Victorian security of payment reforms: New power to void "unfair" time bars

Construction contracts frequently impose obligations on parties to give notice of events or claims within a specific timeframe. Sometimes, if a claimant fails to provide notice within that timeframe, it will be barred from making a claim and it will have no entitlements arising from the event, or its entitlements will only commence from the date notice is given. At present, the Victorian the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act) does not interfere with this kind of contractual risk allocation.

However, significant amendments to the SOP Act will be effected by the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Act 2025, which received Royal Assent on 13 November 2025. Part 2, which will amend the SOP Act, is now waiting to be proclaimed (expected in early to mid-2026 and no later than 1 September 2026). Among these changes is a new power permitting determiners (adjudicators, courts, arbitrators or appointed experts) to void "unfair" notice-based time bars when determining that dispute.

These reforms will apply retrospectively to pre-existing construction contracts. It is therefore important for project delivery teams and contract administrators to develop an understanding of the intricacies of how the amended SOP Act will influence the application of contractual time bars affecting payment entitlements.

How the amendment affects time-barred security of payment claims

The amended SOP Act in Victoria will contain a new section 13A which permits determiners to declare that application of a "notice-based time bar" is unfair if compliance is not reasonably possible or would be unreasonably onerous.

Whoever alleges that a time bar is unfair bears the onus of proving it is so (which will nearly always be the claimant).

A "notice-based time bar" relevantly includes any provision of a construction contract that makes entitlement to payment, an extension of time, or release of performance security contingent or dependent on provision of notice. A "notice" includes notice of the actual or estimated time or cost of doing a thing, the intention to do a thing, the description of a thing, or a prescribed matter.

If voided, the provision is not enforced for that particular disputed claim, but continues to have effect in other circumstances and proceedings arising under the contract or a related contract. That is, the clause is not permanently invalidated. This is an important point that ought to be heeded by contract administrators.

Meaning of "unfair" when considering a notice-based time bar clause

The amended legislation does not define or explain when compliance will be "not reasonably possible" or "unreasonably onerous". A determiner of unfairness or onerousness is likely to consider the wording of the relevant clause and the facts of the particular claim/non-compliance with the time bar.

Additionally, section 13A contains the following list of matters which the determiner must consider when determining whether a notice-based time bar clause is unfair:

(a) when the party required to give notice would reasonably have become aware of the last day on which notice could be given;

(b) when and how notice is required to be given;

(c) the relative bargaining power of each party in entering into the contract;

(d) if compliance with the provision is alleged to be unreasonably onerous, whether the matters set out in the notice are final and binding;

(e) that the parties to the contract have read and understood the terms of the contract (which will be "conclusively presumed" and is likely included to prevent a claimant from pleading ignorance);

(f) that the party required to give notice has the commercial and technical competence of a reasonably competent contractor (which will also be presumed, and would require the claimant to lead evidence to the contrary to assert otherwise, which would be an unlikely occurrence); and

(g) any other matter prescribed by the regulations (none at present).

These indicia reflect that the assessment will be undertaken on a case-by-case basis, and that even if voided for a particular dispute, a time bar clause will continue to have effect in other circumstances and proceedings. This is expressly stated in section 13A(3)(b) of the amended SOP Act that will soon be proclaimed in Victoria.

Given the focus of the inquiry on the unique facts of a particular non-compliance, it will be very difficult for drafters of construction contracts to construct a notice-based time bar clause in a way that completely de-risks the potential for the clause to be voided if an unforeseen and peculiar set of facts emerges. These challenges also mean that parties will require active contract administration during project delivery.

In the meantime, we can draw on lessons learnt from other jurisdictions.

Western Australia

These changes are similar to the current section 16 of the Western Australian Building and Construction Industry (Security of Payment) Act 2021 (WA SOP Act). Compared to the WA SOP Act, the definition of a "notice-based time bar" in Victoria is broader because it extends to clauses regulating the release of performance securities which will be a feature unique to the amended SOP Act in Victoria.

Although section 16 of the WA SOP Act has not been judicially considered in Western Australia, the explanatory memorandum explains that the parliamentary intention was to strike a balance between upholding contractual rights and avoiding the imposition of unreasonably short or unnecessarily onerous notice requirements that lack a real commercial purpose. The explanatory memorandum suggests that the section is targeted at protecting claimants who lack relative bargaining power to push back on the inclusion of such clauses.

The 2018 review of Western Australian security of payment laws, which preceded the introduction of the WA SOP Act, indicates that section 16 does not legislate a general standard of reasonableness. Instead, it preserves freedom of contract by providing for the question of fairness to be determined on a case-by-case basis.

Notably, neither the WA SOP Act or the amended SOP Act expressly provide for the legitimate purpose of a time bar clause being a relevant consideration.

The Commonwealth

Section 13A would also bring the amended Victorian SOP Act into closer alignment with the ethos underpinning the unfair contract terms regime in the federal Australian Consumer Law (ACL), which regulates small business contracts. Under the ACL, a court can declare that a term of a standard form contract is void if it considers the term to be unfair. By contrast to section 13A of the amended SOP Act, a declaration under the ACL voids the clause entirely and means it has no contractual effect in any circumstances.

Unlike the Western Australian legislation, there is some judicial guidance on the application of the ACL to time bar clauses. For example, in ASIC v PayPal Australia Pty Ltd [2024] FCA 762, Justice Moshinsky voided a clause that imposed a 60-day time bar for consumers and businesses to dispute fees that had been incorrectly charged by PayPal, on the basis that it was unfair. It was relevant to the Court's decision that there was no reciprocal limitation on PayPal's right to dispute undercharged fees after 60 days and there was no explanation as to how the time bar protected PayPal's legitimate interests.

It remains to be seen whether similar factors could be relevant inquiries when assessing unfairness of a notice-based time bar under the amended SOP Act, though in particular noting the absence of reference to legitimate interests in the amended SOP Act. Some industry stakeholders consider it a legitimate interest for a party to wish to receive prompt notice of events which could delay project programs or increase costs, so that the party can forward plan with more certainty. As presently drafted, this does not appear to be encompassed by the legislative intent, though we expect considerable judicial scrutiny of this and other aspects of the amended SOP Act in Victoria.

The definition of "notice" and the scope of notice-based time bars

The definition of a "notice" is expansive and likely to cast a wider net than perhaps originally envisaged by industry stakeholders and the November 2023 Victorian Parliamentary review.

The Parliamentary review contemplated legislative amendments to address standard time bars – that is, clauses which bar a claimant from claims for failure to give notice or submit the claim within a specified timeframe. For example, at section 1.3.3 of the Parliamentary review, the target clauses were described in the following terms:

"it is also common for contracts to include provisions which say that a subcontractor who fails to submit a payment claim within the specified timeframe will be ‘barred’ from bringing any further claim. These clauses are known as notice time bar clauses and may be misused to avoid financial liabilities."

However, the definition of a "notice" in the new legislation also includes notice of the cost of doing a thing, intention to do a thing, description of a thing, or a prescribed matter. Therefore, determiners might also be empowered to invalidate notice clauses which disentitle recovery of costs incurred prior to (but not after) the giving of notice. Such clauses are commonly used in connection with contractual regimes regulating scope variations, where the upstream party has a legitimate interest in overseeing scope augmentation before associated works are undertaken. It is common for variation regimes to motivate timely issue notification and to disincentive pre-emptive works on new scope by limiting compensation to costs incurred after the upstream party has been notified and had the chance to consider scope implications. Considered in this light, the commercial purpose of such clauses is not to bar claimants' entitlements due to late provision of a notice, but rather to ensure that extra-scope works are not undertaken until scope implications have been investigated and variation directions have been issued.

It is not clear that the Parliamentary review intended such clauses to be captured, particularly because some of the factors that the determiner must consider do not neatly fit in this context. For example, subsections (a) (when the party required to give notice would reasonably have become aware of the last day on which notice could be given) and (d) (whether the matters set out in the notice are final and binding) appear to contemplate time bars which entirely prevent payment claims, rather than those which grant a right to payment after notice is given. It remains to be seen whether determiners will consider these types of clauses to be affected by the new powers in section 13A of the amended SOP Act in Victoria.

Consequences of a notice-based time bar being found unfair

Decisions which void notice-based time bar clauses will not be applied to the construction contract at large, but will only apply to the given circumstance at issue in each particular case.

While an adverse determination by an adjudicator early in a project would provide practical guidance, it should not set a binding precedent. This can be contrasted with the SOP Act's treatment of "pay when paid provisions", which are prohibited and voided from all construction contracts at large, irrespective of the particular facts in which such a clause might have operated.

Parties should not presuppose that a notice-based time bar will be void in all contexts or disputes, even if it has been declared unfair in one particular case. Each unique security of payment dispute will be assessed on a case-by-case basis. Upstream parties can preserve their rights by continuing to enforce time bars in accordance with their contracts. Failing to apply such clauses in a consistent manner risks inadvertent waiver of contractual rights. Such an outcome would convert an interim outcome into a final and binding outcome under the general law of waiver and estoppel.