Victorian Consolidated Legislation

Domestic Building Contracts Act 1995 - SECT 15

Restrictions concerning cost escalation clauses

15. Restrictions concerning cost escalation clauses



(1) In this section a cost escalation clause means a provision in a contract
under which the contract price may be increased to reflect increased costs of
labour or materials or increased costs caused by delays in carrying out the
work to be carried out under the contract, but does not include a provision
that enables the contract price to increase to reflect-

   (a)  unforeseeable cost increases resulting from changes to government
        taxes or charges7; or

   (b)  prime cost items or provisional sums.

(2) A builder must not enter into a domestic building contract that contains a
cost escalation clause unless-

   (a)  the contract price is more than $500 000 (or any higher amount fixed
        by the regulations); or

   (b)  the clause is in a form approved by the Director and complies with any
        relevant requirements set out in the regulations.

Penalty: 100 penalty units.

(3) A cost escalation clause in a domestic building contract is void unless-

   (a)  before the contract was entered into, the builder gave the building
        owner a notice in a form approved by the Director explaining the
        effect of the clause; and

   (b)  the building owner places her, his or its signature or seal or
        initials next to the clause.