Last Updated on 02/03/2026 by Damin Murdock
Are you a builder who has experienced an owner continuously requesting variations to the contract, leading to unexpected increases in the contract price? If so, you should be aware of a specific legal remedy for and risks under the Domestic Building Contracts Act 1995 (Vic) (the Act).
While variations are common, the Act contains provisions to protect owners from “deliberate underquoting.” Under Section 16(1), it is an offence for a builder to demand or retain money in excess of the contract price unless specifically authorised by the Act.
When Can a Contract Price Increase?
If you have a fixed-fee contract, the price can only be validly increased on specific grounds:
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Requested Variations: Sections 37-39 (Builder or Owner requested).
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Prime Cost/Provisional Sums: Allowances included in the contract.
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Unforeseen Footings Work: Additional work required under Section 30.
The Section 41 Termination Risk
Section 41 confers a right on owners to terminate the contract if the price increases by 15% or more, provided the cost was not “reasonably foreseeable” by the builder when the contract was made. Notably, owner-requested variations and prime cost items are excluded from this 15% calculation.
Dispute Analysis: What is a “Reasonable Price”?
If an owner ends a contract under Section 41, Section 41(5) states the builder is entitled to a “reasonable price” for the work carried out to that date.
In the case of Verve Constructions Pty Ltd v Visser [2012] VCAT 284, the Tribunal provided critical clarity on this term:
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Fair Value: Deputy President Lulham interpreted “reasonable price” as the fair value of work performed, not necessarily the contract rate.
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The Price Ceiling: Section 41(6) puts a ceiling on recovery. You cannot recover more than you would have been entitled to under the original contract.
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Market Rates: In Verve, the Tribunal applied market rates dated to the time of the original tender, rather than the midpoint of construction, which can significantly impact a builder’s recovery in a rising market.
Applied Lessons for Builders
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Foreseeability is Key: If a cost could have been reasonably foreseen at the date of the contract, an increase beyond 15% puts you at risk of total contract termination.
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Statutory Right: Termination under Section 41 is a statutory right; as noted in Verve, no claim in damages flows from this type of termination.
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Vary in Writing: Always ensure variations are authorized under Sections 37-39 to ensure they are excluded from the 15% “Termination Zone.
How Leo Lawyers Can Help
Navigating the Domestic Building Contracts Act requires a blend of technical construction knowledge and applied legal judgment. At Leo Lawyers, we assist builders in managing variations and defending VCAT claims involving Section 41 terminations.
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 favourable 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) is a seasoned commercial lawyer with over 17 years of experience, recognised as a trusted legal advisor and courtroom advocate who has built a formidable reputation for delivering strategic legal solutions across corporate, commercial, construction, and technology law. He has held senior leadership positions, including director of a national Australian law firm, principal lawyer of MurdockCheng Legal Practice, and Chief Legal Officer of Lawpath, Australia's largest legal technology platform. Throughout his career, Damin has personally advised more than 2,000 startups and SMEs, earning over 300 five-star reviews from satisfied clients who value his clear communication, commercial pragmatism, and in-depth legal knowledge. As an established legal thought leader, he has hosted over 100 webinars and legal videos that have attracted tens of thousands of views, reinforcing his trusted authority in both legal and business communities."
