What Must Be Included in a Construction Contract in QLD?

A poorly drafted construction contract is one of the most common causes of disputes in the building industry. Ambiguous scope, undocumented variations, and vague payment terms create room for disagreement long before a project reaches completion. This article sets out the clauses every construction contract in Queensland should address, whether you are a principal, head contractor or subcontractor.

Why a Well-Drafted Construction Contract Matters

Construction projects involve multiple parties, changing site conditions and, often, significant sums of money. A contract that clearly allocates risk, sets out payment terms and establishes a process for handling variations and disputes reduces the likelihood of costly disagreements - and makes those disagreements far easier to resolve if they do arise.

Identifying the Parties and Project Scope

Every construction contract should clearly identify the contracting parties, including the contractor's licence details, and set out a detailed description of the work to be performed. The scope of work should reference plans, specifications and any relevant drawings, leaving as little room as possible for later disagreement about what was actually agreed.

Contract Price and Payment Terms

The contract price or the method for calculating it (e.g for cost-based contracts)  must be clearly stated, along with the payment schedule and claim frequency. Payment terms should align with the statutory timeframes in the Building Industry Fairness (Security of Payment) Act 2017, including the 15-business-day deadline for responding to a payment claim with a payment schedule for ease of alignment with the statutory process.

Variations Clause

Unauthorised or undocumented variations are one of the leading causes of construction disputes and financial loss for contractors. A robust variations clause should require that any change to the scope, price or program be approved in writing before the work is carried out. Standard form contracts such as AS 4000 give the superintendent the power to direct variations, but generally require oral instructions to be confirmed in writing before they are binding.

Practical Completion and Defects Liability Period

The contract should define when practical completion is reached (typically when the works are complete except for minor defects or omissions and can be reasonably used for their intended purpose) and set out the length of the defects liability period that follows. If a contract is silent on this point, retention amounts must generally be released 12 months after practical completion.

Retention and Security

Most construction contracts require the contractor to provide security, in the form of cash retention or a bank guarantee, to protect the principal if defects are not rectified. It is common for half of the security to be released at practical completion, with the balance held throughout the defects liability period as an incentive for the contractor to return and fix any defects that arise.

Extension of Time and Delay Provisions

Delays are common on construction projects, and the contract should set out a clear process for claiming an extension of time, including notice periods and what qualifies as a compensable delay event (such as inclement weather, latent conditions or principal-caused delay). Without a clear process, delay disputes frequently become disputes about liquidated damages.

Insurance and Indemnity Clauses

Contracts should specify the insurance each party is required to hold, typically public liability, contract works and workers' compensation insurance along with indemnity provisions allocating responsibility for loss or damage arising during the works.

Dispute Resolution Clause

A well-drafted dispute resolution clause sets out the steps parties must follow before litigating, often starting with direct negotiation, followed by mediation or expert determination, and preserving the right to adjudication under the BIF Act for payment disputes. For more detail on the pathways available once a dispute arises, see our guide to construction dispute resolution in Queensland.

Termination Provisions

The contract should clearly set out the circumstances in which either party can terminate - including for substantial breach, insolvency, or repudiation - and the process that must be followed, such as notice periods and opportunities to remedy a breach before termination takes effect.

Standard Form Contracts

Rather than drafting from scratch, many parties use recognised standard form contracts such as AS 4000 , AS 4902 or AS 2124 , which are widely understood in the industry and generally address the core clauses above. These forms still need to be carefully reviewed and tailored to the specific project.

Statutory Requirements Under the BIF Act and QBCC Act

Regardless of the form used, construction contracts in Queensland must comply with statutory requirements under the BIF Act (payment timeframes, trust accounts where applicable) and the QBCC Act. A contract that is silent on or inconsistent with these statutory obligations can expose both parties to unnecessary risk.

Common Drafting Mistakes to Avoid

• Leaving the scope of work vague or relying on incomplete drawings

• Failing to require variations to be approved in writing before work proceeds

• Omitting a defects liability period, leaving the statutory 12-month default to apply

• Using a contract template from another state or an outdated version

• Failing to align payment terms with the BIF Act's statutory timeframes

How Roberts Litigation Can Help

Whether you need a construction contract drafted, reviewed, or are already in dispute over one, the team at Roberts Litigation can help you get the terms right the first time. Contact Roberts Litigation today for tailored advice on your next construction contract.

FAQs

What happens if variations aren't documented?

Undocumented variations are a common source of disputes, as the parties may disagree about whether extra work was authorised or how it should be priced. A written variations process helps avoid this.

How much retention can be withheld?

Retention amounts vary by contract and licence category, and are subject to limits under Queensland law for certain trade contracts. The contract should clearly state the applicable percentage and release triggers.

What's the difference between practical completion and the defects liability period?

Practical completion is usually defined as the point where the works are finished except for minor defects and can be used for their intended purpose. The defects liability period is the time after practical completion during which the contractor remains responsible for rectifying defects.

Should I use a standard form contract?

Standard form contracts like the AS 4000 (for commercial contracts) provide a well-understood starting point, but should still be reviewed and tailored to your specific project to ensure the risk allocation is appropriate.