The Prevention Principle and Implied Duty of Good Faith in Construction Contracts

    View Author June 2017

    The recent decision of Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151 emphasises the ongoing importance of the “prevention principle” in the New South Wales and broader Australian construction industry and found that an implied term of good faith can govern the unilateral power to extend time commonly found in standard form construction contracts.

    Key Findings

    • Probuild directed its contractor, DDI, to perform variations after the date for practical completion.
    • DDI did not within the contractual time frames claim an extension of time to the date for practical completion for delays arising out of the variations.
    • Probuild was nevertheless obliged to grant DDI an extension of time because of a discretionary contractual clause which permitted Probuild to grant extensions of time even where no claim had been made.
    • The court found that Probuild was obliged to exercise its discretion because the requirements of honesty and fairness in the context of the prevention principle dictated as much and, separately, because it was operating under an implied duty of good faith to do so.