Last Updated on 10/07/2026 by Damin Murdock and William Schulze
What is a Notional Contract
Section 18B of the Home Building Act 1989 (NSW) (HBA) implies statutory warranties into every contract with respect to residential building work. These statutory warranties include, but are not limited to, the contractor performing the works: with due care and skill; in accordance with plans and specifications; using suitable materials; within a reasonable period of time; in compliance with law. On its face, section 18B is contract-focused, and it assumes a contractual relationship exists between the person performing the works and giving the warranties and the person receiving the works and the benefits of the warranties. That is, the statutory warranties are implied into every contractual relationship for the performance of residential building work. However, what happens when there is no contractual relationship?
What Does a Notional Contract Do?
The “notional contract” concept is the statutory mechanism that overcomes the problem of successors in title rights (i.e., later owners suffering defects but not being parties to the original building contract). That mechanism sits primarily in s 18C of the HBA that entitles an “immediate successor in title” to the benefit of the statutory warranties as if the relevant builder had performed the work under a contract for that successor. In practice, s 18C extends the protection afforded by section 18B to people who may have purchased defective property without initially knowing about the defects.
What Does the Court say About Notional Contracts
As held in Owners Corporation Strata Plan 64757 v MJA Group Pty Ltd (2011) NSWCA 236 at [33] to [34], the Court explained that the statutory scheme operates by deeming relationships between a builder and a buyer exists where there is no evidence proving the relationship exists, so that warranty rights can arise and be enforced.
As held in The Owners – Strata Plan No 66375 v King (2018) NSWCA 170 at [390], the Court of Appeal reaffirmed that where there is an actual contract between developer and builder, s 18C requires the creation of a notional contract between the developer and the owner’s corporation on the same terms as the actual contract between the developer and the builder. This means one can only infer a notional contract where there is an actual contract in place that does not already include the relevant protections.
This matters because s 18BA ties the warranty content to “plans and specifications set out in the contract”, so identifying the notional contract’s terms can shape how the notional contract applies. This means the notional contract terms apply specifically to the actual plans of the building contract.
Time Limits Under for Notional Contracts
Finally, notional contract analysis often intersects with limitation issues under s 18E, because once the Act deems a contractual relationship for warranty purposes, courts must also apply the statutory time limits to that deemed relationship in a coherent way. Under section 18E, a person who owns a house or property suffering from defects may only bring legal action against the builder 2 years after the defect was discovered for minor defects and 6 years after the defects were uncovered for major defects. This limit applies to notional contracts and actual contracts alike.
Conclusion
At Leo Lawyers, we understand that disputes about statutory warranties and “notional contracts” under the HBA can have serious consequences for developers, builders, owner’s corporations and homeowners alike, particularly where liability is alleged despite an absence of direct contractual privity, and often require swift, strategic legal action.
Whether you are seeking to enforce or defend statutory warranty claims under s 18B, navigate the operation of s 18C’s notional contract mechanism, or assess limitation issues under s 18E, feel free to contact Damin Murdock at Leo Lawyers via our website, on (02) 8201 0051 or at office@leolawyers.com.au. Further, if you liked this article, please subscribe to our newsletter via our Website, and subscribe to our YouTube, LinkedIn, Facebook and Instagram. If you liked this article or video, please also give us a favorable Google review.
DISCLAIMER: This is not legal advice and is general information only. You should not rely upon the information contained in this article and if you require specific legal advice, please contact us.
Damin Murdock (J.D | LL.M | BACS - Finance) has over 17 years of experience as a commercial lawyer. He helps businesses navigate construction and technology law. Damin has held several big leadership roles, including serving as a director of a national law firm and the Chief Legal Officer for Lawpath.
He has personally helped more than 2,000 startups and small businesses. With over 300 five-star reviews, his clients clearly value his practical advice and simple way of explaining things. Damin has also hosted over 100 webinars that thousands of people have watched to get reliable legal help.
