The majority of Australian construction businesses dealing with fuel and input cost increases in 2026 are working under fixed-price lump-sum contracts with no rise and fall clause. Being in this position does not mean there are no options. It means the options require more effort, more documentation, and in most cases a commercial negotiation rather than a straightforward contract claim.
The most practical path for most contractors is a direct commercial negotiation with the principal. This is not a legal claim. It is a business conversation. The contractor approaches the principal with a documented case showing the actual cost impact and proposes a mechanism for sharing that impact.
This works more often than contractors expect. The principal has a project to deliver. A contractor absorbing unrecoverable losses becomes a program risk. Subcontractors doing the same become an insolvency risk on the supply chain.
The commercial variation needs to be executed as a deed of amendment, signed by both parties.
Many contractors conclude they have no contractual entitlement without having done a thorough review of the whole contract. Check carefully:
Special conditions that modify the standard form — these frequently add cost adjustment mechanisms that the standard General Conditions do not include.
Superintendent-directed variations — if the Superintendent has directed you to use a specific material, method, or programme that increased your costs, that direction may be a compensable variation regardless of whether the contract has a rise and fall clause.
Delays caused by the principal — if the principal caused delays that extended the project into a higher-cost period, the principal may be liable for those delay costs.
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Three fixed-fee services covering your legal, cost, and business situation. Rachelle Hare and Shannon Drew directly.
Frustration is a common law doctrine that applies where an event outside the parties’ control makes performance of the contract radically different from what was contemplated. Courts apply the doctrine strictly and are reluctant to find frustration where the contract could still be performed, even at a materially higher cost.
The Australian Consumer Law prohibits unconscionable conduct in trade or commerce. In limited circumstances, a principal’s insistence on strict performance in circumstances where the contractor would suffer extreme hardship, and where the principal knew about that hardship and took advantage of it, may constitute unconscionable conduct. This is a high bar.
All require a clear, documented picture of your actual cost position across all six inputs, including overhead recovery and pricing exposure. You cannot negotiate a commercial variation without knowing what you are negotiating for.
Blaze Business & Legal
Three fixed-fee services for construction businesses working through the cost crisis. Rachelle Hare and Shannon Drew directly, from the first conversation.
Rachelle Hare is a construction lawyer and business adviser with 25 years of experience, including in-house roles at Thiess, Laing O’Rourke, Acciona, DHA, and UGL. She advises construction businesses on contracts, cost recovery, risk, procurement, commercial strategy, and business structuring across Queensland and Australia.
