What is an AS 4902 Contract?

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What is an AS 4902 Contract?

December 17, 2020         Jennifer Andrade

AS 4902 are standard form contracts intended for design and construction projects. Properly known as AS 4902-2000 General Conditions of Contract for Design and Construct, they are available for purchase at Standards Australia Limited. These contracts are copyright protected, therefore, anyone intending to use them will need to pay a licence fee. As the AS 4902 is just one of the many types of construction contracts out there, below is a summary of its structure, benefits, and disadvantages. 

Personalisation 

First, as the AS 4902 only provides general conditions for design and construct projects, further amendments to the contract may be necessary to ensure it sufficiently covers the current project. Parties will also need to include additional documents to provide further information about the project and must complete the Annexure Part A section of the contract. These documents include either a Formal Instrument of Agreement or a Letter of Acceptance to demonstrate that both parties agree to enter into the contract as the AS 4902 does not include a section for parties to sign. The AS 4950 – Australian Standard Formal Instrument of Agreement can be purchased at the Standards Australia Limited for this purpose as it was designed to be used with the AS 4902 contract. 

Key Features

Fixed PeriodThis contract provides the contractor must complete their responsibilities by a certain date agreed upon by parties otherwise they will be liable for liquidated damages.
Lump sum priceThe contractor is obliged to work on the project for a fixed price within a fixed timeframe. 
Practical completionAS 4902 acknowledges that construction works can be occupied/ used before they are entirely completed which is also known as the concept of ‘practical completion’. 
VariationsAny variations to the project are covered by the contract which prescribes a process when dealing with variations. 
Extensions of timeThe contractor can seek extensions to the date for practical completion if they are within the requirements of the relevant clause. This clause will provide guidance on what is a ‘qualifying cause of delay’ and whether the contractor can obtain costs in relation to the delay.
Provisional sumsA provisional sum is an allowance for specific sections of the work where the price cannot be accurately estimated because the feature has not been sufficiently developed. Under the contract, the parties can agree on an amount for the ‘provisional sum’ which will be adjusted once the final cost of the feature becomes known. 
Separable portionsThe project can be divided into separate stages, which may result in each stage having different access dates, and dates for practical completion.

Benefits of AS 4902 Contracts

No time barsUnder clause 41.2, if a party fails to comply with a notice of claim requirement, the other party will be entitled to claim damages for breach of contract. This will also not bar the initial claim. However, there are exceptions which will result in the contractor losing its entitlement to the claim. 
Apportionment of concurrent delays If a delay is caused by both a qualifying and non-qualifying cause of delay, the contract still allows the contractor to seek an extension of time. This is unlike other types of contracts that will waive the contractor’s entitlement to claim an extension where there is a concurrent qualifying and non-qualifying delay. 
Relief for latent conditions The contractor can claim an extension of time and costs if they encounter a latent condition. This is when there is a physical condition on the work site that could not have been anticipated by a competent contractor.
Dispute ResolutionThis contract prescribes arbitration as the default method for resolving any disputes.
Deemed approval of EOTsIf within 28 days, the contractor has not had a response from the superintendent in relation to a request for an extension, it will automatically be considered approved. 

Disadvantages of AS 4902 Contracts

There are a few potential disadvantages that may arise when using the AS 4902 contract, however, these are not set and can be avoided by amending the terms of the contract. 

First, as the structure of the contract is almost 20 years old, it is relatively outdated in light of the several legislative amendments that have occurred within that time. These include changes to taxation, and workplace health and safety law. Therefore, parties must make sure that their AS 4902 contract is up to date with any relevant legislative changes. 

Second, the AS 4902 has been considered to weigh in favour of the contractor at the expense of the principal, allowing contractors flexibility in obtaining extension periods and damages. The principal can resolve this by amending the contract to suit their needs such as by introducing clauses to reduce the circumstances where the contractor can variate the contract sum or date for practical completion. 

Final Notes 

The AS 4902 is a common standard form contract used for construct and design projects available for purchase as Standards Australia Limited. As it only provides general provisions, amendments are necessary to ensure that projects are effectively covered by the contract, parties are adhering to legislative changes,  and that each party’s rights and liability are protected equally.

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About Jennifer Andrade

Jennifer is a legal content writer with OpenLegal, with a particular interest in employment, contract and copyright law.