Major Projects & Construction 5 Minute Fix No 136: standard form contracts, challenging payment claim, "cost-plus" arrangements, and misleading or deceptive

Don't play Blankety Blanks when using a standard form contract

The decision in XJS World Pty Ltd v Central West Civil Pty Ltd [2025] NSWCA 133 provides a reminder that courts will not fill in the blanks for parties where optional clauses are left unactivated in the relevant contract particulars or annexure. Here, the failure to fill in a date for completion meant that there was no fixed period for completion of the work and therefore no liquidated damages (stated to be $1,000 per day) were payable.

In this case, XJS World Pty Ltd engaged Central West Civil (CWC) to perform civil construction works. The contract was based on a standard form comprising multiple parts including Part A (Contract Particulars), Part B (Standard Conditions), and Part D (Schedule of Rates, including a Quotation Form). Notably, Item 8 of Part A, which was meant to specify the "Date for Completion", was left blank by the parties. However, the Quotation Form in Part D included a footnote which provided that the works "will need to be completed within three months of contract engagement".

A dispute arose when XJS terminated the contract and sought liquidated damages on the grounds that CWC had delayed progress. XJS argued that the footnote in Part D imposed a binding three-month completion requirement. Meanwhile, CWC contended that XJS's termination was wrongful because no such timeframe was contractually agreed.

One of the key issues on appeal was whether the three-month period referred to in the footnote could operate as a binding completion date. The NSW Court of Appeal held that it could not. Agreeing with the decision at trial, the Court found that the parties' decision to leave Item 8 of Part A blank meant that no fixed completion date had been agreed. Central to the Court's reasoning was the fact that the contractual terms had been derived from a standard form contract, as Justice Kirk explained:

"the terms of such a contract may make provision for various eventualities which only apply if and to the extent that they are activated by the parties completing the relevant details. If the parties choose not to complete those details then they are choosing not to activate those provisions of the contract."

In reaching its conclusion that the footnote did not impose a binding completion date, the Court also considered additional contextual factors. First, the Court noted that the words "will need to be completed" in the footnote were aspirational and relatively informal compared to the careful drafting in Parts A and B. Further, the footnote appeared in Part D, which was subordinate to Part B under the Contract's order of precedence clause. Crucially, Part B specified that the Date for Completion was to be the date stated in Item 8 of Part A, which the parties had left blank.

Since the parties had not expressly agreed on a Date for Completion, the clause providing for liquidated damages could not be triggered. Accordingly, XJS’s claim for liquidated damages failed.

Ultimately, this case reinforces the importance of clearly activating critical terms in standard form contracts, particularly where liability for delays or damages is concerned.

Pay now, argue later? Not always. Stay granted in residential SOP Act clash

Black Label Developments Pty Ltd v McMenemy [2025] NSWCA 114 provides insights into the tension between the competing policy goals of protecting homeowners under residential building contracts and promoting contractor cashflow (via the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act)).

Here, the NSW Court of Appeal came down in favour of the homeowners the McMenemys, extending a stay granted by the District Court against enforcement by the builder Black Label of a SOP Act adjudication against the McMenemys. While Justice McHugh (giving the leading judgment on appeal) saw the facts in the case as "singular", the tension the case reveals is important in the context of security of payment reforms; notably, the 2019 extension of the NSW SOP Act to residential head contracts, and the current consideration in Victoria of that extension as part of that State's "Tranche 2" measures which have been supported in-principle by the Government.

The parties entered into a building contract on 4 January 2023 under which Black Label was to carry out residential building work being the renovation of the McMenemy family home. On 22 September 2023, Black Label, in an attempt to claim additional costs on the building contract, required the McMenemys to execute a deed of variation prior to being allowed to take possession of their home.

On 26 March 2024, Black Label served on the McMenemys a payment claim for the outstanding amounts not paid under the deed of variation and, on 10 April 2024, the McMenemys submitted a payment schedule responding to that claim. The matter was subject to an adjudication in which a determination was made in Black Label's favour. Under section 25 of the SOP Act Black Label obtained an adjudication certificate for enforcement in the District Court. In turn, the McMenemys sought a stay of the determination under section 32 of the SOP Act, having made a counterclaim against Black Label. The counterclaim alleged that the deed was entered into under duress or in contravention of the prohibition of unconscionable conduct under the Australian Consumer Law.

The Court allowed the McMenemys a stay on paying the adjudicated amount pending resolution of the counterclaim. Black Label's primary ground for appeal was that the primary judge failed to have regard to the two statutory policies of the SOP Act:

• to maintain the flow of money to the contractor; and

• as an interim measure, to place the risk of insolvency on the principal.

These had been held as factors that must be considered when deciding to grant a stay in A-Civil Aust Pty Ltd v Ceerose Pty Ltd [2023] NSWCA 144.

The Court dismissed Black Label's appeal against the stay having been granted. Its judgment rests upon the District Court's grant of the stay being discretionary in unconfined terms under section 67 and section 135 of the Civil Procedure Act 2005 (NSW).

The Court noted that the SOP Act policies espoused by Parliament were directed to contracts between, for example, developers and their builders, or between head contractors and their subcontractors, and the principles cited by Black Label must be read and understood in that context. It recognised that there are distinguishable prevailing interests at play in a consumer context:

• execution of a section 25 judgment may have "catastrophic" consequences, especially where the subject matter of the contract is the homeowner's home which they stand to lose; and

• the prospect that the builder might abscond with the homeowner's money pursuant to an unfavourable adjudication of an excessive payment claim and then be unable to meet a section 32 judgment if the principal later succeeds.

Avoiding response regret: respond to a payment claim or lose the right to object

The NSW Court of Appeal has emphasised the importance of submitting a valid payment schedule as a proper response to any payment claim made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act). In Manariti Plumbing Pty Ltd v Universal Property Group Pty Ltd [2025] NSWCA 135, the Court granted summary judgment upholding the validity of a payment claim, overturning the District Court's refusal to do so and holding that the respondent's objections were "bound to fail".

The parties entered into a construction contract for the supply of plumbing works on a multi-dwelling housing development. The plumber commenced proceedings after the respondent failed to pay its payment claim on time or serve a payment schedule. The payment claim had been accompanied by an excel spreadsheet referring to earlier invoices.

The Court considered the respondent's two objections and found them "bound to fail":

• Objection 1: the payment claim did not properly identify the work claimed: The Court observed that, "if a payment claim purports in a reasonable way to identify the particular work in respect of which a claim is made", there will be no failure to identify and supporting documentation may be used to meet this requirement. In this case, the spreadsheet and references to prior invoices provided with the payment claim were sufficient to satisfy the requirements of the SOP Act.
  
  

• Objection 2: the claim was for damages or restitution, not construction work: The respondent argued that the payment claim was invalid because it sought payment for damages or restitution. The Court held that there is no express requirement under the SOP Act that the claim be "for" construction work. Rather, it there is a dispute about an entitlement to payment, this should be dealt with through the issue of a payment schedule, and, if necessary, determined by an adjudicator.

This second point will be of particular interest in Victoria where it is currently proposed, as part of its "Tranche 1" reforms, that its unique "excluded amounts" regime (excluding, for example, claims for damages) be abolished.

When a $1.1 million estimate becomes $3.1 million

Fraser Lyne Constructions Pty Ltd v Waba [2025] NSWSC 600 provides useful consideration of the vexed question of whether a construction contract was brought to an end by termination by agreement or repudiation. The case highlights the importance of maintaining clear and transparent communication in contractual relationships, particularly in "cost-plus" arrangements where estimates are fluid. It also serves as a reminder that claims for damages must be supported by precise and credible evidence.

The parties entered into a cost-plus building contract for a residential property. The build was to be capped at $1.5 million given the owner's borrowing capacity and was originally quoted at $1.1 million by the builder. When the owner's requests for a costs schedule were ignored by the builder (who later provided a revised cost estimate of $3.1 million), the owner advised the builder that the contract could no longer go ahead given the increased price.

Based on the parties' conversations around the owner's inability to pay, the cancellation of insurance over the property and a potential new contract, Justice Peden held that the parties had clearly conducted themselves in a way which demonstrated "mutual abandonment or abrogation" of the contract. While Her Honour noted that the owner's inability to proceed could have constituted a repudiation, the builder failed to provide adequate evidence to support the claim for loss of bargain damages.

On this basis, the Court ordered that the owner only pay the builder $8,250 for wasted expenditure, being the amount originally claimed by the builder for his time, following the parties' agreement to terminate the contract.

Rectification damages awarded in misleading or deceptive conduct case

In a recent defects case involving misleading or deceptive conduct, the NSW Court of Appeal awarded damages tantamount to expectation loss calculated by reference to the loss of a contractual right as a consequence of the contravening conduct – rather than diminution in value.

Larsen as trustee for the Larsen Superannuation Fund v Tastec Pty Ltd (formerly Wonders Building Company Pty Ltd) 2025] NSWCA 145 concerns a home building project in the Blue Mountains for which the owners had specified a particular type of cladding called Maxline 340. The owners established that they had been misled or deceived by the builder into signing a variation to exchange Maxline 340 with a supposedly "Custom BONDOR" product. This substitute product had in fact been fabricated by the builder by gluing steel fins to a Bondor structural panel to reduce the apparent spacing between panel ribs so as to resemble Maxline 340.

The owners sought to recover the cost of rectifying the deficient cladding – that is, of installing the Maxline 340 panels for which they had contracted, absent the impugned variation. They were unsuccessful before the primary judge, whose Honour considered the proper measure of loss to be "diminution in value" and, therefore, the owners to have no entitlement when their evidence had not shown the lack of Maxline 340 to diminish the home's value (having been an aesthetic preference, after all).

The owners appealed successfully. The Court of Appeal held that the owners are entitled to expectation losses where they had been induced, by the contravening conduct, into relinquishing their contractual rights. The amount required to put the owners into the position they would have been in absent the contravening conduct was held to be the value of installing Maxline 340 – incidentally aligning the quantum recoverable for contravention of section 18 of the ACL with that generally awarded at common law for breach of contract.

Stay tuned for our upcoming Insights article which will examine this case in greater detail.