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Construction
Law 2022
New Zealand: Law & Practice
Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro
Anderson Lloyd

practiceguides.chambers.com
 NEW ZEALAND
Law and Practice
North Island
Auckland

New Zealand
Contributed by: Wellington
Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro
Anderson Lloyd see p.20 South Island

CONTENTS
1. General p.3 5.3 Remedies in the Event of Delays p.14
1.1 Governing Law p.3 5.4 Extension of Time p.14
1.2 Standard Contracts p.3 5.5 Force Majeure p.15
1.3 COVID-19 p.4 5.6 Unforeseen Circumstances p.15

2. Parties p.5 6. Liability p.15

2.1 The Employer p.5 6.1 Exclusion of Liability p.15
2.2 The Contractor p.6 6.2 Wilful Misconduct and Gross Negligence p.15
2.3 The Subcontractors p.7 6.3 Limitation of Liability p.15
2.4 The Financiers p.7
7. Risk, Insurance and Securities p.15
3. Works p.8 7.1 Indemnities p.15
3.1 Scope p.8 7.2 Guarantees p.16
3.2 Variations p.9 7.3 Insurance p.16
3.3 Design p.9 7.4 Insolvency p.16
3.4 Construction p.9 7.5 Risk Sharing p.16
3.5 Site Access p.10
8. Contract Administration and Claims p.16
3.6 Permits p.10
8.1 Personnel p.16
3.7 Maintenance p.11
8.2 Subcontracting p.17
3.8 Other Functions p.11
8.3 Intellectual Property p.17
3.9 Tests p.11
3.10 Completion, Takeover, Delivery p.11 9. Remedies and Damages p.17
3.11 Defects and Defects Liability Period p.12 9.1 Remedies p.17
9.2 Restricting Remedies p.17
4. Price p.12
9.3 Sole Remedy Clauses p.17
4.1 Contract Price p.12
9.4 Excluded Damages p.18
4.2 Payment p.13
9.5 Retention and Suspension Rights p.18
4.3 Invoicing p.13
10. Dispute Resolution p.18
5. Time p.13
10.1 Regular Dispute Resolution p.18
5.1 Planning, Programme p.13
10.2 Alternative Dispute Resolution p.18
5.2 Delays p.14

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1. GENERAL controls how this standard is measured and

enforced.
1.1 Governing Law
Legal Framework Resource Management Act 1991
The principal laws governing New Zealand’s This act promotes the sustainable management
construction industry are found in statutes and of natural and physical resources. A construc-
common law authorities. Common law authori- tion project needs Resource Consent to dem-
ties from similar overseas jurisdictions are not onstrate the work does not adversely impact the
binding in New Zealand, but are often influential. environment. The act regulates this process and
requirement.
Key Statutes
Building Act 2004 1.2 Standard Contracts
This is the primary legislation governing the There are no mandatory contracts for construc-
building industry. Its stated purpose is to provide tion projects in New Zealand. However, there are
that people can use buildings safely and without common and standard form New Zealand con-
endangering their health. This act: tracts for construction and for key construction
consultants.
• provides the legal framework for the building
code, which sets out the standard required The New Zealand Standard (NZS) Series of
for buildings in New Zealand, and guidance Construction Contracts
for how to meet those standards; and The two most common standard form contracts
• contains minimum mandatory warranties for for construction are provided by Standards New
building work in relation to household units. Zealand.

Construction Contracts Act 2002 NZS 3910:2013 – Conditions of contract for

This act is predominantly concerned with regular building and civil engineering – Construction
and timely payments between the parties to a This is a “construct only” contract where the
construction contract, given the importance of employer provides the design and the contractor
cash flow for contractors. This act: is responsible for the construction component
of the project.
• governs the requirements for parties holding
retentions; NZS 3915:2005, which is a similar “construct
• provides for a fast-track dispute resolution only” contract, is sometimes used instead of
mechanism (adjudication) for construction NZS 3910:2013 on projects where there is no
disputes and claims; “engineer” (see 2.1 The Employer).
• prohibits “pay when paid” or “pay if paid”
terms in construction contracts; and NZS 3916:2013 – Conditions of contract for
• provides a default payment process of pay- building and civil engineering – Design and
ment claims and payment schedules for construct
construction contracts. This is a “design and build” contract where the
employer provides its requirements and the con-
Health and Safety at Work Act 2015 tractor is responsible for both the design and the
This act outlines the standard needed at work construction of the project.
sites to ensure personnel are safe. The act also

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Design, which is the key distinction between Standard New Zealand Construction
NZS 3910:2013 and NZS 3916:2013, is dis- Consultancy Contracts
cussed further in 3.3 Design. The most common forms of consultancy con-
tract for construction professional services are:
Other Standard New Zealand Construction
Contracts • the Conditions of Contract for Consultancy
Other standard form contracts that are found in Services (CCCS), developed by Engineering
New Zealand include the following. New Zealand and Association of Consulting
Engineers New Zealand (ACENZ), which is
The New Zealand Institute of Architects used for a wide range of construction con-
(NZIA) forms of contract sulting services;
• Standard Construction Contract (for when the • the Agreement for Architects Services (AAS)
architect administers the construction con- 2018, used for professional design services;
tract). and
• National Building Contract (for when the • the Contract for Quantity Surveying Consul-
architect is not contractually involved in the tancy Services (CQSCS) used by members of
administration of the construction contract). the New Zealand Institute of Quantity Survey-
ors (NZIQS).
The Registered Master Builders Association
forms of contract 1.3 COVID-19
• Residential Building Contract (RBC1) (usually The Impact on Standard Form Contracts
for use in smaller homeowner projects). Few standard form contracts in New Zealand
• Subcontract Agreement (for use between anticipated an event as far-reaching as the pan-
contractors and their subcontractors). demic, so parties now commonly add special
conditions to standard form contracts to allocate
Overseas Forms of Construction Contracts associated risks and responsibilities.
That Are Commonly Used in New Zealand
Several overseas forms of contract are com- The Impact on Procurement of Materials
monly used for construction projects in New Shortages of construction materials have been
Zealand including: very common due to COVID-19 (particularly tim-
ber, steel and plasterboard) and supply chains
• the British New Engineering Contracts (com- for specialised materials and equipment (par-
monly NEC3 and NEC4); ticularly from overseas) are a common cause of
• the suite of contracts from the International delay on projects.
Federation of Consulting Engineers (FIDIC),
most commonly: The construction industry has adapted to the
(a) The “Red Book” – Conditions of contracts supply chain delays with a range of strategies,
for construction; including:
(b) The “Yellow Book” – Conditions of con-
tracts for plant and design-build; and • stockpiling key materials; and
(c) The “Silver Book” – Conditions of con- • ordering materials significantly in advance of
tracts for engineering, procurement and when they will be needed on site (often with
construction (EPC)/turnkey. advance payments made by employers) to

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secure materials and to lock in the price of • individual persons (eg, for home builds and
those materials. renovations).

On some projects, employers are procuring key The Engineer as a Key Agent of Employers
materials early and then free-issuing them to The main NZS forms of contract includes the
contractors. concept of “the engineer”, which is similar to the
engineer in the FIDIC series of contracts.
The Impact on Labour
Worker absences on site due to COVID-19 have Under the NZS 3910:2013 and NZS 3916:2013
had a notable impact on productivity, and the contracts, the engineer administrates the con-
infectiousness of COVID-19 can take a high tract and has a dual role as an agent of the
number of workers off the site at the same time. employer and a quasi-independent decision-
Further, the effect of COVID-19 on international maker. In the latter role, the engineer is expected
travel has made it more challenging to secure to act fairly and impartially. Many of the roles of
specialist labour for more complex projects. the employer referred to in this guide will actu-
ally be performed by the engineer (eg, issuing
The construction industry in New Zealand gen- and assessing variations, confirming works are
erally attempts to manage this risk by sourcing complete, etc).
labour locally where possible and having COVID-
19-specific health and safety policies in place. General Rights and Responsibilities of
Employers
The Impact on Costs Common rights
The inflationary pressures linked to the pandem- • To have the contractor perform the works so
ic have been acute in the New Zealand construc- that they meet the requirements in the specifi-
tion market. A range of measures are used in cations and drawings.
New Zealand for allocating and managing this • To vary the works (subject to awarding exten-
risk, including indexation of costs and early pro- sions of time and additional costs to the
curement of materials. contractor where appropriate).
• To have the works performed within a speci-
fied timeframe (subject to extensions of time
2 . PA R T I E S in particular circumstances).
• To have the works be free of defects, and to
2.1 The Employer have the contractor remedy defects within a
The Nature of Employers reasonable timeframe.
The employer, also known as “the principal” in
the NZS contracts, can be a wide range of per- Common responsibilities
sons including: • To set out its requirements for the project
(including providing the design and specifica-
• a local council or central government body; tions, where applicable – see 3.3 Design).
• an incorporated or unincorporated entity, eg, • To have/arrange funding for the project and
in industries such as manufacturing, residen- pay the contractor within the agreed time-
tial and commercial real estate, or irrigation; frames.
or • To secure building consents and resource
consents for the project.

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• To provide access to the site and avoid inter- to involve overseas organisations (often in a joint
fering with the contractor’s performance of venture with local entities).
the works.
Common Rights and Responsibilities of
The Relationship Between Employers and Contractors
Contractors Common rights
The employer and contractor will be the parties • To choose its preferred methodology for per-
to the construction contract. The contractor is forming the works (albeit often within param-
obliged to carry out the works specified in that eters).
contract, and the employer is obliged to pay for • To receive payment from the employer within
those works in accordance with the contract. the agreed timeframes.
• To receive additional payments and exten-
It is also common for the employer to require sions of time for a specified range of events/
security from the contractor to ensure the due, circumstances (commonly events and cir-
proper and punctual performance of the con- cumstances beyond the contractor’s control).
tractor’s obligations under the contract. This is • To perform the works without being pre-
commonly achieved through a contractor’s per- vented from doing so by the employer or third
formance bond or retentions from payments due parties.
to the contractor.
Common responsibilities
Once the contract is under way, to facilitate com- • To perform the works so that they meet
munication, the employer and contractor usually the requirements in the contract (including
each have a single nominated representative to requirements in the design and specifications,
enable clear communication. For the employer, where applicable – see 3.3 Design).
this is usually the engineer (or the engineer’s rep- • To complete the works within a specified
resentative). timeframe (subject to extensions of time in
particular circumstances).
The Relationship Between Employers and • To ensure that the works are free from
Subcontractors defects, and to remedy such defects for a
See 2.3 The Subcontractors. specified timeframe after the completion of
the works.
The Relationship Between Employers and
Financiers Contractors are not relieved from their responsi-
See 2.4 The Financiers. bilities to the employer if they subcontract works
to third parties.
2.2 The Contractor
The Nature of Contractors The Relationship Between Contractors and
There is significant variability in the size and Employers
nature of contractors commonly operating in See 2.1 The Employer.
New Zealand. Contractors range from large
listed corporations (both local and overseas) The Relationship Between Contractors and
to much smaller private companies. It is not Subcontractors
uncommon for larger projects in New Zealand See 2.3 The Subcontractors.

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The Relationship Between Contractors and ceases to be viable (eg, due to termination or
Financiers contractor insolvency.
See 2.4 The Financiers.
The Relationship Between Subcontractors
2.3 The Subcontractors and Contractors
The Nature of Subcontractors Subcontractors are engaged on a construction
Subcontractors can be a local, national or over- project through a subcontract with the contrac-
seas entities. Subcontractors commonly spe- tor. It is common for a contractor to engage a
cialise in specific trades. variety of subcontractors, each with a specific
trade, on a single project.
Common Rights and Responsibilities of
Subcontractors A subcontractor’s scope of responsibility is gen-
The rights and responsibilities of subcontractors erally limited to the work and risks outlined in its
are typically akin to the rights and responsibili- subcontract with the contractor. However, it is
ties between a contractor and the employer. See not uncommon for contractors to seek to pass
2.2 The Contractor. risks in its contract with the employer down to
the relevant subcontractor.
The Relationship Between Subcontractors
and Employers The Relationship Between Subcontractors
By default, due to privity of contract, the employ- and Financiers
er does not form a relationship with the contrac- See 2.4 The Financiers.
tor’s subcontractors. However, through its con-
tract with the contractor, the employer typically 2.4 The Financiers
places some controls on subcontracting such The Nature of Financiers and the Financing of
as: Projects in New Zealand
Financiers of construction projects in New Zea-
• requiring consent to subcontract works over a land are typically local and foreign commercial
specified value; and banks, investment banks and institutional inves-
• requiring particular sets of work to be per- tors (such as pension funds). Multi-financier syn-
formed by specified subcontractors. dicates are common on larger projects.

Moreover, it is not uncommon for employers to Rights and Obligations of Financiers

have limited rights in respect of certain subcon- Financiers are obliged to provide financing to
tract works by virtue of: the employer, but will not be party to the con-
struction contract itself or otherwise have any
• direct warranties – whereby the subcontractor direct obligations to the contractor (although
provides a warranty to the employer (usu- they receive the benefit of undertakings from the
ally by deed) in respect of specified works or contractor under a direct deed – see the relation-
materials; ship between financiers and contractors below).
• subcontractor continuity guarantees: whereby
subcontractors agree to work directly for the In traditional construction financings, financiers
employer in situations where the contract take security over physical assets such as land
between the employer and the contractor and buildings, as well as over construction con-
tracts and other material contracts such as sale

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agreements or leases. They may also receive the agreeing to give the financier additional cure
benefit of a guarantee from a parent company periods to remedy a default of the employer
guaranteeing repayment of financing provided under the construction contract that could oth-
to its subsidiary, and/or take security over the erwise lead to termination by the contractor, and
shares in the employer held by its shareholder. pre-agreeing the basis on which the financier
may sell the benefit of the construction contract
In limited recourse project financings, the secu- and/or of the shares in the employer to a third
rity package may be similar; however, the finan- party on enforcement of its security.
ciers will have a significantly enhanced focus
on the cash flows arising from the operation of The Relationship Between Subcontractors
the completed project. Accordingly, they will and Financiers
exercise a much higher degree of diligence in It is uncommon for financiers and subcontrac-
assessing and monitoring matters arising under tors to have a direct contractual relationship.
the construction contract and related contracts
(such as completion guarantees), given that the
achievement of completion under the construc- 3. WORKS
tion contract will unlock the cash flow.
3.1 Scope
The Relationship Between Financiers and Sources and Descriptions of the Scope
Employers The scope typically takes the form of:
The relationships between financiers and
employers under construction projects are gov- • “requirements” in a design-and-build con-
erned by the relevant finance and security doc- tract: whereby the employer sets out the
uments. These will typically comprise a facility parameters and minimum obligations of the
agreement, a general security agreement (pro- works to be performed by the contractor; or
viding for ‘all assets’ security over the employer), • “specifications” in a construct-only contract:
as well as one or more specific security agree- whereby the employer sets out in much more
ments (for example, providing for an assignment granular detail what the contractor must
by way of security of specific project contracts provide.
or for security over the shareholder’s shares in
the employer) and/or guarantees. Both requirements and specifications can also
contain drawings setting out the locations,
The Relationship Between Financiers and dimensions, forms and finishes required. Draw-
Contractors ings are typically much more detailed in a con-
On financed projects it is common for a direct struct-only contract.
deed to be agreed between the financier, the
employer and the contractor. The Scope in Tenders
The employer will typically initially set out its
A direct deed generally involves the contractor requirement for the works (commonly called the
consenting to the security given to the financier scope or specifications) in a closed or open ten-
over the construction contract, agreeing that der process. It is not uncommon for the contrac-
certain insolvency action (such appointing a tor and employer to negotiate that scope (eg, to
receiver) will not of itself trigger a contractor’s reduce the price) before the contract is finalised
right to terminate the construction contract, and executed.

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The Scope in Contracts Where rates do not include overheads and mar-
Once the contract is executed, the scope is gen- gins, or the variation is valued on a net cost
erally fixed and can only be modified thereafter basis, allowances for overheads and margins
if, and to the extent, permitted by the terms of are usually added.
the contract itself (see 3.2 Variations).
3.3 Design
3.2 Variations In New Zealand, the two most common frame-
Instructing Variations works for allocating design responsibilities and
The scope of an instructed variation is typically risk are the following.
at the sole discretion of the employer, and in
NZS contracts a variation is typically instructed Construct Only
via the engineer. In New Zealand, contracts typi- The contractor is responsible for its methodol-
cally permit the employer/engineer to: ogy of construction based on the design, but not
for errors or omissions in the design itself.
• increase or decrease the quantity of work;
• omit any work (albeit major omissions may be • Between the contractor and the employer,
deemed to be repudiation or termination); the design risk sits with the employer except
• change the character or quality of any mate- to the extent that such design relates to the
rial or work; and contractor’s methodology/temporary works.
• change the level, position, dimensions, speci- • Typically, the employer separately allocates
fications, or any other part of the contract the design risk by contract to an architect
works. and/or engineer. The designer’s duty is only to
the employer, and owes no responsibilities to
Some events/circumstances are also commonly the contractor.
variations even though they do not arise from • NZS 3910:2013 is commonly used for such
an instruction from the employer/engineer, eg, contracts.
unforeseen ground conditions and archaeologi-
cal discoveries. Design and Construct
The contractor is responsible for both the design
Valuing Variations and the construction of the works (if the owner
The process for valuing variations differs across has a pre-existing design, it may be novated to
contracts. In New Zealand, particularly in NZS the contractor).
contracts, valuation is established by one of the
following methods (in descending order of prec- • Between the contractor and the employer, all
edence): design risk sits with the contractor.
• Contractors without in-house design resource
• by agreement; typically subcontract the design aspects of
• by application of rates and prices in the con- such projects.
tract; • NZS 3916:2013 is commonly used for such
• by application of rates and prices derived contracts.
from similar rates in the contract; or
• by assessment of net cost. 3.4 Construction
The employer’s role in the construction itself is
generally limited to providing site access for the

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contractor and its subcontractors. However, the Pollution and contamination is governed by
employer may be obliged to provide supple- the Resource Management Act and often local
mentary information/design clarification when council guidelines.
requested by the contractor.
Archaeological Finds
The contractor generally has the autonomy and Archaeological discoveries, and any delays and
primary obligation to: additional costs caused by such discoveries, are
usually the employer’s responsibility.
• select the appropriate construction methodol-
ogy; Archaeological finds on a construction site are
• source the necessary materials and resourc- governed by the Heritage New Zealand Pouhere
es; and Taonga Act 2014, which requires that no per-
• manage and perform the construction works. son may modify or destroy a site if that person
knows, or ought reasonably to have suspected,
Subcontractors are managed by the contrac- that the site is an archaeological site.
tor, and have a similar role to the contractor in
respect of their subcontracted works. 3.6 Permits
Common Permits
3.5 Site Access • Resource consent: authorisation for certain
The employer is typically responsible for making activities or uses of natural and physical
the site available to the contractor by a particular resources.
date for the purposes of performing the works. • Building consent: authorisation to carry out
building works in a specific way that complies
In respect of the geotechnical site conditions, with the building code.
responsibility and risk can vary significantly by • Code of compliance certificate: confirmation,
contract. Commonly, the employer will bear the once the work is completed, that the work
risks of adverse conditions unless: performed complies with its building consent
and the building code.
• those conditions have been disclosed to the • Certificate of public use: an interim permit for
contractor; members of the public to use a premises until
• the contractor has had the opportunity to the code compliance certificate is issued.
investigate those conditions before pricing; • Other: any other permits or licences required
• the conditions could have been foreseen by by regional regulations.
an experienced contractor; and/or
• the contractor accepts the risk. Responsibility for Permits
Arrangements for permits typically vary by con-
Contamination tract. Generally:
Pre-existing contamination is typically the
employer’s responsibility, whereas the contrac- • the employer obtains the resource consent;
tor is typically responsible for ensuring that it • the party responsible for the design obtains
does not contaminate or pollute the site in the the building consent and the code of compli-
course of construction. ance certificate; and

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• the contractor obtains any permits/licences expected, or that materials have the specified
for its temporary works and services, and for qualities;
the operation of its machinery. • tests on completion – tests after the works
have been installed and commissioned,
3.7 Maintenance before completion is certified, to ensure that
Most construction contracts exclude general works conform with the standards required by
maintenance obligations after completion. These the contract;
become the employer’s responsibility. • tests after completion – ensure the work con-
tinues to meet the standards required by the
Typically, the employer will enter either self-per- contract (eg, to ensure ongoing reliability) and
form maintenance works or enter into separate to demonstrate that the performance guar-
maintenance service agreements with third par- antees specified in the contract have been
ties for the proper operation and maintenance of attained;
the works. The NZS3917:2013 fixed-term con- • discretionary tests –Some contracts in New
tract is available for such maintenance services. Zealand allow a representative of the employ-
er to perform tests if they have concerns
For defects in construction works arising after regarding an aspect of the works. Commonly,
practical completion, see 3.11 Defects and the costs/delays resulting from those tests
Defects Liability Period. are borne by the employer if the works meet
contractual requirements, or by the contractor
3.8 Other Functions if the works are found not to meet contractual
Finance and maintenance primarily sit outside requirements.
the construction contract between the employer
and the contractor. See 2.4 The Financiers and 3.10 Completion, Takeover, Delivery
3.7 Maintenance. Completion/Taking Over
Most standard forms set out a process for verify-
3.9 Tests ing/delineating when works are completed/taken
Some projects require key materials or equip- over. In some contracts this can be a multi-stage
ment to be tested to ensure that they meet con- process, eg:
tractual or regulatory requirements.
• practical completion – when works are largely
The processes vary by contract. The contractor complete but for minor defects/snags that do
will typically give the employer notice of the date not prevent occupancy/use of the works;
when it will be ready for such tests to be carried • final completion – when works are complete
out. The contractor will commonly carry out the and all defects have either been remedied or
tests, or arrange for the tests to be performed by accepted.
specialists, with the employer having the right to
attend (or to have an agent attend) such tests. For construction contracts, the employer (or,
more commonly, its engineer) will typically
There are numerous potential testing types and inspect the works and issue a practical com-
stages. Common tests include: pletion certificate, and later a final completion
certificate, certifying the works meet the require-
• factory acceptance tests – tests in the fac- ments of the contract.
tory itself to ensure that equipment works as

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However, there are also some actions (eg taking It is also common for employers to retain some
possession and using the works before practical of the contract price as a retention until the end
completion) that can result in the employer being of the defect notification period, to incentivise
deemed to have taken over the works. the contractor to return to fix such defects and
thereby ensure the payment of the retentions.
Delivery
The term delivery is typically used for materials Statutory Warranties
or equipment, and is often linked to obligations Under the Building Act 2004, residential building
to make payment and the transfer/allocation of work is covered by a ten-year warranty. Parties
risk or title. may not contract out of this warranty.

In New Zealand, the point of delivery will usually

be expressly stated in the contract. The Interna- 4. PRICE
tional Chamber of Commerce’s Incoterms rules
are not mandatory, but are commonly referred to 4.1 Contract Price
for international deliveries. Cost Structures
The most common structures used to price con-
3.11 Defects and Defects Liability struction projects are:
Period
Most construction contracts have a limited • Lump-sum contracts – a fixed price for a
period after the works are completed (which can defined scope of work. However, the price
range from a few months to a couple of years) can change if the owner alters the design/
within which the contractor must remedy any works, or if unexpected circumstances are
snags/defects (commonly called a defects notifi- encountered.
cation period, or DNP). In addition, the employer • Measure and value – a schedule of prices is
will often require various standalone warranties usually agreed at the outset (eg, a rate per
for defects arising after the DNP. unit of work), and the quantity of work is then
measured/assessed and paid accordingly.
Common standalone warranties include key • Cost-reimbursement – the employer pays the
materials/equipment and weathertightness. The contractor the net costs plus a pre-agreed
NZS forms of contract include standard form margin. This is less common than the above
warranties as a schedule to the main terms. options, due to the lack of cost certainty and
control.
Defect Notification Periods • Target cost – prior to signing the contract,
Typically, if a defect or fault emerges during a parties will outline the target cost of the
defect notification period as a result of defec- project. It is normal for parties to agree to a
tive workmanship or materials, the contractor is structured formula to estimate the cost of the
obliged to remedy the defect or fault. project. At practical completion if there are
any savings or cost overruns the balance will
If the contractor does not remedy the works be shared and paid between the employer
within a reasonable time, the employer can often and contractor.
engage third parties to remedy the works and
then recover the cost of doing so from the con- Alliances and other forms of collaborative con-
tractor. tracting are increasingly used on major projects.

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Payment Structures • suspend work after giving notice; and/or

In New Zealand, it is common for project pay- • issue a statutory demand for payment.
ments to be based on either:
4.3 Invoicing
• progress – payments are based on the per- Requirements for Tax Invoices
centage of the work that is complete; or In New Zealand, an invoice will typically include:
• milestones – payments are made when key
stages of a project are achieved. • the words ‘tax invoice’;
• the name and GST number of the provider;
4.2 Payment • the date of issue; and
Advance Payments • a description of the goods or services.
Advance payments are common in New Zea-
land for long lead items, and have become more Recommended Requirements for
common recently as a means of locking in costs Construction Invoices
and reducing the risk of delays due to COVID-19. To benefit from the Construction Contracts Act
(see 4.3 Payment), a payment claim/invoice
If materials are to be paid for before they arrive should:
on site, separate agreements for offsite mate-
rials are often entered into to allocate the rel- • be in writing;
evant risks and obligations. The NZS forms of • identify the construction contract to which the
contract include standard form offsite material payment relates;
agreements as a schedule to the main terms. • identify the construction work and the rel-
evant period to which the payment relates;
Employers also commonly protect their inter- • state the amount to be paid and the due date
ests in high-value advance payments by way of for payment;
advance payment bonds. • indicate the manner in which the payee calcu-
lated the claimed amount; and
Progress Payments • state that it is made under the Construction
Typically, at regular intervals, the contractor sub- Contracts Act.
mits a payment claim. The employer will then
assess the claim and issue a payment schedule Invoices issued after payment claims are typi-
of amounts that it considers to be due. cally a formality to reflect the outcome of the
payment claim and payment schedule process.
Late Payments
Construction contracts in New Zealand typically
include interest on late payments. 5. TIME

The Construction Contracts Act 2002 has default 5.1 Planning, Programme
payment structures intended to ensure regular The Role of, and Responsibility for,
cash flow throughout the industry. If a qualifying Construction Programmes
payment claim/invoice (see 4.3 Invoicing) is not In New Zealand, a programme is usually pre-
appropriately disputed in a payment schedule pared by the contractor at the outset of a project
and is then late/unpaid, the act enables a con- and it is often integral to setting up a project
tractor to: for success. The programme is often reviewed

13
 Law and Practice NEW ZEALAND
Contributed by: Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro, Anderson Lloyd

by the employer, who may provide comments/ failure to give notice can affect the contractor’s
input, but good programming is ultimately the eligibility for extensions of time and variations
contractor’s responsibility. if it deprives the employer of the opportunity to
avoid or mitigate the delay.
Contracts commonly require the contractor to
report against, and update, the programme reg- 5.3 Remedies in the Event of Delays
ularly over the course of a project. Contractor Delays
If the contractor is responsible for the delay,
Common Programme Requirements then contracts will commonly provide that the
Standard contractual requirements for a pro- contractor:
gramme are that it should set out:
• will be liable for damages for the period
• the proposed sequence of works and start/ between the due date for completion and
end dates of the component activities, dem- actual completion. It is not uncommon for
onstrating how the contractor proposes to contracts in New Zealand to specify a sum of
meet the due dates for completion; liquidated damages per day/week; and/or
• the critical path and dependencies between • must expedite the works at its cost to make
activities; and up the lost time.
• the dates by which the contractor requires
access to specific areas of the site and any Employer Delays
materials, services, or work to be provided by If the employer is responsible for the delay,
the employer. then contracts will commonly provide that the
employer will:
5.2 Delays
If a delay occurs, most contracts in New Zealand • allow more time for the contractor to com-
include a process along the following lines: plete the work; and
• pay the additional costs arising from the pro-
• the contractor must notify the employer/engi- longation of the work.
neer, often within a specified timeframe, and
provide details of the cause and effect of the 5.4 Extension of Time
delay; Contractors usually issue notices for extensions
• the employer will assess the extent of the of time to the employer/engineer in writing.
delay and determine the extension of time
that it considers appropriate (the employer/ Contractors are typically required to set out the
engineer is commonly required to act reason- basis for an extension of time claim under the
ably when making this assessment); and contract. Common grounds for an extension of
• the dispute resolution procedure will apply if time claim include:
the parties disagree on the appropriate extent
of the extension of time. • the effects of variations;
• weather;
There is an expectation in New Zealand that con- • events that an experienced contractor could
tractors will take reasonable measures to avoid not foresee at the time of its tender;
potential delay events, and to mitigate delays if • defaults by the employer under the contract;
such events occur. In standard form contracts, and

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NEW ZEALAND Law and Practice
Contributed by: Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro, Anderson Lloyd

• some force majeure events, such as flood, 6.2 Wilful Misconduct and Gross
volcanic, or seismic events. Negligence
The concepts of wilful misconduct and gross
5.5 Force Majeure negligence are not well-established in the New
In New Zealand, force majeure only applies if it Zealand courts. However, where contracts
is expressly included in the contract. include limitations on liability (see 6.3 Limitation
of Liability), such clauses often seek to ensure
Force majeure clauses are not included in most that any limitation of liability does not apply if
New Zealand construction contracts as stand- the contractor engages in wilful misconduct or
ard. However: gross negligence.

• most standard form contracts include some 6.3 Limitation of Liability

degree of relief for events that would usually Consumer Contracts
be considered force majeure events; and In consumer contracts in New Zealand, limita-
• it is not uncommon for force majeure clauses tions of liability are restricted by the Consumer
to be added to standard form contracts as Guarantees Act 1993. For example, a contractor
special conditions. cannot limit its liability for completing construc-
tion with reasonable skill and care, so that it is fit
5.6 Unforeseen Circumstances for purpose, and on time or within a reasonable
Relief for unforeseen circumstances is gener- timeframe.
ally only available if it is included in the contract
(albeit New Zealand recognises the common law Commercial Contracts
concept of frustration, which can apply in some In CBL Insurance Ltd (Liq) v Harris [2021] NZHC
instances of unforeseen circumstances). Frus- 1393, the High Court confirmed that clear limits
tration is grounds for termination under the NZS of liability are enforceable in commercial con-
3910:2013 and NZS 3916:2013 contracts. tracts in New Zealand.

In standard form contracts in New Zealand, a Limitations of liability are not included in New
contractor is commonly entitled to additional Zealand’s most common standard form con-
time for unforeseen circumstances but not nec- tracts, but it is not uncommon for parties to add
essarily additional costs. such clauses.

6. LIABILITY 7. RISK, INSURANCE AND

SECURITIES
6.1 Exclusion of Liability
Warranties under the Building Act 2004 cannot 7.1 Indemnities
be contracted out of for residential properties. Parties are generally free to negotiate indem-
nities subject to policy restrictions – eg, not
On policy grounds, a person cannot exclude indemnifying certain court issued fines and pen-
liability for their own fraud. alties. Standard form contracts in New Zealand
typically include indemnities:

15
 Law and Practice NEW ZEALAND
Contributed by: Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro, Anderson Lloyd

• from the contractor to the employer for • Construction insurance – for loss and dam-
losses: age to the works.
(a) arising out of the construction; • Plant insurance – for loss of equipment on
(b) for remedying defects in the construction; site that is critical to the performance of the
and contract.
(c) injuries to persons or damage to property; • Public liability insurance – for legal liability to
• from the employer to the contractor for third parties.
losses: • Professional indemnity insurance – for the
(a) arising from the employer’s lack of rights design of the construction work.
to carry out construction on the site;
(b) arising from acts or omissions of the However, it is not uncommon for other insur-
employer; and ances, such as marine cargo insurance, to be
(c) injuries to persons or damage to property. taken out where the specific project involves
relevant risks.
It is not uncommon for parties to agree further
indemnities (to the extent permitted by law) for: 7.4 Insolvency
Under most contracts in New Zealand, the insol-
• infringement of third-party intellectual prop- vency of a party typically permits the other party
erty rights; and to terminate the contract. The insolvency of the
• infringement of the Building Act or Resource contractor commonly also permits the employer
Management Act. to resume possession of the site.

7.2 Guarantees 7.5 Risk Sharing

There are no mandatory guarantees in New Zea- Risk-sharing arrangements are not particularly
land. However, there are several forms of perfor- common in New Zealand, and are most often
mance guarantee that are common in the New found in alliance agreements or target cost
Zealand market. arrangements (see 4.1 Contract Price).

Bonds The orthodox approach regarding risk in New

Standard form contracts in New Zealand antici- Zealand is to allocate the risk to the party who
pate performance bonds. These may be provid- is best placed to control that risk, or for a party
ed by the principal to the contractor, or by the to accept additional risk in return for a price pre-
contractor to the principal. mium (if accepted by the contractor) or reduction
(if accepted by the employer).
Parent Company Guarantees
If the contractor is a subsidiary and/or has lim-
ited assets, the employer may require (and finan- 8. CONTRACT
ciers may expect) performance to be assured A D M I N I S T R AT I O N A N D
by way of a guarantee from a parent company. CLAIMS
7.3 Insurance 8.1 Personnel
In the NZS standard forms of contract, there It is not uncommon for employers to require the
are four types of insurances that are commonly contractor to:
taken out by the parties:

16
NEW ZEALAND Law and Practice
Contributed by: Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro, Anderson Lloyd

• retain key personnel – often any changes to Common Employer Remedies

the key personnel will require the employer’s • Liquidated damages for delay (see 5.3 Rem-
approval; edies in the Event of Delays).
• remove unsuitable personnel – in standard • Rectification of defects, or the right to recover
form contracts, the employer may require the cost of rectifying defects by third par-
that contractors remove personnel for serious ties (see 3.11 Defects and Defects Liability
misconduct, incompetence, negligence, or for Period).
causing danger to safety or welfare. • Damages for non-performance (see 7.2 Guar-
antees).
8.2 Subcontracting • The right to draw upon bonds, parent compa-
The standard NZS construction contract prohib- ny guarantees, or retentions (see 7.2 Guaran-
its a contractor from subcontracting the whole tees and 3.11 Defects and Defect Liability
or substantially the whole of the works. Sub- Period).
contracting generally requires the employer’s • Suspension or termination of the contract.
consent.
Common Contractor Remedies
Subcontracting does not relieve the contractor • Payment, including interest when payment is
from any liability or contractual obligations owed late (see 4.2 Payment).
to the employer under the contract. • Variations (see 3.2 Variations).
• Extensions of time (see 5.4 Extension of
8.3 Intellectual Property Time).
Typically the employer and the contractor will • Suspension or termination of the contract.
each retain their intellectual property rights, but
grant licences to the other to the extent neces- 9.2 Restricting Remedies
sary for the project. Rights over new intellectual See 6.1 Exclusion of Liability, 6.3 Limitation
property that may result from a project are typi- of Liability, 9.3 Sole Remedy Clauses and 9.4
cally negotiated and vary significantly – a com- Excluded Damages.
mon approach is shared ownership with cross-
licences. It is common for parties to limit the duration of
some liabilities, for example liability under con-
It is not uncommon for parties to agree indem- sultancy contacts is typically limited to six years.
nities for infringement of third-party intellectual
property rights. 9.3 Sole Remedy Clauses
Sole remedy clauses, also referred as exclusive
remedy clauses, are not included in the standard
9. REMEDIES AND NZS construction contracts but are enforceable
DAMAGES in commercial contracts. However, these are not
widely used in New Zealand.
9.1 Remedies
Contract law in New Zealand recognises general Where a contract provides for delay liquidated
damages for breach of contract. Sufficiently seri- damages, that will typically be considered the
ous breaches of contract may also entitle a party sole remedy for delay.
to terminate the contract.

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 Law and Practice NEW ZEALAND
Contributed by: Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro, Anderson Lloyd

9.4 Excluded Damages Adjudication is a relatively swift but interim dis-

It is not uncommon for commercial parties in pute resolution process that takes place entirely
New Zealand to exclude liability for: by way of written submissions (there are no
hearings). Adjudication decisions are binding
• indirect, consequential, special, incidental, and any awards must be paid within two working
exemplary or punitive loss or damage; and days of award. Notwithstanding the obligation
• loss of profit, revenue, goodwill, or loss of to pay, parties may then proceed to litigation or
production. arbitration for final determination of the dispute.

9.5 Retention and Suspension Rights Adjudications are determined by a single adju-
Retentions dicator from a recognised institution.
Retentions are permitted and common in New
Zealand construction contracts. Employers are Recognised Institutions
required to hold retention monies on trust for In New Zealand, there are several institutions
the contractor under the Construction Con- recognised as competent to appoint persons to
tracts Act. Further requirements, such as holding hear construction disputes as adjudicators or
retentions in a separate account, are anticipated arbitrators. These include:
in the near future.
• the Building Disputes Tribunal;
Suspension Rights • the New Zealand Dispute Resolution Centre;
Contractors have statutory suspension rights and
for non-payment but, under the NZS forms of • the Arbitrators & Mediators Institute of New
contract, are typically not permitted to suspend Zealand.
works due to a dispute.
10.2 Alternative Dispute Resolution
Private and alternative dispute resolution options
10. DISPUTE RESOLUTION recognised in New Zealand include:

10.1 Regular Dispute Resolution • Arbitration – this binding form of dispute reso-
Courts lution is common in New Zealand contracts
In New Zealand there are four tiers of court that and is included in the NZS forms of contract.
may hear construction disputes (in descending This form of dispute resolution has its statu-
order): tory basis in the Arbitration Act 1996.
• Mediation – this non-binding form of dispute
• the Supreme Court; resolution is common in New Zealand con-
• the Court of Appeal; tracts and is included in the NZS forms of
• the High Court; and contract.
• the District Court. • Expert recommendation/determination –
referrals to experts for either binding deci-
Adjudication sions or non-binding recommendations are
In New Zealand, parties may not contract out of relatively common in New Zealand.
the adjudication process, which is set out in the • Dispute review boards – these tend to be
Construction Contracts Act. limited to major projects due to the cost. The

18
NEW ZEALAND Law and Practice
Contributed by: Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro, Anderson Lloyd

extent of their authority varies from contract

to contract.

19
 Law and Practice NEW ZEALAND
Contributed by: Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro, Anderson Lloyd

Anderson Lloyd is one of New Zealand’s old- based in Auckland and is made up of a combi-
est and most respected law firms. It is a unique nation of its construction, property, banking &
national firm with four integrated offices (Auck- finance and litigation departments. Recent ma-
land, Christchurch, Dunedin and Queenstown) jor projects in New Zealand have included the
across New Zealand. Project development, Waimea Dam, ACC and CORT’s joint venture
energy, construction and infrastructure have social housing project, Christchurch City Coun-
become core strengths and Anderson Lloyd cil’s Ngā Puna Wai sports hub development, Tilt
is widely recognised for its expertise in these Renewables’ Waipipi wind farm and Mercury’s
areas. The projects team at Anderson Lloyd is Kaiwaikawe and Kaiwera Downs wind farms.

AUTHORS

Anton Trixl is a partner and a Geoff Busch is a partner and

specialist in the energy, natural heads Anderson Lloyd’s Banking
resources and infrastructure & Finance team. He has
sectors. Since 2004 he has been particular expertise in
advising clients on transactions acquisition, project, corporate,
in these sectors, in over 30 structured and property finance
countries, including project development and and debt capital markets transactions. Geoff
project financing, public-private partnerships, acts regularly for international and domestic
mergers and acquisitions, joint ventures, banks, financial institutions and borrowers/
construction and a wide variety of commercial issuers on high-profile transactions across a
contracts. After more than ten years with law range of sectors. He also provides general
firms in Wellington, Dubai and Singapore banking and finance advice, including advising
(including seven years with Clifford Chance in on debt restructuring and insolvency and
Dubai and Singapore), Anton joined Anderson financial services regulatory issues. Geoff has
Lloyd in March 2015. He is a member of the practiced for 28 years in Auckland, London
Society of Construction Law New Zealand. and Sydney, and became a law firm partner in
2004.

20
NEW ZEALAND Law and Practice
Contributed by: Anton Trixl, Geoff Busch, Steve O’Dea and Simon Munro, Anderson Lloyd

Steve O’Dea is a senior Simon Munro has more than 20

associate and a specialist in years’ experience as a specialist
infrastructure and construction commercial litigator. He advises
transactions and project clients on commercial disputes
troubleshooting. For over a involving a wide variety of
decade he has advised on matters, including complex
transactions and disputes in a range of commercial contracts and property issues,
commercial sectors in multiple jurisdictions, construction and infrastructure projects,
including major energy and infrastructure insurance, company and shareholder
projects, construction, public-private obligations and directors’ duties. His clients
partnerships, corporate and commercial are many and varied, including financiers, local
matters, and intellectual property and authorities, developers, insurers, building and
technology matters. Steve relocated from construction companies, directors and
London in 2017 to join Anderson Lloyd’s shareholders, and insolvency professionals.
commercial team. He is admitted as a solicitor Simon spent five years working in London, and
in England and Wales and New Zealand, and is was admitted as a solicitor in England and
a member of the Society of Construction Law Wales. He is a member of the New Zealand
New Zealand. Society of Construction Law.

Anderson Lloyd
Level 3
Australis Nathan Building
37 Galway Street
Britomart
Auckland 1010
New Zealand

Tel: +64 9 338 8300

Fax: +64 9 337 1115
Email: [email protected]
Web: www.al.nz

21
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