FAQ's Principal Building Agreement

Clause 39

Termination – Cessation of works (Ref 39.007 / 39.0 )

Question 1 A tender has been awarded but site handover has been delayed by more than a year due to land claims in the area. The employer has significantly changed the building design in the interim and seeks to ‘cancel’ the existing contract before retendering the project. What compensation is due to the original contractor? Ref: P39.001

Answer Clause 39 would apply as the delay is out of the control of both parties. Under the circumstances the contractor has not established site or done building work – but has lost the anticipated profit.

Question 2 The owner of a small (one man close corporation) construction company has died –how is the contract terminated? Ref: P39.002

Answer Clause 39 describes the process where the works cease due to circumstances beyond the control of either party. Neither party ‘shall be liable to the other for any expense and loss resulting from this termination” Clause 39.4 and Clause 39.3 describes the process of clearing the site, preparing a final account and final payment certificate to allow the estate to be wound up.