Written by In Perara v Bold Properties (Qld) Pty Ltd [2023] QDC 99, the District Court of Queensland considered whether price adjustment clauses in a home building contract was enforceable or not.
The owners entered into a contract with Bold Properties for the construction of a new home. The fixed price for the contract was the sum of $645,000. However, Special Condition 7 permitted the builder to increase the contract price at the builder’s “sole discretion”. It specified:
“In the event that commencement has not taken place by the anticipated start date… the builder reserves the right, at the builder’s sole discretion, to increase the contract price to the current base price of the house type, which is the subject of this contract and identified in the Contract Tender, to the builder’s current base price for that house type.”
2 months before completion, Bold Properties informed the owners that the price would increase by 8% on account of purported increases in construction costs. The owners sought a declaration that Special Condition 7 was void for uncertainty and constituted an unfair contract term under Australian Consumer Law.
Given there was no objective reference criteria by which the price change could be determined, the Court held that Special Condition 7 was void for uncertainty and unenforceable. The Court noted that there can be no concluded bargain if a “vital matter” has been left to be determined unilaterally by one of the parties. Special Condition 7 was also found to be an unfair contract term under Australian Consumer Law because it would cause a significant imbalance in the parties’ rights and obligations and was not reasonably necessary to protect the legitimate rights and interests of the builder.
This decision serves as a reminder for drafters of price variation clauses to ensure objectively ascertainable benchmarks exist for determining price increases. It also indicates that a contract term granting one party unilateral rights to adjust the contract price may constitute an unfair contract term under Australian Consumer Law.