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Posted 27 August 2024
Category: Construction
It has been commonly accepted for many years by many of those in the construction industry in New South Wales that contractors could limit their liability for negligence to the value of their fees or reduce the period of time of liability.
Those limitation clauses will face tests for their validity and possible penalties imposed by:
Duty of care imposed by D&BPA
From 10 June 2020, Part 4 of the D&BPA imposes on any person who carries out construction work a duty to exercise reasonable care to avoid economic loss caused by defects:
(D&BPA Duty of Care)
Section 40 of D&BPA
Section 40 of the D&BPA provides:
40 No contracting out of Part
Any contract term, on the proper construction of the contract, is void if it is considered by the Court to annul, vary or exclude the D&BPA Duty of Care.
UCT Regime
From 9 November 2023, the UCT Regime under the Australian Consumer Law (ACL), being Sch 2 of the Competition and Consumer At 2010 (Cth), and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) has been expanded. It is now applicable to standard form contracts for consumers or small business contracts entered or renewed on or after 9 November 2023.
A building contact is potentially subject to the UCT Regime when:
In the UCT Regime, a contract term is considered unfair when:
In the case Australian Competition and Consumer Commission v Fujifilm Business Innovation Australia Pty Ltd (previously known as Fuji Xerox Australia Pty Limited (FXA)) [2022] FCA 928, the terms in the standard form contract used by FXA were determined by consent to be unfair, which include a limitation of liability clause that:
“limits FXA’s liability for any delay in supplying or delivering equipment to the customer in circumstances where the customer has no right to be excused from charges payable for the period of the delay”.
The building contract terms in the standard form contract attempting to contract out the D&BPA Duty of Care may be void and not enforceable if the term is found to be unfair under the UCT Regime.
Significant penalties have been introduced for companies in the event their contract is in contravention of the UCT Regime:
Warranties imposed by the HBA
Section 18B of the HBA implies the following warranties by the holder of a contractor licence, or a person required to hold a contract licence before entering into a contract, in every contract to do residential building work:
(HBA Warranties)
Section 18G of the HBA
Section 18G of the HBA provides:
18G Warranties may not be excluded
A provision of an agreement or other instrument that purports to restrict or remove the rights of a person in respect of any statutory warranty is void.
Any contract term, on the proper construction of the contract, is void if it is considered by the Court to restrict or remove the rights of a person in respect of the HBA Warranties.
See the link below for further reading in relation to contract terms limiting liquidated damages made void by the operation of section 18G of the HBA.
UCT Regime
In a similar way mentioned above, the UCT Regime may apply to a building or engineering contract , or a consulting or superintendent agreement entered into on or after 9 November 2023 having limitation of liability clauses on the HBA Warranties. A builder found in contravention of the UCT Regime may face severe penalties imposed by the Regime.
What we can do to help
For home owners, and contractors or designers, we can:
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