Understand Construction Contract – Read before you sign

CASE STUDY

V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2021] VSC

Facts

V601 Developments Pty Ltd (V601) engaged Probuild Constructions (Aus) Pty Ltd (Probuild) for development and construction of a project know as the Precinct Project, which comprised 5 separate buildings and 467 apartments.

First Urban Pty Ltd was appointed by V601 as the Project Manager and charged with both administrative obligations under the Contract. The Project Management Agreement was between V601 and First Urban.

The Project Manager certified that liquidated damages where due and payable by Probuild to V601 for each day after the agreed Dated for Practical Completion and issues the certificates.

V601 commenced proceedings to seek recovery of liquidated damages under the Contract, relying on the certificates issued by the Project Manager. Probuild alleged the Project manager failed to allow Probuild’s claims entitlement to extensions of time under the Contract and lacked independence.

Issues

• Issues about the proper interpretation and application of the Contract
• Whether the Project Manager has acted as the independent assessor and certifier under the Contract, in particular, in relation to the Contractor’s extension of time claims.

Decision

The Court held that the V601 and Project Manager co-operated, consulted, and colluded to implement strategies and tactic which were directed at placing V601 in an advantageous position in dealing with Probuild’s extension of time and delay damages claims.

As result of Project Managers’ lack of independence and breaches of its obligations, the assessments and certification of Liquidated Damages were void and set aside. Probuild is entitled to acceleration costs and bonus costs.

Key Takeaways

1. Most Building and Construction Contracts are extremely detailed and require a complete understanding prior to signing (and during the administration of the contract). Seek legal advice before signing a contract and when disputes arise.
2. It is important to follow the procedure set out in any time extension clauses in the construction contract and give full reasons for any delay when requesting the extension. 
3. Ensure the extension is approved in writing and the updated completion date confirmed by all parties to avoid disputes down the track.

What we can do for you

Using our industry experience and specialist legal knowledge, we can help you review your contracts before signing to ensure that you fully understand your rights and obligations and help you can get the best business opportunity.