Do I Need A Lawyer To Review A Head Contract?

Sarah runs a small electrical business in Newcastle. A builder emails her a subcontract for a shopping centre fitout and says, "We need this signed today so you can start Monday." The price looks good, but the subcontract also says Sarah must comply with the head contract - and she hasn't been given a copy.

If you're in that position, it's very normal to feel pressure to sign and keep the work moving. But head contracts and subcontracts can push serious risk down the chain, especially in construction.

A head contract review can help you spot the clauses that affect your cash flow, your insurance, your timeline and your ability to get paid for variations before you commit your business.

Do I Need A Lawyer To Review A Head Contract?

Yes, it's usually worth getting a lawyer to review a head contract or subcontract before you sign, especially if the project is high value, time-sensitive or tied to a larger construction job.

You don't need a lawyer to tell you whether the commercial deal feels attractive. You already know your margins, your team and whether the job fits your business. The legal review is about a different question: what could this contract make you responsible for if things go wrong?

This matters because many subcontracts don't just set out your scope and price. They also pull in obligations from the head contract between the principal and the head contractor. You may be asked to accept:

• strict deadlines you didn't price for
• liquidated damages if your delay affects the wider project
• broad indemnities for losses outside your control
• payment terms that depend on certificates, claims and notices
• short time limits for variations and delay claims
• defect liability periods, warranties and insurance obligations

A contract lawyer for a subcontractor will usually look for the practical pressure points first. For example, can you actually comply with the notice process? Are you exposed to losses caused by other trades? Does the payment clause line up with the way you invoice and pay your workers or suppliers?

If the contract is small, low-risk and familiar, you might only need a targeted contract review of the key clauses. If it's a major project or a new client, a fuller construction contract review is often the safer option.

What Is A Head Contract And Why Does It Matter To A Subcontractor?

A head contract is the main contract between the principal, such as the developer or asset owner, and the head contractor who is responsible for delivering the project.

If you're a subcontractor, you may not be a party to the head contract. Your direct contract is usually the subcontract between you and the head contractor. Even so, the subcontract may say that you must comply with parts of the head contract that relate to your works.

That can be fine when the obligations are clear and limited. It becomes risky when the subcontract says something broad, like you must comply with "all obligations of the contractor under the head contract" without showing you the head contract or narrowing it to your scope.

Before you sign, ask for:

• the full head contract, or at least the parts incorporated into your subcontract
• the project specifications, drawings and program
• any principal's requirements that affect your works
• site rules, safety requirements and induction documents
• insurance schedules and required policy limits
• any special conditions that override the standard terms

If you're not allowed to see the full head contract because of confidentiality, ask for the relevant extracts before signing the subcontractor agreement. You can't sensibly price or manage obligations you haven't seen.

For construction work, also remember that each state and territory has its own security of payment legislation. These laws usually give contractors and subcontractors rights to progress payments and adjudication, and they often limit clauses that try to delay payment until someone higher up the chain has been paid. The exact process and deadlines differ across Australia, so the contract should be checked against the law that applies to the project location.

What High-Risk Clauses Should I Check Before Signing?

You should check the clauses that affect money, delay, liability and control first, because those are the clauses most likely to hurt your business in practice.

Payment Timing

Look at when you can claim, what documents you need, when payment is due and what happens if the head contractor disputes your claim.

Be careful with wording that says you only get paid after the head contractor is paid by the principal. "Pay when paid" clauses are generally restricted under Australian security of payment laws, but you don't want to rely on fixing a bad clause after a payment dispute has already started.

Liquidated Damages

Liquidated damages are pre-agreed amounts payable for delay. In a head contract, the head contractor may owe the principal a daily delay amount. The subcontract may try to pass some or all of that risk to you.

For example, Mike runs a plumbing subcontracting business. His subcontract is worth $80,000. The head contract has liquidated damages of $5,000 per day for late completion, and the subcontract says Mike is liable for any delay he causes with no cap. If a supplier delay pushes Mike's work back by 6 days, the claim could be $30,000 before anyone even argues about other costs. That's a very different risk profile from an $80,000 job.

Indemnities

An indemnity can make you responsible for certain losses suffered by the head contractor, the principal or others. Some indemnities are fair, such as covering loss caused by your negligence or breach. Others are too broad and may make you responsible for losses you didn't cause.

Check whether the indemnity is limited to your acts, omissions, negligence or breach. Also check whether it matches your insurance policy. If your insurance won't respond, the risk is coming from your own pocket.

Variations And Delay Claims

Variations are where many subcontractors lose money. A contract might say you only get paid for a variation if you submit a written notice within a strict timeframe and receive written approval before doing the work.

That can be manageable, but only if your team follows the process on site. If your supervisor accepts verbal instructions and paperwork happens later, you may struggle to recover unpaid invoices for extra work.

How Do Back To Back Contract Clauses Work?

Back to back clauses try to make your obligations under the subcontract line up with the head contractor's obligations under the head contract.

That idea isn't always unreasonable. If the head contractor must meet a specification, quality standard or project program, they'll want subcontractors to support that. The issue is whether the flow-down clause is clear, fair and limited to your scope.

A back to back clause might affect:

• scope: you must perform the part of the head contract works that relate to your trade or services
• time: you must meet milestones that help the head contractor meet the overall program
• quality: your work must meet the principal's requirements, drawings and specifications
• notices: you must notify the head contractor quickly so they can notify the principal on time
• payment: your claims may be linked to certification processes under the head contract
• liability: losses flowing from your breach may be passed down to you

The danger is a clause that says you accept "all risks" assumed by the head contractor under the head contract. That may expose you to risks outside your control, such as design errors, principal-caused delay, access issues, other trades or broader project management failures.

A better approach is to narrow the wording so you're responsible for head contract obligations only to the extent they relate to your works and your breach, negligence or delay. You can also ask for a cap on liability, a carve-out for consequential loss and a fair process for delay extensions.

If the head contract isn't attached, don't sign a subcontract that says you're bound by it. At a minimum, ask for the parts you're expected to comply with and keep a dated record of what was provided.

What Should A Subcontractor Head Contract Review Include?

A subcontractor head contract review should cover the legal risk, the commercial risk and the practical site process, not just whether the document looks legally polished.

Before you send a contract for review, it's helpful to prepare a short project summary. This doesn't replace tailored legal advice, but it helps your lawyer focus on the clauses that matter most to your business.

1. Project And Parties: write the project name, site address, principal, head contractor and your contracting entity name, including your ABN or ACN.
2. Scope Of Works: describe exactly what you're supplying or installing, and list any exclusions.
3. Contract Price: set out whether the price is fixed, schedule of rates, cost plus or another model.
4. Payment Claims: note when you'll claim, what supporting documents are needed and who certifies payment.
5. Program And Milestones: list start dates, completion dates, access dates and any hold points.
6. Variations: explain who can instruct variations, what approval is needed and when pricing must be submitted.
7. Delay And Extensions Of Time: state when you must give notice and what events entitle you to extra time.
8. Liquidated Damages: identify the daily rate, trigger, cap and whether it can be passed down from the head contract.
9. Indemnities And Liability Caps: flag who you indemnify, what losses are covered and whether liability is capped.
10. Insurance And Licences: list required policies, limits, certificates of currency and any state-based building licences.
11. Termination And Suspension: note when either party can terminate or suspend works, and what notice is required.
12. Documents Incorporated: list the head contract, drawings, specifications, schedules and special conditions that form part of the deal.

A lawyer should tailor this review to the project before you rely on it. Templates and checklists are useful for getting organised, but they often miss the risk created by the special conditions, order of precedence and head contract flow-down wording.

Can I Negotiate A Construction Contract After It Is Sent To Me?

Yes, you can usually negotiate a construction contract after it's sent to you, and you don't need to negotiate every clause to improve your position.

Many subcontractors worry that asking for changes will make them look difficult. In reality, sensible contract amendments often show that you understand risk and want the project to run properly. The key is to focus on the clauses that genuinely affect your price, timing and liability.

Common negotiation points include:

• limiting your obligations to the parts of the head contract that relate to your scope
• capping liquidated damages, for example at a percentage of your subcontract price
• removing liability for delays caused by the principal, head contractor or other trades
• requiring written variation approvals, but allowing emergency or site-directed work to be confirmed shortly after
• making payment dates clear and consistent with security of payment laws
• limiting indemnities to losses caused by your breach, negligence or wilful misconduct
• excluding indirect or consequential loss where appropriate
• adding a fair extension of time process for weather, access delays and late information

There are also broader legal protections that may apply. Under the Australian Consumer Law, unfair contract term rules can apply to standard form small business contracts. Since 9 November 2023, businesses can face penalties for proposing, using or relying on unfair terms in contracts covered by the regime. A small business contract is generally covered where at least one party has fewer than 100 employees or annual turnover under $10 million.

That doesn't mean every harsh clause is automatically removed. It does mean a standard form contract that creates a significant imbalance, isn't reasonably necessary to protect legitimate interests and would cause detriment may be open to challenge. It's still much better to fix the wording with a contract redraft before you sign.

What Should I Do If I Have Already Signed?

If you've already signed, don't panic - start by working out what the contract requires you to do next and tighten your record-keeping straight away.

First, save a complete copy of the signed contract, including schedules, drawings, specifications, purchase orders and any head contract extracts. Then create a simple obligations tracker for notices, payment claims, insurance renewals, milestones, defects and variation deadlines.

If a problem is already emerging, act in this order:

1. Check the notice clause: identify how notices must be given, where they must be sent and any time limits.
2. Record the facts: keep emails, site diaries, photos, delivery records, meeting minutes and instructions from the head contractor.
3. Send notices on time: even if you don't have every detail yet, a holding notice may protect your position if the contract allows it.
4. Keep claiming properly: make payment claims in the required form and within the required claim cycle.
5. Separate disputed work: track original scope, approved variations, disputed variations and delay costs separately.
6. Get advice early: if payment is withheld, a delay claim is threatened or termination is mentioned, get help before sending a heated response.

For construction payment disputes, your rights may be affected by the relevant state or territory security of payment legislation. These laws often have strict steps and short timeframes for payment schedules and adjudication, so timing can matter a lot.

If the signed contract is a standard form small business contract, it may also be worth checking whether any unfair contract term issues arise under the Australian Consumer Law. That won't solve every dispute, but it can be relevant where the other party is relying on a one-sided term that you had little real ability to negotiate.

Key Takeaways

• A head contract review helps you understand what risk is being pushed down to you before you sign a subcontract.
• The biggest clauses to check are payment timing, liquidated damages, indemnities, variations, delay notices and liability caps.
• Back to back clauses should be limited to your scope and your own breach, negligence or delay.
• Don't accept obligations under a head contract you haven't seen, or at least ask for the relevant extracts.
• Australian security of payment laws and unfair contract term rules may affect your rights, but it's safer to fix the contract upfront.
• If you've already signed, keep strong records and meet all notice and payment claim deadlines.

If you'd like help with reviewing your head contract or subcontract, negotiating high-risk clauses, or preparing a practical contract summary before you sign, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.