Last Updated on 11/03/2026 by Damin Murdock
Under Section 41 of the Domestic Building Contracts Act 1995 (Vic) (the Act), owners are granted a powerful statutory right to terminate a contract if a project runs significantly over time. However, as recent VCAT decisions demonstrate, this is not a “get out of jail free” card for owners. A purported termination that fails to meet strict evidentiary standards can backfire, resulting in the owner repudiating the contract and becoming liable for significant damages to the builder.
The Statutory Threshold: Section 41
An owner confers a right to terminate under Section 41 only if:
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The 1.5x Time Rule: The work has not been completed within one and a half times the period specified in the contract.
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Unforeseen Circumstances: The reason for the increased time (or cost) was something the builder could not have reasonably foreseen at the date the contract was made.
Important Exclusions: Under Section 41(2), variations requested by the owner, prime cost items, and provisional sums are excluded from this calculation to the extent that they caused the delay.
Dispute Analysis: The Burden of Proof
Two landmark cases illustrate the “failure points” for owners attempting to use this section.
1. The Evidence Trap: In Kubic Pty Ltd v Catanese [2011] VCAT 862, VCAT clarified that the intention of the owner is irrelevant if the factual requirements of the Act aren’t met.
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The Lesson: The burden of proof rests entirely on the owner. It is not enough to suggest “possible” reasons for delay in an affidavit. The owner must prove exactly what caused the delay. If the evidence fails to link the delay directly to unforeseen circumstances (rather than owner-driven changes), the notice of termination is legally ineffective.
2. The Repudiation Risk: Mardel Constructions Pty Ltd v Sinha [2009] VCAT 1532 highlights that Section 41 does not operate in a vacuum; it must be read alongside the building contract.
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The Conflict: The owner attempted to terminate for delay under Section 41 while they themselves were in “substantial breach” (specifically, non-payment of a lock-up stage claim).
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The Outcome: Because the owner’s own failure to pay caused the builder to suspend works, the owner had no right to terminate. By attempting to end the contract without a valid basis, the owner was found to have repudiated the contract.
Applied Lessons for Builders and Owners
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For Builders: Maintain rigorous site diaries. If an owner-requested variation or a provisional sum selection causes a delay, document it immediately. This documentation is your primary defense against a 1.5x time calculation.
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For Owners: Do not serve a Section 41 notice based on a “feeling” that the project is too slow. You must perform a forensic analysis of the schedule, subtracting all owner-caused delays, to see if the 1.5x threshold has actually been crossed.
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Check the Contract: Statutory rights and contractual rights often overlap. Ensure that you have complied with the notice and “opportunity to remedy” clauses in your specific HIA or MBA contract before relying on the Act.
How Leo Lawyers Can Help
Terminating a building contract is the “nuclear option” of construction law. At Leo Lawyers, we provide the applied legal judgment to determine if a termination is valid before the notice is served.
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."
