After repudiation, the contract price disciplines what terminated work is worth

In March 2014, Peter and Angela Mann engaged Paterson Constructions under a major domestic building contract governed by the Domestic Building Contracts Act 1995 (Vic) to build two double-storey townhouses at Blackburn, Melbourne, for a fixed price of $971,000, payable by staged progress payments. During the works the Manns orally requested 42 variations, which the builder carried out, without the written notices the contract and s 38 of the Act required.

After the first unit was handed over, the builder claimed roughly $48,000 for that unit's variations. Relations collapsed; in April 2015 the Manns purported to terminate for the builder's repudiation and excluded it from site. The builder treated that purported termination as itself repudiatory and accepted it. VCAT found the Manns had wrongfully repudiated, and the builder elected quantum meruit. VCAT valued the work, before defects, at $1,722,611 against the $971,000 price, and awarded $660,526.41, substantially more than contract damages would have produced. The Victorian Supreme Court and Court of Appeal, bound by the old line of authority, upheld the approach. The High Court allowed the appeal and remitted the matter: Mann v Paterson Constructions Pty Ltd [2019] HCA 32.

Three questions of real commercial consequence: may a builder who accepts a repudiation claim restitution as an alternative to contract damages at all; if so, for which work; and is the recovery capped by the contract price? A fourth, specific to domestic building work: can a builder recover anything for variations that bypassed the statutory written-notice regime?

The Court was unanimous on the central restriction: where the contractual right to payment for a stage had already accrued (completed stages), there is no restitutionary alternative. Termination for repudiation operates prospectively; accrued rights survive and are enforced as debt or damages under the contract. The old reasoning that termination “rescinded” the contract and left the work unpaid-for on a clean slate (the rescission fallacy) was rejected.

For the incomplete stage, the Court divided. Kiefel CJ, Bell and Keane JJ would have abolished the quantum meruit alternative outright. The majority preserved it in confined form: Gageler J held recovery cannot exceed the portion of the contract price attributable to the work; Nettle, Gordon and Edelman JJ held the amount should prima facie not exceed a fair value calculated in accordance with the contract price or the appropriate part of it. The practical effect either way: the bargain disciplines the valuation. Earlier authority permitting recovery above the contract rate (the Renard and Sopov v Kane line) no longer represents the law.

On the variations, the Court unanimously held s 38 of the Victorian Act covers the field: a builder who performs domestic building variations without the statutory process is confined to the Act's narrow gateway, and common-law restitution is excluded. Forty-two oral variations, recoverable (if at all) only through a provision the builder had not engaged.

For decades, Australian builders held a famous escape hatch: if the principal repudiated, the builder could terminate, ignore the contract price, and claim a “quantum meruit” (the reasonable value of the work) which courts sometimes assessed at figures far above the bargain. Underpriced job, difficult client, repudiation: the termination could be worth more than performance. Mann closed that hatch. The High Court confined restitution after repudiation to a narrow field and anchored its value to the contract, ending one of construction law's most commercially distorting doctrines.

Victoria is replacing ss 37 and 38. For contracts entered into from commencement (1 December 2026 at the latest), a variation needs a signed written agreement, and a builder who skips it can recover only if VCAT finds exceptional circumstances or hardship (Domestic Building Contracts Amendment Act 2025 (Vic) ss 2(3), 17; new s 37(3) to (5), s 139).

1. 01

   Terminated work is now valued through the contract, not around it. For completed stages or milestones, entitlement is the accrued contract amount. For work in progress, expect any restitutionary assessment to be built from the contract price and rates: schedule of rates, milestone breakdowns, the priced bill. The “independent reasonable value” report untethered from the bargain is a relic.

2. 02

   Stage and milestone payment structures shrink the battlefield. The more granular the payment structure, the more of the work sits behind accrued rights where only contract remedies run. That is now a drafting consideration: principals benefit from fine-grained stages; contractors should at least understand what the structure does to their termination position.

3. 03

   Repudiation maths has changed for principals too. Before Mann, repudiating against an underpriced contractor risked a quantum meruit windfall to the other side. That in terrorem effect is gone, but contract damages, including loss of profit on the balance of the works, remain fully alive.

4. 04

   Document variations or lose them. The s 38 holding is Victorian, but domestic building regimes in other states impose their own formalities, and commercial contracts have their own written-direction machinery. Mann's variation holding turns on the Victorian Act, but the lesson travels: the contract's written-direction machinery is the safe route everywhere. Forty-two oral variations should never exist on any well-administered project: the variation register, signed directions and contemporaneous pricing are the entitlement.

5. 05

   Quantum discipline applies to claim preparation now. When valuing termination accounts or supporting experts in repudiation disputes, start from the contract's own pricing architecture and build any departures as exceptions requiring justification, because that is precisely how a tribunal will now test the figure.

• Domestic Building Contracts Act 1995 (Vic) s 38 (variations), including s 38(6)(b) and (7) (recovery through VCAT).
• Domestic Building Contracts Amendment Act 2025 (Vic) ss 2(3), 17, 20 (new ss 37, 38 and 139).
• Mann v Paterson Constructions Pty Ltd [2018] VSCA 231 (the decision appealed from).
• Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234.
• Sopov v Kane Constructions Pty Ltd [No 2] (2009) 24 VR 510.