CTI Lawyers can review and refine your contracts to ensure your rights, margins, and cash flow are protected before you sign.we can review and refine your contracts to ensure your rights, margins, and cash flow are protected before you sign.
AS 4901 is the standard form subcontract often used alongside head contracts. It’s designed to “back-to-back” the main contract terms with subcontractors, but in practice, it often shifts key risks down the chain. Many subcontractors sign AS 4901 agreements without realising that clauses on security, time, variations, and provisional sums can expose them to payment delays, scope uncertainty, and unfair risk allocation.
In this article, we unpack the top five AS 4901 clauses that most often catch subcontractors off guard and share practical tips to protect your business.
Clause 34.7A Indemnity for delay causing main contract damages
1. Definition
This clause means that if your delay in completing the subcontract work causes the head contractor to miss the main contract completion date, you must reimburse the head contractor for any losses it suffers as a result. This includes both the liquidated damages (the pre-agreed daily rate under the main contract) and any additional damages the head contractor must pay to the principal. If your delay only partly causes the problem, you are only responsible for your share. If you’ve already paid liquidated damages and later receive an extension of time, you must be repaid for those days.
2. Risks
The main risk is that your liability is not limited to your own contract or delay damages — it extends to whatever the head contractor owes under its main contract, which could be very large. Even a small delay on your part could make you responsible for significant sums, including the principal’s losses, unless you can prove you only contributed in part. In practice, this clause creates open-ended financial exposure and shifts the head contractor’s main-contract risk directly onto you.
3. Tips
To manage the risks, negotiate a cap on liability and ensure it only covers direct, reasonably foreseeable losses caused solely by your delay, not all main contract damages. Keep thorough records of delays, notices, and EOT claims to prove when delays were not your fault and to protect against unfair liquidated damages. If liquidated damages are wrongfully deducted, recover them promptly through a SOPA payment claim rather than litigation. Also, use your rights under SOPA to suspend work lawfully if unpaid, which stops further delay damages from accruing, and maintain a lien over unfixed materials for added payment security.
Clause 34.9 No delay costs unless caused by a compensable cause
1. Definition
This clause means you can only claim delay damages (money for delays) if the delay is caused by a compensable cause listed in Clause 1 or Item 29 of Annexure A. If you get an approved extension of time (EOT) for such a cause and submit a proper claim under Clause 41.1, the Subcontract Superintendent must certify the daily amount payable under Clause 41.3. The certified sum becomes your entitlement for each day of delay covered by the approved EOT.
2. Risks
Most delays only entitle you to more time, not money. Unless the delay fits one of the specific compensable causes, you cannot recover delay costs. If compensable causes are not clearly listed in the subcontract or you miss the notice deadline, you may have to absorb major cost overruns even when the delay wasn’t your fault. For example, bad weather or industrial issues may allow extra time but not compensation.
3. Tips
To manage the risks, clearly list all compensable causes in Item 29 (such as late access, design changes, or superintendent directions) so delays from these events qualify for both EOT and delay damages. Keep detailed site records, daily diaries, and timely written notices under Clause 41.1, as late or unclear notices can void entitlement. If the head contractor wrongly withholds payment or deducts liquidated damages, include those disputed amounts in your next SOPA payment claim with supporting evidence (EOT approvals, notices, Item 29 references). This allows quicker recovery through adjudication and preserves your right to suspend work or exercise a lien until paid.
Clause 33 No automatic right to suspend or terminate for delayed site access
1. Definition
This clause gives the Superintendent wide authority to suspend your work — either in whole or part — for many reasons, including safety issues, site or contract disputes, or problems caused by you or the Main Contractor. You cannot stop work on your own unless the Superintendent approves it in writing. Once the issue causing suspension is resolved, the Superintendent must tell you to resume work as soon as reasonably possible.
2. Risks
The main risk is that you have limited control over suspensions but remain responsible for costs and delays if the suspension results from your own fault or request. Even if suspension is caused by others, you can usually only claim extra time (EOT) and possibly additional costs if approved as a variation. You cannot unilaterally suspend or terminate for access delays or other contractor issues, so the clause shifts both timing and cost risks largely onto you.
3. Tips
To manage the suspension risks, always keep detailed written records of all suspension directions, causes, and impacts on time and cost. If suspension is due to the Main Contractor’s fault or non-payment, issue a formal notice under SOPA to preserve your right to lawfully suspend and claim delay costs. Avoid informal or unilateral suspension without written approval. During suspension, document idle labour, equipment, and delay impacts to support EOT or variation claims later. Only recommence work once full access, information, or payment arrears are resolved, and confirm all directions and approvals in writing to protect your position.
Clauses 5, 35, and 39 Release of Security on termination, unresolved claims or during DLP
1. Definition
Under Clauses 5.2 and 5.4, the head contractor can use or keep your security (bank guarantee or retention money) to cover any money they claim you owe, such as for set-offs, delays, or damages, after giving five days’ notice. Security is only released once a certificate of practical completion or final certificate is issued. If the contract ends early, or there are ongoing claims or defects, the head contractor can hold or draw on the security until everything is resolved. Clauses 35 and 39 extend this right to cover defect rectification or completion costs after termination.
2. Risks
You have no guaranteed right to get your security back if the contract is terminated, if there are unresolved claims, or during the defects liability period. The head contractor can unilaterally draw on the security even if you dispute their claim, meaning your cash flow or bank facility could be affected. In short, your security remains at risk until all works are certified complete and all disputes, defects, and potential claims are fully settled.
3. Tips
To manage the above risks, amend the contract so the head contractor can only draw on security after the amount is finally determined by agreement, adjudication, arbitration, or court order, and ensure security is released within 14 days of termination if you’re not at fault. Limit retention beyond the DLP only to certified defects and require prompt release once no certified claims remain. In administration, keep the DLP short (e.g. 12 months), maintain detailed defect and completion records, confirm rectification closure in writing, and negotiate lower retention percentages or use bank guarantees to protect cash flow. Track completion certificates closely and formally request release once obligations are met. If payments are withheld, use your SOPA rights to claim, adjudicate, or suspend work lawfully to recover or protect outstanding amounts.
Clause 3 Provisional Sum
1. Definition
A provisional sum is just a placeholder in the contract for work that is uncertain or not yet defined. It is not part of the fixed contract price and will only be paid if the Main Contractor instructs you to actually do that work. Even then, the value is decided afterward by the Superintendent, not you, based on what they think the work is worth and your actual sub-subcontractor costs plus a capped profit and attendance margin.
2. Risks
This clause puts most of the financial and pricing risk on you. You may spend time or resources preparing for work that never happens, or find that your profit is reduced when the Superintendent values it. You also lose pricing control, may be underpaid for overheads or management time, and face potential disputes or delays in getting paid since everything depends on formal directions, documentation, and the Superintendent’s later assessment.
3. Tips
To manage these risks, treat provisional sums as uncertain and avoid relying on them for cash flow or preliminaries. Before signing, make sure the profit and attendance percentage in Item 16 reflects your real overhead and profit. Always get a written direction and confirm the scope and pricing basis before starting any provisional work. Keep clear records of costs, timesheets, and sub-subcontractor invoices to support later valuation. Only include provisional sum items in your progress claims after formal direction and completion. Under SOPA, you can still claim payment for directed provisional work even if pricing is pending, so ensure all directions and communications are properly documented.
Advice & Support
Should you have any questions or require further clarification, we encourage you to connect with CTI Lawyers Workplace Relations Specialists to get specific guidance and expert assistance on this matter. They are highly knowledgeable in these areas and will be able to provide you with the necessary support.