Understanding Contract Price Increases and Your Legal Rights

Right to Review and Approve Variations Before Implementation

If your builder proposes a variation that will result in a price increase, you have the legal right to review the variation documentation and approve or reject the proposed changes. This right is fundamental to protecting homeowners from unauthorised cost blowouts.

When reviewing a proposed variation, carefully assess whether the changes are genuinely necessary, whether the scope of additional work justifies the proposed price increase, and whether the increase is calculated in accordance with the contract terms. Your contract should specify the methodology for pricing variations—such as schedule of rates, cost-plus arrangements, or fixed-price variations. Compare the builder's variation quote against independent quotes from other contractors to ensure the pricing is reasonable and market-competitive before approving significant cost increases.

You are not obligated to approve any variation that is not supported by the contract terms or that imposes unreasonable costs. If the builder pressures you to approve a variation without adequate documentation or justification, you have the right to refuse. Never agree to price increases that are not properly documented in writing and signed by both parties.

Under NSW, Victorian, and Queensland building legislation, variation agreements must be in writing and signed by both the homeowner and the builder. Verbal variation agreements are generally not enforceable, and builders cannot claim additional payment for variations that were not properly authorised.

Right to Dispute Unjustified Price Increases

If you believe a price increase proposed by your builder is not supported by the contract terms, you have the legal right to dispute the increase. This right protects homeowners from builders attempting to impose unjustified cost increases by misinterpreting or misapplying contract clauses.

To effectively dispute a price increase, carefully review the contract provisions related to price adjustments—including escalation clauses, force majeure clauses, and variation clauses. Identify the specific clause the builder is relying upon and assess whether the conditions for invoking that clause have been satisfied. Check whether the builder has provided adequate supporting evidence and followed the required contractual processes. Request itemised breakdowns showing how the builder calculated the price increase, including supplier invoices, material cost comparisons, and labour rate justifications to verify the claimed cost escalation is legitimate.

If the proposed price increase is not permitted under the contract, notify your builder in writing that you dispute the increase and explain the legal basis for your dispute. Request that the builder provide detailed documentation supporting their claimed entitlement to the price increase. Maintain copies of all correspondence for your records.

If the builder insists on the price increase despite your dispute, seek legal advice promptly. An experienced construction lawyer can assess whether the builder's claim is valid and advise you on the best strategy for resolving the dispute—whether through negotiation, formal dispute resolution processes, or tribunal or court proceedings if necessary.

Obligation to Communicate Promptly and Professionally

When your builder proposes a variation or price increase, you have an obligation to maintain open communication and provide timely responses. While you are entitled to take reasonable time to review proposed changes and seek advice, unreasonable delays in responding may impact the project timeline and potentially result in additional costs.

If you need additional time to review the proposed variation, obtain independent costings, or seek legal advice, communicate this to your builder promptly. Explain that you are reviewing the proposal and will respond within a specified timeframe. Most builders will accommodate reasonable requests for additional time, particularly for complex or high-value variations. Specify a realistic response deadline when requesting additional review time—typically 7-14 business days for complex variations—to demonstrate good faith while protecting your right to proper assessment.

Maintain professional and courteous communication, even when disputing price increases. Document all communications in writing—whether by email or formal letters—and keep copies for your records. Clear written communication creates an evidence trail that protects both parties and facilitates dispute resolution if disagreements escalate.

Obligation to Pay for Approved Variations and Legitimate Price Increases

When you have properly approved a variation or when a price increase is legitimately supported by the contract terms, you have a legal obligation to fulfill your financial commitments. This includes paying progress claims and final payments in accordance with the amended contract price and the payment schedule.

Your building contract will specify the payment terms and schedule, including the timing and amount of progress payments. When a variation increases the contract price, the builder may adjust the payment schedule accordingly. Review any revised payment schedule carefully to ensure it reflects the approved variation amount and complies with the contract's payment provisions.

Under NSW, Victorian, and Queensland building legislation, progress payments must be made within specified timeframes after the builder issues a valid payment claim. Failure to pay legitimate progress payments on time may constitute a breach of contract and could expose you to legal action by the builder, including potential suspension of works or debt recovery proceedings.

However, you are not obligated to pay for variations or price increases that have not been properly approved in writing or that are not supported by the contract terms. If you dispute whether a price increase is justified, you may withhold payment for the disputed amount while continuing to pay undisputed amounts. Seek legal advice before withholding payment to ensure you comply with your contractual obligations and avoid potential breach of contract claims. Notify the builder in writing of the specific amount you are withholding, the contractual basis for your dispute, and your willingness to pay the disputed amount if the builder provides adequate supporting evidence.