Ending a building contract

A building contract comes to an end when the parties have done all things required of them under the contract. A building contract can be ended mutually by agreement or where one party to the contract breaches the contract and that breach gives the non-breaching party a right to terminate the contract. Whether or not the non-breaching party can terminate the contract will depend on the nature of the breach. For example, a breach of an essential term, a breach renouncing of the contract (otherwise known as repudiation) or a sufficiently serious breach of an intermediate term.

Owner is the defaulting party

Under the MBA ACT Lump Sum Residential Building Contract (ACTHBC01/2024), the builder may end the contract according to clause 29 (The Builder Ending this Contract) if the owner is defaulting party. Clause 29 requires the builder to give a written notice to the owner clearly identifying the default and allowing the owner 5 business days to rectify the default. If the default is not rectified in accordance with the notice, then the builder will be entitled to terminate the contract.

Suspension of Work

Clause 23 of the contract gives the builder the additional right to suspend work if the owner:

• fails to pay a progress payment;
• fails to provide written instructions regarding an owner requested variation;
• fails to provide necessary written instructions in a manner and time so as to reasonably avoid delay to the progress of the works;
• accesses the building site without consent of the builder; or
• assault or threatens the builder and its workers with violence.

The builder is required to issue to the owner a written notice of the suspension and to resume work within 10 business if the issue to which the suspension is related is rectified.

Dispute resolution

If a dispute or difference is raised during the course of construction, for instance the owner refuses to pay a cost variation, the parties must attempt to resolve the dispute in accordance with the procedure of dispute resolution (clause 30) under the contract. A party to the contract must provide a written notice to the other party to signify the starting of the dispute resolution process. If the dispute is not resolved within 20 business days of the notice being provided, either party has the right to take legal proceedings to determine the matter.

Great care must be taken to follow the contractual procedure for ending the contract, and the default to be relied upon should be clear and able to be proven. If a party purports to terminate a home building contract without a proper entitlement to do so, the other party can treat the termination as the terminating party renouncing their obligations under the contract, and terminate themself. The consequences of a wrongful termination are extreme. We strongly recommend that members do not end a building contract without seeking appropriate legal advice first.

If you need any advice in relation to ending a contract, please reach out to our Workplace Relations and Legal Team on (02) 6175 5900.