works will be completed by an agreed date (known as the ‘date for practical completion’). Liquidated damages may apply in the event of a delay. 
    Practical completion  The point at which the construction project can be used and occupied before all works (such as minors works) are actually completed. 
    Design obligations  The contract requires the principal to provide the contractor with a design brief. The principal may also be required to provide a ‘Preliminary Design’ where the principal chooses a ‘design, development and construct’, or ‘design, novate and construct’ contract. 
    Variations The contract provides a process for addressing variations between the design and the actual construction. 
    Extensions of time  The contractor is able to claim extensions of time to the date for practical completion if it is delayed by an event listed at clause 35.5 (which includes delay caused by the principal). 
    Latent Conditions  The contractor may claim an extension of time and additional costs if it encounters a latent condition. A latent condition is a physical condition on or near the site that could not reasonably have been anticipated by a competent contractor at the time of tendering.
    Provisional sums Where the design of part of the works is not sufficiently developed, a provisional sum may be provided. A provisional sum is an allowance for a specific element of the works that is not yet defined in enough detail to accurately price.
    Separate portions  The works can be divided into separable portions, so each portion potentially has a different access date, date for practical completion and liquidated damages rate. 

    Benefits of AS 4300

    With an AS 4300 contract, the project is streamlined and cost-effective, as the contractor is responsible for both the design and construction of the project. For example, since the contractor produces the design, there should be minimal variations in the completed construction.

    Further, the contractor is accountable for both the design and construction means, so cannot point fingers in the event of any defects as they will be solely responsible. 

    Disadvantages of AS 4300 

    Unlike other construction contracts, the principal has less control over the final design under an AS 4300. This is because the principal has no team of consultants of their own. As a result, the principle is heavily reliant on the contractor. 

    Further, under an AS 4300 contract which adopts a lump-sum type arrangement, the contract sum may be more costly than its alternatives to reflect increased contractor risk. If the parties enter the contract after the design is completed, disputes may arise about whether a change is a normal ‘design development’, or a variation (which can change the costs). 

    To Sum Up 

    AS 4300 remains a widely used form of construct in commercial construction. It can be either a lump-sum type or ECI arrangement. 

    In deciding which whether AS 4300 is right for your project, it is important to weigh up several considerations, including convenience, cost, and control over the final design.

    If you need any assistance relating to your construction contracts, our construction lawyers are here to help.

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    About Philip Evangelou

    phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.

    About Raymond Chbib

    raymond chbibRaymond is a legal intern at OpenLegal, working with our legal content team. He is currently a penultimate student at the University of Technology Sydney, studying a Juris Doctor degree with an undergraduate Bachelor of Global Studies. He is particularly interested in Intellectual Property law and the increasing internationalisation of that area of business.

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