How to Choose the Right Con­struc­tion Con­tract: AS4122 Con­di­tions vs Com­mer­cial Terms of Business

Select­ing the right con­tract is crit­i­cal for con­sul­tants and con­trac­tors in the con­struc­tion indus­try. The choice between AS4122 Gen­er­al Con­di­tions of Con­tract for Con­sul­tants and Com­mer­cial Terms of Busi­ness can sig­nif­i­cant­ly impact project risk, time­lines, and out­comes. In this arti­cle, we break down the key dif­fer­ences, explain when each option is most suit­able, and share prac­ti­cal tips to help you achieve com­pli­ance and pro­tect your busi­ness interests.

AS4122 — Fea­tures & Why It’s Con­struc­tion Specific

Stan­dard of Care and Scope of Services

• holds the con­sul­tant to a spe­cif­ic and high­er stan­dard of care rel­a­tive to the con­struc­tion industry
• spe­cif­ic oblig­a­tions on noti­fi­ca­tions that shift risk to the con­sul­tant if there is an error in any infor­ma­tion pro­vid­ed to the consultant
• detail on scope of ser­vices is pro­vid­ed for with an annex­ure insert­ed to pro­vide fur­ther specifics to out­line the con­sul­tan­t’s scope of services

Directions/​instructions

• details how instructions/​approvals/​directions are pro­vid­ed through­out the project

Design and IP Clauses

• cov­ers design lia­bil­i­ty, copy­right own­er­ship, and licens­ing – these are cen­tral to architectural/​engineering work
• own­er­ship in designs and copy­right are clear­ly stated

Vari­a­tions Clause

• allows for for­mal scope changes and payment/​time adjust­ments which are essen­tial in evolv­ing con­struc­tion projects

Coor­di­na­tion Duties

• recog­nis­es mul­ti-dis­ci­pli­nary teams (archi­tects, engi­neers, con­sul­tants) and sets col­lab­o­ra­tion obligations

Insur­ance Requirements

• requires Pro­fes­sion­al Indem­ni­ty, pub­lic lia­bil­i­ty, and work­ers com­pen­sa­tion stan­dard for design con­sul­tants in construction 

Lia­bil­i­ty Cap

• enables capped con­sul­tant lia­bil­i­ty, align­ing with pro­fes­sion­al indem­ni­ty cov­er­age and indus­try norms

Delay/​EOT Clauses

• pro­vides for when con­sul­tants may claim exten­sions if delayed by oth­ers (e.g. by the client or their contractors/​consultants, author­i­ties, oth­er allowed events) and costs for delays

Sus­pen­sion rights

• allows the par­ties to sus­pend ser­vices with price adjust­ment in cer­tain circumstances

Ter­mi­na­tion with­out cause rights

• allows the client to ter­mi­nate for its con­ve­nience, sub­ject to cer­tain pay­ments being made to the consultant

Sub­con­sul­tants Clause

• reg­u­lates use of sub­con­sul­tants and who remains liable for those services/​deliverables

Par­ties’ Representatives

• reflects con­tract chain and for­mal com­mu­ni­ca­tion needs of projects

Mile­stone Pay­ments / Completion

• sup­ports stage-based billing and defines when ser­vices are complete 
• this allows for phased deliv­ery of the project

Spe­cif­ic war­ranties and indemnities

• These indem­ni­ties may include dam­age to prop­er­ty and per­son­al injury, and war­ranties for amongst oth­ers the stan­dard of care, fit for pur­pose deliv­er­ables and appro­pri­ate skill levels

Our Val­ue adds 

Work Health & Safety

• address specifics required on a con­struc­tion site eg who the prin­ci­pal con­trac­tor for work health and safe­ty pur­pos­es is

Spe­cif­ic legislation 

• Civ­il lia­bil­i­ty Act 2002 (NSW)
• Design and Build­ing Prac­ti­tion­ers Act 2020 (NSW)
• Stra­ta Schemes Man­age­ment Act 2015 (NSW)
• Build­ing and Con­struc­tion Indus­try Secu­ri­ty of Pay­ment Act 1999 (NSW)
• Build­ing Code of Aus­tralia and Nation­al Con­struc­tion Code

Bespoke spe­cial conditions 

• fixed pric­ing, vari­able pric­ing on rates or com­bi­na­tion of rates and fixed fee pricing
• stag­ing of the project and services
• for design ser­vices — process to deal with design approval, deliv­ery of designs/​reports, how errors are rec­ti­fied and priced/​paid
• for Reg­u­lat­ed Designs under the Design and Build­ing Prac­ti­tion­ers Act 2020
• lim­i­ta­tion of lia­bil­i­ty claus­es and caps, spe­cif­ic to each project and party
• liq­ui­dat­ed dam­ages for delays or late completion
• shift­ing risk and bal­anc­ing the risk between the head con­sul­tant, sub­con­sul­tant and client eg request­ing a high­er stan­dard of care
• licenc­ing, devel­op­ment con­sents and approvals provisions
• dis­pute res­o­lu­tion mechanisms

Want to read more on select­ing and edit­ing con­struc­tion con­tracts? Fol­low the link to our arti­cle on Con­struc­tion con­tracts are more than just a doc­u­ment — remove… | Swaab

Con­tact us to assist you with your con­struc­tion spe­cif­ic contracts.