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Can a builder still recover payments due under a building
contract after being 141 weeks late in completing works?
- Despite the owner terminating a building contract for serious
delay and breach by the builder in failing to provide supporting
documents for progress claims, a recent Supreme Court decision
found that the builder was entitled to recover full payment
- The builder delayed completing works for 141 weeks and ran $1
million over-budget but was still able to recover the contract
- Unless the contract otherwise provides, a builder who completes
the works, where the unpaid cost of the works has been assessed,
may claim the balance of the contract price notwithstanding the
builder fails to provide supporting documents for progress claims
as required by the contract
- It is important to have specialist advice early in building
disputes when consideration is being given to terminate a building
Dr Sader (owner) entered into a
“cost-plus” contract with Renbar
(builder) to construct a new residence in Connell
Point. Renbar commenced work in mid-2014 and inconsistently made
progress claims to Dr Sader. While the contract required progress
claims to be accompanied by supporting documents, Renbar failed to
provide such documentation for the first 12 claims. However, Dr
Sader paid those claims without complaint.
Renbar completed the works in April 2018, 141 weeks after the
date specified by the contract. By this time, total building costs,
to be paid by Dr Sader, stood at $3.2 million, well above the
initial estimate of $2.2 million.
In mid-2019, Renbar made the ‘final’ progress claim,
representing the balance of the contract price ($1.5 million). In
2020, the owner disputed his obligation to pay and terminated the
contract on the basis of Renbar’s serious delay in carrying out
the works. After termination, Renbar made a further progress claim,
being a repetition of the previous claim.
Was Renbar entitled to payment despite Dr Sader’s
termination of the contract?
The Court found that Renbar, having completed the work but
failing to make complying progress claims, was nonetheless entitled
to the balance of the contract price. While the contract did not
specifically deal with Renbar’s rights in this situation, the
agreement could not effectively operate without this term since the
builder would not be paid for work it had done at its own expense.
The term was “so obvious it goes without saying” and
could be implied into the contract. Thus, Renbar had a right to
payment when it completed the works in 2018 which survived
termination in 2020.
Renbar highlights a common dispute in building
contracts. While in many cases building owners will feel aggrieved
by apparent breaches of the builder, including delays or budget
blow outs, termination is not a straightforward matter. Even if, on
the face of it, the builder breaches the contract or causes loss to
the owner, this doesn’t necessarily mean the builder is not
entitled to full payment under the contract.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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