Building contracts: what to check before you sign

What makes a building contract binding?

A contract is an agreement the law will enforce. In general, it needs an offer, acceptance of that offer, something given in exchange (usually money for work), an intention to be legally bound and enough certainty about the key terms. A quote accepted by text message can be a binding contract, and so can a handshake.

That does not make a verbal deal a good idea. Security of payment laws can apply even where a contract is verbal, but you still have to prove what was agreed. For residential work, many states also require a written contract above a set value, and a builder who does not comply can lose rights or face penalties. Our guide to security of payment explains how payment rights work in each state.

The law also limits what a contract can say. Statutory warranties on home building work generally cannot be signed away. Under the Australian Consumer Law, unfair terms in standard form contracts with consumers and small businesses are prohibited from 9 November 2023, and the small business test now covers businesses with fewer than 100 employees or annual turnover under $10 million. That can include many subcontractors signing a head contractor’s standard subcontract.

Which standard form contract should you use?

Standard forms are popular because the terms are tested, widely understood and balanced to a known degree. The main families in Australia are:

• AS 4000:2025 General conditions of contract. Standards Australia published the updated edition in June 2025, replacing the long-running 1997 version. It is widely used on commercial and civil work where the principal provides the design.
• AS 4902 and AS 4905. AS 4902 covers design and construct work and AS 4905 covers minor works. Standards Australia has said AS 4902 will also be revised, so check which edition you are being offered.
• Industry association forms. HIA and Master Builders associations publish residential and commercial contracts written for each state’s home building laws, such as new homes and renovation contracts, plus subcontract forms.
• Bespoke contracts. Large principals and government agencies often use their own forms or heavily amended standard forms.

Read the special conditions and any annexure, not just the familiar general conditions. Amendments in the special conditions often shift risk, such as latent conditions, design responsibility or time bars, back onto the contractor.

What do home building laws require in each state?

Each state has its own home building contract law. These rules protect owners, but they also bind builders and trades. Some verified examples:

• NSW (Home Building Act 1989). Residential building work worth between $5,000 and $20,000 needs a small works contract, and work over $20,000 needs a large job contract, with all amounts including GST. You cannot ask for a deposit of more than 10%. Large job contracts must state a cooling-off period of 5 clear business days, and the owner must have the Consumer Building Guide published by the Building Commission NSW.
• Victoria (Domestic Building Contracts Act 1995). A major domestic building contract is needed for most work worth more than $10,000. Deposits are capped at 10% for contracts under $20,000 and 5% for contracts of $20,000 or more. Owners generally have five business days to cool off after receiving a signed copy, unless an exception applies, such as having had a lawyer check the contract first.
• Queensland (QBCC Act, Schedule 1B). Regulated domestic building contracts over $3,300 must be in writing. The QBCC caps deposits at 10% for level 1 contracts (under $20,000) and 5% for level 2 contracts ($20,000 or more), with some exceptions for offsite work. Owners have a five business day cooling-off period, and an owner who withdraws must pay $100 plus reasonable out-of-pocket expenses.
• Western Australia (Home Building Contracts Act 1991). The Act covers home building contracts between $7,500 and $500,000. The maximum deposit is 6.5% of the contract price, and the builder must give the owner the prescribed notice before the contract is signed.

South Australia, Tasmania, the ACT and the Northern Territory have their own rules on written contracts, deposits and notices, so check with the regulator where the work is done.

Victoria’s rules are changing. The Domestic Building Contracts Amendment Act 2025 passed in September 2025, and draft regulations released in August 2026 propose fixing the major domestic building contract threshold at $20,000. Check Consumer Affairs Victoria for the commencement date before you rely on the figures above.

How should the scope and price be described?

The scope is the heart of the contract. Every item of work should be traceable to the plans, specifications or a schedule of inclusions, with exclusions listed just as clearly. “Allowances” and vague descriptions such as “kitchen to suit” are a common source of dispute.

On price, check:

• The pricing basis, such as fixed price, cost plus or schedule of rates, and what can change it.
• Provisional sums and prime cost items, how they are described, and how the price is adjusted when the actual cost is known.
• The payment schedule, including progress stages, claim dates and due dates.
• GST, and whether the price includes it.
• Insurance and other on-costs, such as home warranty cover, that must be built into the price.

Our guide to construction insurance explains what contract works, public liability and professional indemnity cover do.

How are variations handled?

A variation is any change to the work in the contract. Good contracts say who can direct a variation, how it must be documented, how it is priced and how it affects time. Home building laws add formal rules. In NSW, any agreement to vary a home building contract must be in writing and signed by both the owner and the contractor, and in Queensland a variation must be agreed in writing, in a variation document, before the variation work starts.

The practical rules are simple: no written, priced and signed variation, no extra work, unless the contract allows otherwise. Check for time limits on notifying variations and claims, because a missed notice can cost you the claim. Our guide to variations and extensions of time covers how to claim them properly.

What should the contract say about time and delays?

Look for the date for practical completion (or the number of working days), what counts as a working day, and how rain, public holidays and delays caused by the owner are treated.

Then check:

• Extensions of time. Which events entitle you to more time, the notice you must give and the deadline for giving it.
• Liquidated damages. The amount per day or week you must pay for late completion, and whether it is a genuine pre-estimate of loss.
• Delay costs. Whether you can claim money, not just time, for delays the other party causes.
• Suspension and termination. When either party may suspend work or end the contract, and the steps they must follow first.

How are defects, retentions and security dealt with?

Most contracts set a defects liability period after practical completion, during which you must return to fix defects. This is separate from the statutory warranties on home building work, which usually last longer. Our guide to statutory warranties and home warranty insurance explains those periods.

On commercial and subcontract work, also check retentions, bank guarantees or other security: how much is held, when it is released, and the conditions for the other party to use it. In Queensland, eligible cash retentions on larger contracts must be held in a retention trust account.

How are disputes resolved?

Look for a dispute resolution clause that sets out the steps, such as a notice of dispute, a meeting between senior people, and then mediation, expert determination, arbitration or court. Check any time limits, because some clauses require a notice within days.

For home building disputes, the state regime usually decides the path. NSW, Victoria and Queensland, for example, each have a state tribunal (NCAT, VCAT and QCAT) that hears many building disputes, often after a conciliation or dispute resolution step through the regulator. A contract clause cannot remove rights the home building laws give. Payment disputes may also go to adjudication under security of payment laws.

Checklist: before you sign a building contract

• Identify the parties correctly, including company names, ABNs and licence numbers.
• Confirm the form, its edition, and every special condition or amendment.
• Check the scope, plans, specifications, inclusions and exclusions.
• Check the price basis, provisional sums, prime cost items and GST.
• Check the deposit against your state’s cap and any insurance that must be in place first.
• Check the cooling-off notice and consumer guide for home building work.
• Read the variation, extension of time and notice clauses, and diarise every time bar.
• Check liquidated damages, defects liability, retentions and security.
• Check insurance and indemnity clauses against your actual policies.
• Read the dispute resolution clause and know the first step.
• Get legal advice if you do not understand a clause or the risk it shifts to you.

Frequently asked questions