NZS 3910 Risk Checklist — 10 Special Conditions That Shift Risk

Time Bar on Claims — Tightened to 10 Working Days (Absolute Bar)

High Risk

What It Does

NZS 3910 Clause 13.3.1 requires the contractor to give notice of a potential claim "as soon as practicable." Special Conditions frequently tighten this to a strict 10-working-day window from when the event occurred or should reasonably have been known — and make it an absolute bar. Miss it, and the claim is extinguished regardless of its merit.

Owner / DeveloperProtection against late claims — but if your contractor misses a legitimate claim, it may surface as a dispute later.

PMC / CAMust track every potential claim event in real time. Missing the window on behalf of either party creates liability.

ContractorHighest risk amendment. Your site team must recognise claim events and notify within the window — or the entitlement is gone forever.

Body Corporate 326421 v Auckland Council [2015] — The court upheld a strict time bar on claims. The contractor's failure to notify within the prescribed period was fatal to the claim, regardless of the merits of the underlying entitlement.

Liquidated Damages Cap Removed

High Risk

What It Does

NZS 3910 Clause 10.3 normally caps liquidated damages at 10% of the contract price. Deleting this cap means LDs run at the daily rate indefinitely for the duration of delay. On a $50M project with $15,000/day LDs, a 6-month delay generates $2.7M in damages — uncapped. The penalty doctrine (127 Hobson Street v Honey Bees [2020] NZSC 53) provides a legal backstop — but the threshold is deliberately high: a clause must be "out of all proportion" to the innocent party's legitimate interests or "exorbitant" before a court will intervene. This replaced the older "genuine pre-estimate of loss" test from Dunlop with a more permissive standard. In practice, a reasonable daily LD rate accumulating over an extended delay period will be nearly impossible to challenge, even if the total becomes substantial — meaning the practical risk of uncapped LDs remains significant.

NZS 3910:2023 note: The 2023 revision introduces an opt-in overall liability cap mechanism (clause 7.2) that may interact with LD provisions. Where the 2023 form is used, check whether this separate cap has been adopted and how it applies to LD exposure.

Owner / DeveloperAttractive until your contractor becomes insolvent at 60% completion. An uncapped LD regime can push contractors to insolvency rather than completion. The penalty doctrine means courts may scrutinise accumulated LDs if the total becomes grossly disproportionate to the owner's legitimate interests — but this is a high bar to clear.

PMC / CAExtension of time assessments become critical. Every day counts. Your EOT procedures must be watertight.

ContractorFundamentally changes the risk profile. Must price accordingly and ensure programme contingency is adequate. The modern penalty test (Cavendish / 127 Hobson Street) is deliberately permissive — courts will be slow to interfere with a commercially negotiated LD rate. Contractual negotiation (capping, step-down rates, or sunset provisions) is the primary protection, not the courts.

127 Hobson Street v Honey Bees Preschool Ltd [2020] NZSC 53 — The NZ Supreme Court adopted the UK Cavendish Square Holding BV v Makdessi [2015] UKSC 67 test for penalties. The test is whether the contractual consequence is "out of all proportion to the legitimate interests of the innocent party in the performance of the obligation." Key points: (1) legitimate interests can be broader than direct financial loss — they include commercial interests in timely performance; (2) the court will be slow to interfere with provisions freely negotiated between parties of comparable bargaining power; (3) the burden of proof is on the party challenging the clause. This replaced the older Dunlop "genuine pre-estimate of loss" test with a more permissive standard. Removing the LD cap doesn't automatically make LDs unenforceable — but if accumulated LDs reach a level that is plainly exorbitant relative to the owner's legitimate interests, the clause may be challenged.

Payment Schedule Response Period Shortened

High Risk

What It Does

The Construction Contracts Act 2002 provides a default 20-working-day window to respond to a payment claim with a payment schedule. Special Conditions often shorten this to 15 or even 10 working days. Missing the window makes the full claimed amount a debt payable immediately — no discretion, no appeal.

Owner / DeveloperMust have systems to process payment claims immediately on receipt. No room for "it's on someone's desk."

PMC / CAThe PMC typically manages this process. A shortened window with multiple active contracts means no margin for error.

ContractorShorter windows apply both ways. If you're a head contractor responding to subcontractor claims, the same tight deadlines bind you.

George Developments Ltd v Canam Construction Ltd (2006) — The court confirmed there is zero discretion on payment schedule deadlines. The full claimed amount becomes payable if no schedule is provided within the window.

Variation Valued at Scheduled Rates Only — Engineer's Assessment Final

Medium Risk

What It Does

Standard NZS 3910 allows variations to be valued by agreement, scheduled rates, or reasonable rates. This Special Condition restricts valuation to scheduled rates only and makes the Engineer's assessment final — removing the contractor's right to negotiate or dispute the valuation through the contract.

Owner / DeveloperCost certainty on variations — but only if scheduled rates are comprehensive and the Engineer's assessments are defensible.

PMC / CAAs Engineer, your variation assessments carry greater weight and greater scrutiny. Must be thorough and well-documented.

ContractorEnsure your scheduled rates cover all foreseeable variation scenarios. Gaps in the schedule become unrecoverable cost risk.

Fletcher Construction Co Ltd v Attorney-General (2003) — Variation work performed without proper instruction or agreement created significant dispute. The case underscores why variation procedures must be followed precisely.

Notice Requirements for Extensions of Time — Absolute Bar

High Risk

What It Does

Clause 13.5 requires timely notice of delay events. Special Conditions often impose strict time limits (10 or 15 working days) and make compliance an absolute precondition to any EOT entitlement. Late notice = no extension, regardless of the legitimacy of the delay.

Owner / DeveloperProtects against late-stage delay claims — but an unfairly denied EOT can trigger a time-at-large argument, weakening your LD position entirely.

PMC / CAMust track all delay events and ensure both parties are complying with notice obligations. This is a process discipline issue.

ContractorSite teams must immediately recognise and report delay events. A diary-based approach is insufficient — systematic tracking is essential.

Multiplex Constructions Pty Ltd v Honeywell Ltd (2007) — While an Australian case, it is widely cited in NZ. The court held that inadequate EOT substantiation — "we were delayed" — is insufficient. The contractor must demonstrate the causal link between the event and the delay to the programme.

No Cap on Engineer's Instruction Variations

Medium Risk

What It Does

Removes any ceiling on the value of work the Engineer can instruct via variation. Combined with "Engineer's assessment final" clauses, this gives the Engineer significant unilateral power to direct additional work without a predetermined cost limit.

Owner / DeveloperFlexibility to respond to changing project needs — but without a cap, variation costs can escalate without a natural check.

PMC / CAIncreased responsibility for variation management and cost control. Must maintain robust variation registers.

ContractorCash flow risk if variations accumulate faster than payment. Ensure the contract doesn't also defer variation payments until final account.

Retention Percentage Increased or Retention Trust Compliance Removed

Medium Risk

What It Does

Standard retention under NZS 3910 Clause 12.4 is typically 10% (capped at 5% of contract value). Special Conditions may increase the percentage or attempt to modify the retention trust obligations imposed by the CCA. The CCA requires retention money to be held on trust — this cannot be contracted out of.

Owner / DeveloperMust comply with CCA retention trust obligations regardless of what the Special Conditions say. Non-compliance is an offence.

PMC / CAAdvise clients on retention trust compliance. Monitor that retention funds are properly held and released at PC and DLP expiry.

ContractorIncreased retention means more cash tied up. Verify that your retention is held on trust as required by the CCA — insolvency of the principal without a trust is a total loss.

Cridge v Studorp Ltd (2017) — This case established that retention money must be held on trust under the CCA. Failure to do so means the money is not protected if the party holding it becomes insolvent.

Practical Completion Criteria Expanded

Medium Risk

What It Does

NZS 3910 Clause 11.3 defines Practical Completion and the Engineer's certification obligation. Special Conditions often expand the criteria — requiring completion of commissioning, third-party certifications, operational readiness, or CCC before PC can be certified. This delays the PC date and extends the contractor's liability period.

Owner / DeveloperEnsures you don't take over an incomplete facility — but extended PC criteria must be clearly defined and achievable.

PMC / CAMust assess PC against expanded criteria. Disputes often arise from ambiguous definitions — document everything.

ContractorExtended PC criteria mean longer defects liability, continued site costs, and delayed retention release. Programme accordingly.

Westminster Properties Ltd v Callick (2015) — Highlighted disputes around what constitutes "complete" when criteria extend beyond the standard form definition. Clear, measurable PC criteria in Special Conditions prevent this.

Engineer's Independence Obligation Modified

Medium Risk

What It Does

Under NZS 3910, the Engineer has a dual role — acting as the owner's agent for some functions and as an independent certifier for others (valuation, PC, EOT). Special Conditions sometimes blur or remove this independence requirement, making the Engineer purely the owner's agent in all functions.

Owner / DeveloperGreater control over the Engineer — but undermines the credibility of certifications, making disputes more likely.

PMC / CAIf acting as Engineer, understand which functions require independence. A compromised independence obligation creates professional liability risk.

ContractorIf the Engineer's independence is removed, every certification becomes challengeable. Consider whether adjudication provisions are adequate.

McConnell Dowell Constructors Ltd v Otago Healthcare Board (2002) — The case examined the Engineer's obligation to act independently in certain functions. When the Engineer stops being independent, the certification framework under NZS 3910 loses its foundation.

CCA Provisions Attempted to Be Contracted Out Of

Medium Risk

What It Does

Some Special Conditions attempt to modify or exclude provisions of the Construction Contracts Act 2002 — for example, restricting the right to suspend work for non-payment, modifying adjudication rights, or altering payment claim procedures. Under s12 of the CCA, provisions that attempt to contract out of the Act are void and unenforceable.

Owner / DeveloperA void clause gives a false sense of security. You think you have a protection that doesn't exist at law. Rely on CCA-compliant procedures instead.

PMC / CAFlag these clauses during contract review. Operating under a void provision exposes the project to unintended consequences.

ContractorKnow your CCA rights. A Special Condition that tries to take them away is unenforceable — but you may need adjudication to prove it.

Marsden Villas Ltd v Wooding Construction Ltd (2007) — Confirmed that provisions in construction contracts which conflict with the CCA are void under s12. The Act's protections cannot be contracted out of regardless of what the parties agree to.

Contract Review Checklist

Use this on your next NZS 3910 contract review. Tick each item as confirmed.

Reviewed all Special Conditions against the NZS 3910 standard form — identified every amendment
Checked time bar provisions — notice periods documented and diarised
Confirmed LD rate and cap — if cap is removed, risk exposure has been quantified
Verified payment schedule response periods — team knows the exact deadline
Reviewed variation valuation method — confirmed scheduled rates cover foreseeable scenarios
Checked EOT notice requirements — absolute bar provisions identified and communicated to site team
Confirmed Engineer's independence obligations — dual role understood by all parties
Verified retention percentage and trust compliance — CCA obligations will be met
Reviewed Practical Completion criteria — expanded requirements are achievable and measurable
Checked for CCA contracting-out provisions — flagged any void clauses
All critical deadlines and notice periods entered into a tracking system
Contract review findings communicated to all relevant team members