Proposed New AS11000 General Conditions of Contract

Background

Standards Australia has released a draft AS11000 General Conditions of Contract (construct only) which is intended to replace AS2124-1992 and AS4000-1997.  There will also be a companion AS11001 on dispute resolution and management in contracts, plus companion subcontract conditions in AS11002.

The wide use of the Australian Standard contracts generally means that any changes in the revisions will have inevitable impacts on the construction and infrastructure industry.

Importantly, even though these new Australian Standard conditions will take into account some recent changes in the law and the construction industry, in our view these conditions will still only be a starting point and require amendment to suit the circumstances of each individual project.

Proposed Changes

Some of the key changes proposed in the AS11000 include:

  • clauses to specifically reference and enable compliance with the Security of Payment legislation of the States and Territories (for example, clauses that allow the Superintendent to act as agent of the Principal for the purposes of the Security of Payment legislation and which require the Superintendent to issue only one payment certificate which also serves as a payment schedule under the Security of Payment legislation);
  • obligation on each party to act in good faith towards the other (we note that “good faith” is not defined in the draft AS11000 and the extent of this requirement and what a party must do to act in good faith is unknown);
  • requirement for each party to comply with an early warning procedure requiring notification to the other party if any issues arise under the Contract (for example, issues in relation to cost, time or scope of works);
  • broadening of potential methods of dispute resolution including expert determination;
  • additional power of Superintendent to accelerate works;
  • amendment to extension of time clauses in relation to timeframes for notification of delays, causes of delay, concurrent delays and the procedure for the Superintendent’s response to claims;
  • Contractor to be required to use AS11002 when engaging subcontractors;
  • amendment to notice provisions to allow for service of notices by email (the effect of this needs to be carefully considered in light of the Security of Payment legislation);
  • an obligation on the Contractor to rectify defects as soon as they become aware of them, without first waiting for a direction from the Superintendent;
  • differentiation between ‘delay damages’ (damages for delays to practical completion due to a ‘principal’s act of prevention’) and ‘delay costs’ (costs for delays to practical completion caused by variations); and
  • various improvements to Annexure Part A.

Next Steps

The AS11000 template is due to be finalised and released later this year. Due to the novelty of some concepts contained in the draft (for example, the obligation of good faith), it will be of some interest to see how the industry has reacted to the discussion draft during the public comment period, and whether further amendment is made in relation to these clauses in the final draft.

We will provide a further update on the final form of AS11000 once it is released. In the meantime, please contact our Construction & Infrastructure team if you would like any further information on these proposed amendments.

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