Good Faith in QLD Construction Contracts: The Unwritten Rule You Can't Ignore

John Merlo
Jan 23
13 min read

In the world of Queensland construction, contracts are king. They detail scopes of work, payment schedules, and timelines with meticulous precision. Yet, beneath the black-and-white text of even the most detailed agreement lies an unwritten, powerful principle: the duty to act in good faith.

This isn't about being friendly; it's a fundamental expectation that builders, developers, and homeowners will act honestly, cooperatively, and reasonably towards each other. Ignoring this implied duty can turn a straightforward project into a costly and stressful dispute.

While not automatically inserted into every contract by law, Queensland courts and tribunals increasingly recognise and enforce this duty, especially in the relational contracts typical of building projects. A failure to uphold it is often the hidden catalyst behind conflicts over payments, variations, and defects, frequently leading parties into the complex worlds of the Queensland Building and Construction Commission (QBCC) and the Queensland Civil and Administrative Tribunal (QCAT).

This guide explains what the duty of good faith means in a practical sense, how a lack of it can derail your project, and what you can do to protect yourself.

Key Takeaways

Not Automatic, But Assumed: While not written into every contract, Queensland courts increasingly expect parties to act in good faith, meaning honestly and cooperatively.
Actions Speak Louder: Good faith is judged by behaviour. This includes communicating clearly, not hindering progress, and acting reasonably when exercising contractual rights.
Dispute Catalyst: A failure to act in good faith is a common factor in building disputes that end up before the QBCC or in the Queensland Civil and Administrative Tribunal (QCAT).
Documentation is Your Defence: The best way to demonstrate good faith is through clear, consistent, and written communication, especially regarding variations, payments, and delays.

What Does "Good Faith" Actually Mean in a Construction Context?

Understanding the implied duty of good faith is crucial because it governs the spirit of the agreement, not just the letter. It’s a concept rooted in fairness that shapes how contractual obligations should be performed and how rights should be exercised within the framework of Queensland’s building and construction law.

Defining the Implied Duty of Good Faith

The implied duty of good faith is a common law concept, meaning it has been developed by judges through court decisions over time. It is not a specific clause automatically written into all construction contracts.

Instead, it functions as an underlying expectation that the parties will act honestly and with fidelity to the bargain they've struck. It requires them to do what is necessary to enable the other party to have the benefit of the contract. This is distinct from an express good faith clause, which parties can choose to include in their contract to explicitly define what good faith means for their specific project.

The implied duty exists to prevent one party from using the contract's technical terms to undermine its fundamental purpose.

Is This Duty Present in Every Queensland Contract?

The legal landscape in Queensland is nuanced. There is no universal rule that automatically implies a duty of good faith into every commercial contract. However, courts are increasingly willing to imply this duty, particularly in what are known as "relational contracts."

Construction projects, which involve long-term cooperation, mutual trust, and significant interdependence between parties, are prime examples of relational contracts. The specific terms of the contract are critical; they can influence whether the duty is implied. In some complex commercial agreements, it's even possible to draft clauses that attempt to exclude the duty, though doing so successfully is a legally complex and risky endeavour.

The Three Pillars: Honesty, Cooperation, and Reasonableness

The duty of good faith is generally understood to rest on three core components:

Honesty: This is the most straightforward pillar. It means parties must not deceive or mislead each other. It goes beyond simply not lying; it involves a standard of commercial honesty in conduct and communication.
Cooperation: This requires parties to actively do what is reasonably necessary to help the other party receive the benefits of the contract. For example, a homeowner must provide timely access to the site for the builder, and a builder must cooperate with the homeowner's certifier. It's about working together to achieve the project's goals, not creating obstacles.
Reasonableness: This pillar governs how parties exercise their contractual powers. A party cannot use a discretionary power (like approving an extension of time or a contract variation) capriciously, arbitrarily, or for an ulterior purpose unrelated to the contract's objectives. The decision must be made reasonably and fairly.

How a Lack of Good Faith Manifests on a Worksite

Theoretical definitions are one thing, but bad faith becomes a real problem when it plays out on a building site. These scenarios often escalate into formal building disputes, souring relationships and costing both parties significant time and money.

Scenario: The Vague Variation Request

A homeowner in Brisbane repeatedly asks their builder for "minor tweaks" during site visits—moving a power point here, changing a paint colour there. The builder, wanting to be agreeable, accommodates these verbal requests without issuing formal variation forms.

When the final invoice arrives with itemised costs for the extra work, the homeowner is shocked and disputes the charges, claiming they never formally approved the additional costs. The builder’s failure to document the changes and the owner’s refusal to acknowledge their verbal directions create a classic standoff.

This ambiguity opens the door for either side to argue the other acted in bad faith, leading to a payment dispute that could have been avoided with simple paperwork.

Scenario: Withholding a Progress Payment Unreasonably

A developer on the Gold Coast is experiencing cash flow problems on a multi-unit project. To delay a large progress payment due to their main contractor, they begin to meticulously find trivial, non-structural faults in the work.

They use the contract's defect clauses as a pretext to withhold the entire payment, even though the work is substantially complete and fit for purpose. The contractor quickly realises the developer is improperly using the defects liability period clauses to starve them of crucial funds.

This act of bad faith not only breaches the spirit of the agreement but also threatens the project's timeline and the contractor's ability to pay their own workers and subcontractors, jeopardising the entire security of payment framework.

The Critical Role of Clear Communication

Most good faith disputes stem from a fundamental breakdown in communication. Verbal agreements, assumptions, and unwritten instructions create a breeding ground for ambiguity, which can then be exploited or misinterpreted.

A clear, consistent, and written paper trail is the single most effective defence against accusations of bad faith. Emails confirming conversations, signed variation forms for every change, and detailed site diaries provide objective evidence that all parties have acted honestly, cooperatively, and with full transparency.

This documentation transforms a "he said, she said" argument into a factual discussion, which is far easier to resolve.

The QBCC's Role in Upholding Fair Conduct

When communication breaks down and a dispute arises, the first port of call for many homeowners and contractors in Queensland is the Queensland Building and Construction Commission (QBCC).

While the QBCC Act doesn't explicitly mention "good faith," its entire framework is designed to enforce a level of fairness and professionalism that aligns with the principle's core tenets.

Understanding the QBCC's Legislative Framework

The Queensland Building and Construction Commission Act 1991 is the primary legislation that empowers the Queensland Building and Construction Commission (QBCC) to regulate the state's building industry. Its objectives include maintaining proper standards, resolving building disputes, and ensuring the solvency of licensees.

While the term "good faith" isn't used, the Act's provisions requiring licensed contractors to act in a professional and reasonable manner indirectly compel behaviour consistent with good faith principles. This is further supported by other key legislation, such as the Building Act 1975, which together create a regulatory environment where unfair or uncooperative conduct can have serious consequences.

It's important to note that parties can expressly exclude the implied duty of good faith from certain contractual obligations through careful drafting. For example, the duty may be excluded from a superintendent's discretionary powers if the contract explicitly provides for such exclusion with sufficiently clear language.

However, attempting to exclude good faith obligations entirely is a complex legal undertaking that requires precise drafting and may not always be upheld by courts, particularly where such exclusion would undermine the fundamental commercial purpose of the agreement.

As Queensland's building regulatory framework continues to evolve through 2025-2026, with ongoing reforms to licensing, dispute resolution, and industry standards, the practical importance of good faith conduct has only intensified. Recent QBCC regulatory reports show that dispute numbers remain elevated, with defective work complaints and payment disputes continuing to challenge the industry.

This underscores why operating in good faith—through clear communication, proper documentation, and cooperative problem-solving—remains the most effective strategy for avoiding costly disputes.

How the QBCC Investigates Disputes

When a party lodges a complaint, the QBCC initiates a structured dispute resolution process. Initially, this often involves an assessment to determine if the issue falls within its jurisdiction, followed by an attempt at early resolution or mediation.

If the matter is not resolved, a QBCC inspector may be assigned to the case. They might visit the site to assess claims of defective or incomplete work, review contract documents, and gather evidence from both the homeowner and the contractor. This process is a significant part of their workload; the QBCC received over 3,200 building disputes in the most recent six-month reporting period, reflecting the ongoing challenges in maintaining construction quality and managing contractual expectations.

Their goal is to make a determination based on the evidence and, if necessary, issue a direction to rectify defective work. Navigating this process can be complex, and understanding your rights and obligations when dealing with the QBCC is vital.

Can the QBCC Rule Based on Bad Faith?

This is a critical distinction. The QBCC's primary focus is on tangible, verifiable issues: does the work comply with the National Construction Code and Australian Standards? Does it meet the terms of the signed contract? They do not typically make rulings based on the abstract legal doctrine of good faith. However, behaviour that demonstrates bad faith can absolutely influence their decisions.

For example, if a homeowner unreasonably refuses to allow a builder access to the site to rectify a minor defect, the QBCC may view the homeowner's complaint less favourably. Similarly, if a builder deliberately obstructs an inspection or provides misleading information, it will undermine their position. So, while the QBCC won't issue a "direction to act in good faith," they will factor the reasonableness and cooperativeness of each party's actions into their overall assessment of the dispute.

When a Good Faith Dispute Escalates Beyond the Regulator

Sometimes, a QBCC decision doesn't resolve the matter, or the dispute falls outside its jurisdiction (for example, a purely monetary claim).

In these cases, the next step is often the Queensland Civil and Administrative Tribunal (QCAT), a more formal venue for dispute resolution.

QCAT continues to play a vital role in Queensland's building dispute resolution landscape, with the tribunal currently undergoing a statutory review (due for completion in April 2026) that may further refine its processes and accessibility.

Navigating the Path to QCAT

The journey to QCAT begins when one party files an application, either to review a QBCC decision or to initiate a new building dispute claim. Once the application is accepted, QCAT typically orders the parties to attend a compulsory conference or mediation. This is a less formal, confidential meeting facilitated by a QCAT member or mediator, aimed at helping the parties reach a mutually agreeable settlement.

Many disputes are resolved at this stage. However, if no agreement is reached, the matter proceeds to a formal hearing, which operates much like a court, where both sides present evidence and arguments before a QCAT member who will make a legally binding decision. Our guide to QCAT provides a more detailed overview of this process.

Presenting Evidence of Bad Faith in a Tribunal

Proving bad faith in QCAT requires more than just a feeling of being wronged; it demands concrete evidence. A tribunal member needs to see a clear pattern of unreasonable or uncooperative behaviour. This is where meticulous record-keeping becomes invaluable.

A compelling case is built on a foundation of documented evidence:

Emails and correspondence showing unreasonable delays or refusals.
Meeting minutes that record obstructive behaviour or broken promises.
A clear timeline demonstrating how one party consistently undermined the contract's purpose.
Witness testimony from subcontractors, consultants, or neighbours who observed the conduct.

Isolated incidents are far less persuasive than a well-documented history of bad faith. This evidence can be crucial in a variety of claims, including those related to terminating construction contracts due to a fundamental breach of trust.

Why Legal Guidance Is Crucial at This Stage

Attempting to self-represent in a complex contract dispute at QCAT is a significant risk. The rules of evidence, legal precedent, and tribunal procedures are complex.

A layperson may struggle to effectively argue that an implied duty of good faith was breached or to present their evidence in a way that satisfies the tribunal's requirements. An experienced lawyer understands how to construct a compelling narrative, cross-examine witnesses, and correctly apply legal principles to the facts of the case.

They can navigate the formal litigation process and frame the evidence to clearly demonstrate a pattern of bad faith, dramatically increasing the chances of a favourable outcome. In these high-stakes situations, the guidance of an expert building and construction lawyer can be the difference between winning and losing.

Practical Steps for Upholding Good Faith (For Builders and Owners)

While the law provides a backstop, the best way to deal with the duty of good faith is to actively practice it from the very beginning. Proactive client communication and sound project management are the most effective forms of risk management for both parties.

For Contractors: Building Trust from Day One

Establishing a relationship built on good faith is a deliberate process that starts long before the first nail is hammered.

The first step is providing a clear, comprehensive, and easy-to-understand contract that explicitly details the scope of work, payment schedule, and processes for handling variations and disputes. Before work commences, conduct a thorough pre-start meeting with the client to walk through the plans, confirm selections, and align expectations on communication protocols.

Throughout the project, maintain this transparency by providing regular, honest progress updates—even when there's bad news. Critically, you must formalise every single change, no matter how small, with a written variation document that is signed by the client before the work is done. This discipline protects both parties and is a hallmark of a professional operator.

For Homeowners: Your Responsibilities in the Partnership

The duty of good faith is a two-way street. As a homeowner, you have a crucial role to play in the project's success. Your primary responsibility is to make decisions and provide necessary information promptly.

Delaying a choice on tiles or fixtures can have a significant knock-on effect, holding up multiple trades and potentially costing the builder time and money. Upholding your end of the bargain also means making progress payments on time, as set out in the contract schedule.

If you have concerns about the quality of work or progress, raise them constructively and in writing as soon as they arise. Allowing issues to fester and then raising them all at the end of a payment stage can be seen as an ambush and is counterproductive. A cooperative partnership is the surest path to a successful outcome.

Avoiding Common Pitfalls That Lead to Disputes

Ambiguity is the enemy of good faith. The most common and avoidable disputes arise from grey areas in the contract that are not managed with transparency. "Prime Cost Items" (PCs) and "Provisional Sums" are frequent sources of conflict. If the allowances are not clearly defined and the process for confirming final costs isn't managed with open communication, sticker shock and disputes are almost inevitable.

Another major pitfall is failing to document site instructions. A casual conversation on-site where a homeowner asks for a change can easily be forgotten or misremembered later. This leads to a "he said, she said" scenario, which is the fastest way to destroy trust and end up in a formal dispute. A breakdown in these fundamental areas can quickly escalate, requiring the intervention of a building dispute lawyer.

The Future of Good Faith in Queensland Construction

The concept of good faith is not static; it continues to evolve through court decisions and industry practices, shaping the future of construction law and setting new standards for professional conduct. As Queensland undergoes significant building regulation reforms in 2025-2026, including the Building Reg Reno initiative and the QCAT Act review, the role of good faith principles remains central to fair dealing in the construction sector.

Is Codification on the Horizon?

There is an ongoing legal debate in Australia about whether the implied duty of good faith should be "codified"—that is, formally written into legislation like the QBCC Act. Proponents argue that codification would provide greater certainty and clarity for all parties, making obligations clear from the outset.

Opponents suggest it could create rigidity, removing the flexibility that allows courts to apply the principle to the unique facts of each case. For now, the duty continues to be defined by legal precedent on a case-by-case basis through the courts and tribunals, with professional bodies like the Queensland Law Society providing guidance to practitioners on its application.

The Bottom Line: Good Faith as Best Practice

Regardless of whether the duty is implied by a court or written into a contract, operating in good faith is simply good business. It is the cornerstone of industry best practice. A reputation for honesty, fairness, and cooperation is a builder's most valuable asset, leading to positive reviews, referrals, and repeat business. For homeowners, a cooperative approach ensures a smoother, less stressful building experience.

Ultimately, embracing the principles of good faith dramatically reduces the immense financial and emotional costs associated with disputes. Honesty, cooperation, and reasonableness are not just legal concepts; they are the essential foundations of any successful, profitable, and rewarding construction project in Queensland.

FAQs

Is a handshake agreement to do building work enforceable in Queensland?

While a verbal contract can be legally binding, it is extremely risky and ill-advised for building work. The Queensland Building and Construction Commission Act 1991 requires that contracts for domestic building work of a certain value and nature be in writing. Specifically, contracts for domestic building work must be in writing where the contract price exceeds the prescribed amount (currently $3,300). This requirement ensures clarity and consumer protection. A written contract provides clarity and is essential for proving the terms of the agreement, which is crucial for demonstrating good faith and resolving any disputes that may arise.

What is the difference between a "Provisional Sum" and a "Prime Cost (PC) Item"?

A Prime Cost (PC) Item is an allowance in a contract for the supply of a specific item (e.g., taps, oven, tiles) where the final selection has not been made. A Provisional Sum is an allowance for work (including labour and materials) that cannot be precisely costed at the time of signing the contract, such as excavation where the soil conditions are unknown. Both are common sources of disputes if not managed transparently with clear communication and documentation.

Can I refuse to pay a builder's progress claim if I'm not happy with the work?

You cannot simply refuse to pay an entire progress claim without valid, contractual grounds. Most modern contracts have a specific process for disputing a payment claim, which must be followed. Unreasonably withholding a large payment due to minor defects could be seen as a breach of contract and a failure to act in good faith. You should document the defects, communicate them to the builder in writing, and follow the dispute resolution procedure in your contract.

How long does a builder have to fix defects after the project is finished?

The period for fixing defects is known as the defects liability period, which is typically 12 months from practical completion for non-structural defects. For structural defects, the statutory warranty period under the QBCC scheme is six years and six months. The builder has an obligation to return and rectify defects that are their responsibility during these periods.

What should I do if I think my builder is acting in bad faith?

The first step is to document everything. Keep a detailed record of all communications, events, and issues, including dates and times. Communicate your concerns to the builder clearly and in writing, referencing the specific parts of the contract you believe are not being honoured. If the situation does not improve, you should seek legal advice from a lawyer specialising in construction law to understand your rights and options, which may include lodging a complaint with the QBCC or initiating formal dispute resolution.

This guide is for informational purposes only and does not constitute legal advice. For advice tailored to your specific circumstances, please contact Merlo Law