In a building contract, parties are burdened with a number of obligations. These obligations will be classified as either conditions (essential terms) or warranties (non-essential terms). While a breach of a contractual condition will, subject to the terms of the contract, entitle the innocent party to terminate the contract, breach of a warranty will, as a rule, only give rise to a claim for damages by the innocent party. A warranty may be an express term of the contract or implied into the contract. Warranties may be implied either by statute (Competition and Consumer Act 2010 (Cth); the States' various Sale of Goods Acts and Domestic/Residential Building Acts) or by the common law.

There are three standard warranties to be provided by the
contractor that, if not expressly stated, will be implied into all forms of building contracts (being contracts for work and materials):

  • that the materials used will be of good quality;
  • that the work will be carried out in a good and workmanlike manner; and
  • that the materials used and the completed works themselves will be reasonably fit the purpose for which they are required.

As a rule, these warranties are expressed as explicit terms in the building contract.

In a standard format
design and construct contract, the contractor will warrant to the principal that the contractor:

  • at all times will be suitably qualified and experienced, and will exercise due skill, care and diligence in the execution and completion of the work under the contract;
  • has examined any preliminary design included in the principal's project requirements and that the preliminary design is suitable, appropriate and adequate for the purpose stated in the principal's project requirements;
  • will carry out and complete the contractor's design obligations (often a defined term in the contract meaning all tasks necessary to design and specify the works) to comply with the principal's project requirements; and
  • will carry out and complete the works in accordance with the design documents so that the works, when completed, will be fit for their stated purpose; and comply with all the requirements of the contract.

A contractor may also be required to warrant that it will cooperate with the principal or principal's representatives or employees and provide all reasonable assistance throughout the life of the project to develop the design of the works.

These design warranties will typically be expressed to operate even though:

  • some of the design work may have been carried out by or on behalf of the principal or any of the principal's employees and included in any of the design documentation provided by the principal; and
  • the principal or principal's representatives may review, comment or give a direction on the design documents.

The primary obligation of the contractor is that the works are fit for their intended purpose.

For further discussion on fitness for purpose warranties, see
Chapter 24 - Fitness for purpose.

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