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Victoria’s security of payment reforms: Unfair time bars in construction contracts

09 October 2025

13 min read

#Construction, Infrastructure & Projects

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Victoria’s security of payment reforms: Unfair time bars in construction contracts

Construction contracts often require contractors to notify the principal (or another party) of events or claims, such as delays, latent conditions or variations, within a certain timeframe. Failure to give notice on time will, in many contracts, prevent (or ‘bar’) the contractor from subsequently making a claim in relation to that event.

Courts will enforce these contractual ‘time bars’ according to general contract law principles, which can result in parties (generally contractors) losing rights to significant claims, and incurring significant losses, only for missing a deadline. That a time bar that is very short or difficult to meet is generally not an excuse.

As part of wider reforms in the construction industry, which continues to struggle with cashflow and insolvencies, the Victorian Government is introducing a new power for decision makers in disputes to declare time bars in construction contracts ‘unfair’ and of no effect for particular claims. This is one of the significant changes proposed in the Building Legislation (Fairer Payments on Jobsites and Other Matters) Bill 2025 (Vic) (Bill) introduced in September.

Our earlier summary of the Bill’s wide-ranging reforms can be accessed here. In this article, we focus on the unfair notice-based time bars and its implications for project participants and the industry.

Victoria’s security of payment laws

The proposed amendments in the Bill represent a major overhaul of Victoria’s security of payment legislation under the Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act). Broadly, the Bill will bring the SOP Act more into line with the equivalent legislation in New South Wales and Queensland.

In a new development for the eastern states, the Bill introduces a power that enables decision makers to declare that a ‘notice-based time bar’ is ‘unfair’ and of no effect in relation to the claim being made in a proceeding (time bar disallowance power). This new power will be inserted in a new section 13A of the Victorian SOP Act and is based on, though not identical to, section 16 of Western Australia’s Building and Construction Industry (Security of Payment) Act 2021 (WA) (WA Act). At the date of this article, only Western Australia has a similar provision. However, we are not aware of any cases that have applied or examined the boundaries of the time bar disallowance power in that jurisdiction.

The Bill remains before Parliament. The amendments are expected to commence no later than 1 September 2026, and possibly earlier. Once in force, they will apply to existing construction contracts. It is possible that further changes to the Bill may be made or regulations will affect its operation after it is enacted. References in this article to the new section 13A of the SOP Act are made on the assumption that the Bill is enacted in its current form.

What is the time bar disallowance power?

There are six key elements to understand about the new time bar disallowance power:

  1. it applies to all formal dispute resolution proceedings, not just security of payment adjudications
  2. to be ‘unfair’, compliance with the time bar must be not reasonably possible or be unreasonably onerous
  3. there are six prescribed matters that must be considered in determining whether a time bar is unfair
  4. time bars in another contract (e.g. upstream) must not be considered
  5. it only overcomes the application of a time bar in single instances – it does not void the time bar altogether, which might still apply to other claims or proceedings
  6. it applies to a broad range of typical time bars, but not necessarily to every kind of notice.

Application to all formal dispute resolution proceedings

Under the new section 13A(2) of the SOP Act, a time bar can be declared unfair by an adjudicator, court, arbitrator or an expert in an expert determination. The time bar disallowance power is therefore not limited to only security of payment adjudications. Arguments that a time bar is unfair and should be declared ineffective can be raised in most typical formal dispute resolution proceedings.

Compliance must be not reasonably possible or unreasonably onerous

Under the new section 13A(1) of the SOP Act, a time bar can only be ‘unfair’ if (a) it is not reasonably possible to comply with the time bar or (b) it would be unreasonably onerous to comply with the time bar. A time bar that does not satisfy at least one of these criteria cannot be disallowed under the power, even if the time bar otherwise appears ‘unfair’.

The first limb appears to be focused on the physical or temporal possibility of compliance. For example, if:

  • a time bar requires notice of a claim to be given within a certain time following an event, even if a contractor is not yet actually aware that the event happened  
  • through no fault of the contractor, the time for compliance passes before the contractor becomes aware of the event,

it could be argued it is not reasonably possible for the contractor to comply with the time bar.

The second limb of section 13A(1) appears to be focused on the cost or effort required to comply. For example, where compliance with a time bar:

  • is literally possible; but
  • would require the claimant to dedicate resources to producing notices and detailing potential claims that are significantly disproportionate or detrimental,

compliance with the time bar might be argued to be unreasonably onerous. 

When is a time bar unfair?

Under the new section 13A(5) of the SOP Act, the decision-maker must, in determining whether a time bar is unfair, take into account:

  • when the party giving notice would reasonably have become aware of the last day it could do so
  • when and how notice is required to be given
  • the parties’ relative bargaining power
  • if compliance is said to be unreasonably onerous, whether the matters in the notice are final and binding
  • that the parties read and understood the contract
  • that the party giving notice has the commercial and technical competence of a reasonably competent contractor.

The first factor requires examining when a party reasonably becomes aware of how long it has to issue the notice. The factor highlights the significance of a party’s awareness, not just focusing on the length of time provided in the contract. Interestingly, the equivalent provision in the WA Act also requires considering when the party became aware of the relevant event or circumstance, but this element is not included in the Victorian Bill. In most cases, however, the difference between these states of knowledge may not be practically significant.

The second factor addresses the formal requirements for notice. For example, it may be unfair to require full details of a claim and estimated costs but may be fair to merely require notice of an intention to make a claim in the future.

The third factor focuses on relative bargaining power. In keeping with the objective interpretation of contracts, it does not require examination of the actual contract negotiations. However, it is likely to be invoked by contractors presented with terms on a ‘take it or leave it’ basis and suggests that principals seeking to rely on time bars ought to be open to reasonable negotiation on their terms.

The fourth factor highlights that a notice restricting the matters a party can raise later is inherently more onerous and more likely to be unfair than a notice that can be amended or supplemented later.

The fifth factor prevents parties from arguing they did not actually understand what was written in their contract. Specifically, the new section 13A(7)(a) of the SOP Act prevents a party from bringing evidence that it did not understand what the contract required.

The sixth factor introduces an objective standard in examining a time bar. A time bar is less likely to be unfair if a reasonably competent contractor would be expected to comply with it. Section 13A(7)(b) does allow a party to bring evidence that it did not have the relevant standard of competence. However, the commercial downsides of such evidence are obvious.

Time bars and provisions in related contracts are irrelevant

Typically, time bars in subcontracts are shorter than in the head contract. This is on the logic that it allows time for the subcontractor’s notice to be incorporated into a notice under the head contract. Under the new section 13A(6) of the SOP Act, the terms or circumstances of a related contract must not be taken into account when determining whether a time bar is unfair. This will prevent arguments that a time bar is not unfair because it was necessary to comply with the time bars in an upstream contract.

Time bars are not void and are only ineffective in relation to specific claims

Under the new section 13A(3) of the SOP Act, if a time bar is declared unfair, it is only prevented from barring the particular entitlement the subject of the proceeding. That means a time bar that is declared unfair under certain circumstances will remain a term of the contract and can still be relied on in other circumstances or proceedings. A decision-maker may decide to not declare the time bar unfair and ineffective in those situations.

Breadth of the power

The time bar disallowance power applies to ‘notice-based time bars’. To paraphrase the new section 13A(8) of the SOP Act, a notice-based time bar is a provision of a construction contract that makes a right contingent or dependent on provision of a notice. The right can be to payment or an extension of time for performance of work, supply of goods or services, or the release of performance security. A ‘notice’ can relate to the ‘time of doing a thing’, the ‘cost of doing a thing’, an ‘intention to do a thing’ or ‘the description of a thing’. 

Interestingly, the definition of ‘notice’ does not expressly include notice of an event occurring. It remains to be seen whether a court would find that this falls into ‘the description of a thing’.

The Bill’s provisions will have a wide field of application, including many typical time bars used in the industry. However, unlike the WA Act, the Bill does not expressly capture ‘notices of any other kind’. This omission may invite attempts to draft around the operation of the time bar disallowance power and debate about the application of the power to certain types of notice. The power’s application to the occurrence of an event may be an early issue for the courts to resolve.

Contrasts to unfair contract terms legislation

The time bar disallowance power is in some respects similar to the prohibition on unfair contract terms in the Australian Consumer Law (ACL). However, there are significant differences between the powers under the SOP Act and the ACL:

  • although construction contracts may fall within the unfair contract terms legislation, that legislation only applies to certain types of ‘small business’ contracts. By contrast, the time bar disallowance power applies to any construction contract that meets the definition in the SOP Act
  • an unfair contract term within the meaning of ACL is void and has no contractual effect. The time bar disallowance power does not make an unfair time bar void and the time bar could continue to operate in different circumstances
  • the unfair contract terms legislation is enforceable by the Australian Competition and Consumer Commission, with penalties for proscribed unfair contract terms. However, under the SOP Act there are no penalties or enforcement of unfair time bars outside of the specific civil proceedings between the parties to the contract
  • although both legislation use the term ‘unfair’, the tests for what is unfair, and the factors that must be considered, are different. What courts have considered to be unfair under the ACL may provide guidance to the application of the time bar disallowance power, but it may not always be directly applicable. For example, the concepts of transparency, legitimate interests and detriment, which are central to examining unfair contract terms under the ACL, are not expressly referenced in the new section 13A of the SOP Act.

Implications for the industry

What won’t change

Overall, the time bar disallowance power is unlikely to radically change current practices.

Time bars will remain a feature of construction contracting. Exercise of the time bar disallowance power requires analysis of the specific circumstances of each case, including the claimant’s actual awareness and the possibility and reasonableness of compliance. A time bar deemed unfair in one context may still apply in others. As a result, principals will continue to have incentives to use time bars in their contracts. Time bars will continue to be used to provide early warning and maintain orderly contract administration and claim resolution.

The time bar disallowance power will also not allow contractors to disregard contractual time bars.  Its application expressly requires examination of the possibility or difficulty of compliance, and exercise of the power depends on concepts of reasonableness and unfairness. The possible subjectivity of analysis means it would be reckless for contractors to disregard or not put effort into compliance with time bars. For the same reasons, other responses to the application of time bars, such as estoppel, are likely to remain relevant.

What will change

We anticipate the time bar disallowance power will be raised frequently when time bars are in issue. It will therefore tend to add to the issues in a dispute and, from a principal’s perspective, increase the risk associated with claims that would otherwise be fairly clearly time barred.

That said, the time bar disallowance power should help alleviate the most severe time bars. Principals will be incentivised to allow more time and be less prescriptive in time bars to increase the likelihood of enforcement and reduce the risk of disallowance. Even in contracts with sophisticated contractors, market positions on time bars in upstream contracts may shift because head contractors can push for notice periods to accommodate enforceable time bars in downstream contracts.

Decision makers are often reluctant to deny otherwise good claims merely for technical non-compliances with time bars that cause little real detriment to a principal. The time bar disallowance power will provide a means of facilitating that and allowing decision makers to alleviate the harshest cases. It could diminish reliance on strained contract interpretation or generous estoppels to achieve that purpose.

Key takeaway

The time bar disallowance power seems to be well-tuned to retain the function of time bars to provide reasonable notice while reducing their function as threats and leverage. It remains to be seen whether and how the introduction of the time bar disallowance power will shift market positions, but it is hoped it will encourage more reasonable practices in the industry. Construction industry participants should reassess the risks and opportunities in relation to time bars in their current and future contracts.

If you have questions regarding your construction contract or the proposed changes to the Victorian security of payment regime, please contact us here, and watch our on-demand video here which covers the above in more detail.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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