Residential Building Contract: What to Understand Before You Sign
Most clients sign a building contract with limited scrutiny. The clauses you overlook at signing are the ones that matter most when something goes wrong.
The clauses in a building contract that get the least scrutiny at signing are consistently the ones that matter most once something goes wrong.
Fixed price versus cost plus
Fixed price contracts provide the most client protection — the builder agrees to complete the defined scope for a fixed price, and cost overruns are their risk subject to legitimate variations. Cost plus contracts transfer all cost risk to you and the final cost is unknown at signing.
The clauses that matter most
- Commencement date — without one, there is no enforceable programme
- Liquidated damages — your financial remedy if the builder is late. $50 per day is inadequate on almost any residential project.
- Variations clause — no variation work should proceed without a signed variation order
- Payment schedule — tied to physical milestones, not calendar dates
- Defects liability period — standard is 12 months after practical completion
- Prime Cost Items — all listed with realistic allowances, not blank or zero
Before you sign
Do not sign until a full specification is attached, all Prime Cost Items are itemised, a commencement date is confirmed, and the QBCC licence is verified. For contracts above $500,000, consider a solicitor review.
This covers the clauses common to most residential contracts, but the actual template in front of you — ABIC, HIA or Master Builders — changes some of the specifics. See ABIC vs HIA vs Master Builders contracts explained for which one you are likely looking at and what genuinely differs between them.
Frequently asked questions
What's the difference between fixed price and cost-plus, in practice?
Fixed price puts cost-overrun risk on the builder; cost-plus transfers that risk to you, with the final cost genuinely unknown at signing.
Which single clause causes the most disputes?
Liquidated damages, usually — a token daily rate provides almost no real financial remedy if the builder runs late on most residential projects.
Not sure the contract reflects what you agreed to?
Tender Support gets you to a clean, comparable position before signature.
So you're not the one reading the fine print alone, after the fact.