Fuel shortages, rising costs and delays. What WA builders need to know

Fuel supply disruptions are now impacting the construction industry across Australia, with suppliers introducing fuel levies, increasing prices and delaying deliveries.

The current disruption is being widely compared to the supply chain shocks experienced during the COVID‑19 period. Builders are grappling with rapidly rising costs, unexpected fuel surcharges and growing delays across key trades and supplies, with industry bodies warning that conditions are intensifying and may threaten project viability and delivery timeframes.

For builders and subcontractors, these pressures raise urgent and practical questions about who is likely to bear the risk when costs escalate and projects are delayed.

The guidance below outlines key considerations for both residential and commercial builders operating in Western Australia, with a focus on managing risk, contractual rights and compliance obligations during this period of disruption.

Residential builders

Can I cancel my contract because prices have gone up?

Usually no. Under the Home Building Contracts Act 1991(WA), most residential contracts are fixed price, meaning:

• The Builder carries the risk of cost increases 
• Rising material or fuel costs do not give you a right to terminate 

Termination is only possible if:

• Your contract includes a specific clause allowing it, or 
• The contract is legally “frustrated” (rare and difficult to prove and fuel price rises alone don’t get there)

Can I increase my price?

Usually no. If you are working on a lump sum basis, you can only increase your price if your contract expressly allows it. If you are working on a ‘cost plus’ basis the issue will not arise.

For residential building contracts in WA:

• “Rise and Fall” clauses are illegal for contracts under $500,000 and cannot be used to pass on fuel or material cost increases.
• For lump sum contracts over $500,000, price increases are only permitted if your contract includes a specific rise and fall clause or other escalation mechanism.
• You may be able to recover increased costs where they fall within an agreed Provisional Sum or Prime Cost item, or where the owner agrees to a valid price variation.

If none of these apply, the contract price is fixed and you will generally need to absorb the increased costs.

It is also important to remember that rise and fall clauses often operate both ways. If fuel prices decrease, owners may expect and be entitled to those reductions.

What if suppliers delay me because they have no fuel?

This is an area where builders are generally better protected.

Fuel shortages and related supply disruptions will often qualify as an Extension of Time (EOT) event, as they are typically delays beyond your control (Home Building Works Contract 2019 (WA) cl 19). You should check your contract carefully for the specific wording that applies to supply chain or transport disruptions.

To protect yourself, you usually have to: 

• issue a Notice of Delay to the owner immediately and strictly in accordance with your contract requirements.
• ensure notice is provided in writing and on time, as late notice might jeopardise your entitlement.
• keep clear supporting evidence, including supplier notices, delivery delay confirmations and fuel surcharge documentation.

Important to note:
An EOT generally gives you more time to complete the works, but it does not usually entitle you to additional payment for the delay itself. Unless your contract expressly allows recovery of delay costs, the law generally requires builders to absorb the financial impact of neutral delays.

What if my suppliers/tradie are increasing their prices, what can I do?

Many suppliers are currently adding so‑called “Emergency Fuel Levies” in response to rising diesel prices. Builders and subcontractors should review invoices carefully and remain vigilant, as some suppliers may be “bracket creeping”—using the fuel crisis to disguise broader price increases for materials such as PVC, timber or tiles that are not directly linked to transport costs

What you can do: 

• Request a breakdown of any "surcharge" to ensure it is a transparent fuel levy and not a hidden base-price increase.
• Check for Provisional Sums and Prime Cost Items in your contract. If the affected material was listed as a PS/PC item, you may have some protection under your contract for passing costs to your client.
• Check if the quote is for a fixed price and the validity period.

Commercial builders

Can I cancel my contract?

Very unlikely. Under standard commercial contracts like AS2124-1992 or the updated AS4000-2025:

• There is generally no ability for a Contractor to terminate for "convenience" or due to increased costs
• Attempting to cancel without a substantial breach by the Principal is very risky and you might end up liable for massive damages. Only consider such a step with proper legal advice.

Can I suspend work?

Only in limited circumstances and usually NOT because you have no fuel.

You may be able to suspend under the Building and Construction Industry (Security of Payment) Act 2021 (WA) legislation if:

• You are not paid a statutory payment claim
• You are not paid an adjudicated amount in full
• You are not paid any retention money relating to a payment claim, or

Under the contract, your right to suspend may only arise where the Principal breaches the contract. A fuel price rise is not likely to be a breach.

Can I get a price adjustment?

Only if your contract provides for it. In most cases, fixed price/lump sum commercial contracts shift the risk of cost increases onto the contractor.

You should review your contract carefully for:

• Rise and fall clauses
• Cost escalation provisions
• Provisional sums

In practice, most modern commercial contracts in WA (including AS2124‑based contracts) have the Rise and Fall clause either deleted or amended so the contract operates on a fixed‑price basis. Unless your contract includes a specific escalation mechanism, or the Principal agrees to a variation, you will generally be required to absorb increased fuel and material costs. If none of these mechanisms apply, the cost risk remains with the contractor.

Can I get Extensions of Time (EOTs)?

Fuel‑related supply disruptions are your strongest potential claim area under commercial contracts. Where delays occur from events beyond your reasonable control, you may be entitled to an Extension of Time (EOT), helping protect you from liquidated damages. Entitlement depends on the specific wording of your contract. To maximise your position, delay notices must be issued strictly on time, clearly link the delay to the supply issue, and be supported by evidence such as supplier notices and delivery confirmations.

Am I entitled to delay costs?

An EOT gives you more time, but absent a breach by Principal, delay costs are only recoverable if your contract expressly provides for them, such as through a compensation or reimbursement clause. Most standard commercial contracts treat fuel shortages as neutral events, meaning the financial impact of delays is often borne by the contractor. You should assume delay costs are not recoverable unless the contract clearly says otherwise.

Does force majeure apply?

You can only rely on force majeure if your contract includes a force majeure clause. The amended AS2124 does not contain a general force majeure provision unless it has been amended. 

In any event, most force majeure clauses are unlikely to be engaged simply because of fuel disruptions or costs rises as the works can still be performed albeit they will be delayed or cost more. 

Sub-contractors should also be cautious:

Most commercial sub‑contracts are drafted back‑to‑back with the head contract. If the head contractor is operating under a fixed‑price arrangement, fuel surcharges are likely to be resisted. Subbies should review their sub‑contracts for any variation, Prime Cost or other provisions that may provide a mechanism for relief.

What should you do now?

Cost increases are usually borne by the builder. Consider if EOTs can be claimed and be aware of contract notice requirements:

• Review your contracts for escalation and risk allocation clauses 
• Issue delay notices early and in accordance with your contract 
• Keep detailed records of supplier impacts and cost increases 
• Engage with clients early if issues arise. 

Need advice on your specific contract?
Our construction team can help you assess your position and provide you with specific legal advice. Please contact Tom Jacobs and Isla McRobbie.

Disclaimer:

• The content of this note does not constitute legal advice and should not be relied upon as advice.
• This note contains guidance on the sorts of issues and risks that are commonly raised by the drafting in commercial contracts and subcontracts
• This note is intended to assist members to understand the nature of the risk or issue identified, and to give examples of the methods and drafting that might be used to manage those issues and risk methods addressed.
• Any particular solutions for any particular contract scenario will depend upon the particular facts, matters and circumstances of that situation. 
• All contractors and subcontractors should take their time to fully review and make sure they understand all contract documentation.
• If in doubt about the meaning and effect of any specific clause, please seek legal advice.
• Members of Master Builders Association of WA can call the member hotline to receive 30 mins legal guidance from a qualified lawyer 1300 651 959.