The warranties under section 8 of the Domestic Building Contracts Act 1995 (Vic) (DBCA) are implied as terms of a building contract in all domestic building work to be carried out under a domestic building contract in Victoria. The warranties include that:

• the work will be carried out in a proper and workmanlike manner, in accordance with the plans and specifications set out in the contract;
• all materials will be good and suitable for the purpose for which they are used and that, unless otherwise stated in the contract, those materials will be new;
• the work will comply with all laws and legal requirements, including the Building Act 1993 (Vic) and the regulations made under the same;
• the work will be carried out with reasonable care and skill and completed by the date or within the period specified in the contract;
• if the work is for a home, or intended to renovate, alter, extend, improve or repair a home, that it will be suitable for occupation when completed; and
• if the purpose for the work is contractually stated or the builder is relied upon for skill and judgement, that the builder warrants that the work and materials are fit for purpose or reasonably expected to achieve that result.

Section 10 of the DBCA states that any provision of an agreement or instrument that purports to restrict or remove the right of a person to take proceedings for a breach of any of the warranties listed in section 8 of the DBCA is void to the extent that it applies to a breach, unless the breach was known, or ought reasonably to have been known, to the person to exist at the time the agreement or instrument was executed.

For instance, an owner may be aware of certain defects of their building, yet agree with the builder to compromise his/her rights with respect to a breach of a warranty by reason of a settlement agreement or the like between the builder and the owner. However, that compromise will only apply in respect of that particular breach and does not affect the owner’s right to bring proceedings against the builder for the rest of the warranties owed by the builder (if applicable). Also, the owner cannot bargain away their right to take future action for “latent” or unknown defects.

There are a number of factors that the courts or tribunals will take into account in determining whether a person has compromised his/her rights with respect to a breach of a warranty. Naturally the onus is on the builder to satisfy the court or tribunal on the balance of probabilities that any disputed items of work (breach of warranties) were actually known, or ought reasonably to have been known to exist by the person at the time the agreement or instrument was executed.

A contravention of section 10 of the DBCA, will result in any agreement or instrument being void and of no effect by reason of section 132(b) of the DBCA.

Can a subsequent owner reignite compromised rights of an original owner in reliance upon section 9 of the DBCA?

Section 9 of the DBCA gives a subsequent owner rights equal with the rights of the original owner “as if the subsequent owner was a party to the contract”. For instance, if an original owner agrees with its builder to compromise it’s right with respect to a breach of a warranty, that compromise may bind a subsequent owner in respect of that particular breach, but it will depend on the facts and circumstances of the case, and will require careful consideration (Delic & Ors v Yahome Pty Ltd [2012] VCAT 752).

Disclaimer

This article is not legal advice and discusses it’s topic in only general terms. Should you be in need of legal advice, please contact a construction law firm. The experienced team at Lovegrove & Cotton can help property owners and building practitioners resolve any type of building dispute.

Written by Tsigereda Lovegrove