HB 1402000

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Administration manual for AS 40001997 General conditions of contract

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HB 1402000
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Administration Manual for AS 40001997 General conditions of contract

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John L Pilley LLB, DipCommLaw, FIAMA Barrister and Solicitor of the Supreme Courts of Victoria and Tasmania

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All rights are reserved. No part of this work may be reproduced or copied in any form or by any means, electronic or mechanical, including photocopying, without the written permission of the publisher.

Published by Standards Australia International Ltd, GPO Box 5420, Sydney, NSW 2001, Australia Design and typesetting by Write Result, 22 Firwood Trail, Woodvale WA 6026 email: write@iinet.net.au

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ISBN 0 7337 3600 9 Australian Standard is a registered trade mark Copyright Standards Australia International

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HB 1401999: Administration Manual for AS 40001997

Preface

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AS 40001997 in many respects breaks new ground in the way that general conditions of contract are prepared by Standards Australia. AS 21241992 its predecessors and the suite of contracts derived from them, have traditionally not only set out the obligations of the parties to each other, i.e. what each party is to do under the contract but also how they are to do it. This no doubt is due to having as their antecedent, contract conditions developed originally by the Institution of Engineers Australia in the mid-1920s. The OB/3 Committee responsible for the preparation of general conditions of contract, has broken new ground with AS 40001997 by seeking to remove from the contract conditions themselves, much of the administrative procedure concerning a project governed by that set of contract conditions. One immediate benefit is that AS 40001997 has less than half the words than contained in AS 21241992. This also should make administration of the contract easier especially as the options and alternatives contained in AS 21241992 are now transferred to the Annexure which in itself makes the Annexure a far more user-friendly document. This fundamental change of style has made this Handbook an important supplementary tool to AS 40001997. Consequently whilst this Manual is titled a Handbook, it is far more extensive and provides much more guidance to the users of AS 40001997 than Handbooks prepared for earlier forms of Standards Australia's contract conditions. Acknowledgements I must sincerely thank Brian Farmer of Capital Insight, Sydney, the Chairman of the OB/3 Committee who has had the thankless task of proofreading and correcting the earlier drafts of this Manual. His suggestions and advice have contributed greatly to the substantial improvements to the Manual compared with my earlier efforts. I would like particularly to acknowledge the unflagging assistance of my secretaries, Mary Acutt and especially Kelley Lorback, who bore the burden of typing this substantial manual. I also express my gratitude to Nigel Shaw of Write Result of Perth, WA who typeset the document and provided considerable assistance in improving its layout and readability. Finally, I would like to thank members of the OB/3 Committee for their helpful suggestions and comments and particularly to Susanne Gerstmyer of Standards Australia who had the responsibility to ensure that the Manual was produced and published. John L Pilley June 2000

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HB 1402000:Administration Manual for AS 40001997

Contents

Preface

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PART 1: General
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1 When and how to use AS 40001997

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10

1
1 2 3 3 4 5 5 5 6 6

2 The background to AS 40001997

2.1 2.2

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The head contracts in the AS 4000 suite of contracts The subcontracts in the AS 4000 suite of contracts Drafting principles Comparison with AS 2124 suite of contracts How to use AS 40001997 and this manual Definitions Clauses, subclauses and paragraphs and and or Items Drafting style and set out

7
7 9

General Style and format of AS 40001997

3 The Contract documents

3.1 3.2 3.3 3.4 3.5

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10
10 14 15 16 17

General information Formal instrument of agreement Documents which do not form part of the Contract Optional and alternative clauses Forms in Part 4 relevant to this Chapter 3

4 The role and functions of the Superintendent under AS 40001997

4.1 4.2 4.3 4.4 4.5 General The Superintendent as certifier The Superintendent as assessor The Superintendents pricing and valuing functions Summary of functions

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18 20 22 22 23

5 The functions of the Principal under AS 40001997

5.1 5.2 General Summary of functions

29
29 29

6 The functions of the Contractor under AS 40001997

6.1 6.2 General Summary of functions

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38 38

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HB 1402000:Administration Manual for AS 40001997

PART 2: Pre-contractual guidance

7 Completion of the Annexure Parts A, B and C to AS 40001997 53
53 54 55 57 79 82 83 7.1 7.2 7.3 7.4 7.5 7.6 7.7
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PART 3: Guidance notes on clauses grouped into topics

8 The parties
8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 The Principal The Contractor Contractors employees and subcontractors Selected subcontractors Novation The Superintendent Superintendents Representative Forms in Part 4 relevant to this Chapter 8

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Introduction Annexure Part A Completion of Annexure Part A Specific guidance for completion of Annexure Part A Separable portions: Annexure Part A Annexure Part B to AS 40001997 Annexure Part C Approved form of unconditional undertaking

84
84 85 86 89 90 91 95 96

9 Formation of the Contract

9.1 9.2 9.3 9.4 9.5

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97 100 101 102 103

10 Contract formalities
10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15

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Creation of the Contract Provisional sums Separable portions Waiver of conditions Forms in Part 4 relevant to this Chapter 9

104
104 105 123 129 129 132 135 135 136 141 143 144 148 156 158

Interpretation and construction of Contract Definitions Provisions concerning the construction of the Contract Formal Contract documentation Interpretation of the Contract Supply of documents Confidentiality Media releases Approval of subcontractors Intellectual property rights Assignment Security Insurance Service of notices Forms in Part 4 relevant to this Chapter 10

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HB 1402000:Administration Manual for AS 40001997

11 Start of WUC (Work under the Contract)

11.1 11.2 11.3 11.4 11.5 11.6 11.7 11.8 The site Working hours and working days Legislative requirements Protection Appointment of representatives Setting out Insurances Forms in Part 4 relevant to this Chapter 11

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160 162 163 166 167 170 171 171

12 Duration of WUC (Work under the Contract)

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13 Progress of WUC (Work under the Contract)

13.1 13.2 13.3 13.4 13.5 13.6 13.7 13.8 13.9 13.10 13.11 Interpretation and construction Working hours Programming Suspension of WUC EOT Liquidated damages Bonus Delay damages Substantial breaches relevant to progress of WUC Miscellaneous provisions relevant to the progress of WUC Forms in Part 4 relevant to this Chapter 13

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12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10 12.11 12.12 12.13 12.14 12.15 12.16 12.17 12.18

Nature of the Contract Care of the work and protection of people and property Directions The role and functions of the Superintendent Legislative requirements Discrepancies in documents Supply of documents Setting out the Works Materials, labour and construction plant Access by Principal and others Discovery of minerals, fossils, relics, etc. Latent conditions Quality of work Defective work Examination and testing Cleaning up Insurance claims Forms in Part 4 relevant to this Chapter 12

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173 178 187 188 189 192 194 197 199 203 205 206 209 210 213 217 219 220

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223 227 228 233 237 247 250 252 255 256 257

14 Variations to WUC (Work under the Contract)

14.1 14.2 14.3 14.4 14.5 14.6 14.7 Variations generally Directing variations Proposed variations Variations for Contractors own convenience Deemed variations Pricing of variations Forms in Part 4 relevant to this Chapter 14

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259 260 262 264 265 265 268

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15 Payments, claims and certificates

15.1 15.2 15.3 15.4 15.5 15.6 15.7 15.8 15.9 15.10 15.11

269
269 270 290 292 300 307 309 314 320 322 322

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16 Security of payment
16.1 16.2 16.3

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Provisions relevant to payment claims, payments and payment certificates Assessments and certificates by the Superintendent Moneys due and moneys due and payable General obligation as to payment Calculation of the payment Unfixed plant and materials Final payment claim and final certificate Notification of claims Miscellaneous payment provisions Final payment Forms in Part 4 relevant to this Chapter 15

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324 328 329

Specific provisions Additional provisions relevant to security of payment Forms in Part 4 relevant to this Chapter 16

17 Completion
17.1 17.2 17.3 17.4

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330 336 339 343

18 Termination
18.1 18.2 18.3 18.4 18.5 18.6 18.7

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Practical completion Defects liability Final payment claim and final certificate Forms in Part 4 relevant to this Chapter 17

344
344 345 356 359 360 362 364

19 Dispute resolution
19.1 19.2 19.3 19.4 19.5 19.6

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General Default of the Contractor Default by the Principal Effects of termination by either party Insolvency of either party Termination by frustration of the Contract Forms in Part 4 relevant to this Chapter 18

365
365 366 368 369 370 370

PART 4: Practical administration

Section 1:Flowcharts Section 2:Forms
20.1 20.2 20.3

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General The notice of dispute Settlement of the dispute Arbitration of the dispute Right to take other proceedings Forms in Part 4 relevant to this Chapter 19

371 405
405 405 405

General Forms Defined terms

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HB 1402000:Administration Manual for AS 40001997

PART 5: Appendices
1 Table of comparative clauses between AS 21241992 and AS 40001997 2 Comparative analysis of AS 40001997 with AS 21241992 3 Special user requirements A1 A7 A40

PART 6: References
Clauses and Items
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Statutes Legal cases Texts referred to

INDEX

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R1 R12 R14 R13

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HB 1402000: Administration Manual for AS 40001997

PART 1

CHAPTER 1

When and how to use AS 40001997

1.1
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The head contracts in the AS 4000 suite of contracts

a) Construct only contracts

AS 40001997 is intended for use as General conditions of contract primarily for construct only projects of a major nature. AS 40001997 can be used when payment is to be made by way of lump sum or by way of a schedule of rates or a combination of both. AS 40001997 has provision for a bill of quantities which may be used as part of the Contract (Alternative 1 of subclause 2.2) or not as part of the Contract (Alternative 2 of subclause 2.2). Alternative 2 of subclause 2.2 also provides that a bill of quantities not forming part of the Contract may nevertheless be priced if that is required. AS 40001997 also provides for selected contractors (see subclauses 9.3 and 9.4) and for novation by the Principal of a prior subcontract to the Contractor (see subclause 9.4). AS 40001997 requires administration by a Principal-appointed Superintendent who may appoint Superintendents Representatives.

b) Design and construct contracts

AS 40001997 is generally not suitable for use where the project requires the Contractor to both design and construct the project. AS 49022000 General conditions of contract for design and construct is the appropriate Standard. That Standard caters for situations where the Principal provides only a brief (in that Standard called the Principals project requirements), with or without a preliminary design.

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c) Supply of equipment, etc., contracts

AS 40001997 is generally not suitable for the supply and installation of major items of equipment. If this delivery system is required, Australian Standard AS 49102000 General conditions of contract for the supply of equipment with installation should be used.* AS 40001997 is not suitable for the supply of equipment without installation. If this delivery system is required, Australian Standard AS 49112000 General conditions of contract for the supply of equipment without installation should be used. Where delivery or supply of equipment or goods is required on a long term basis, AS 49122000 General conditions of contract for periodic supply of goods should be used.

* See note (1) on page 6 of this Manual. See note (2) on page 6 of this Manual.

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Section 1.1: The head contracts in the AS 4000 suite of contracts

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HB 140-2000 (Reference Use Only), Administration manual for AS 4000-1997 General conditions of contract

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