No Written Contract? You Could Lose Your Profit Margin Entirely

What Queensland Builders Must Know About the Statutory Withdrawal Right Under Schedule 1B of the QBCC Act

Published by Odyssey Legal | Business & Litigation Lawyers

You have spent months on site. Materials purchased. Subcontractors paid. The job is substantially complete. The owner has moved in. Then, out of nowhere, a letter arrives from their solicitor purporting to withdraw from the contract and claiming a refund.

If you never provided your client with a signed copy of the contract and the QBCC Consumer Building Guide, that scenario is not hypothetical. It is exactly what happened in Number One Quality Homes Pty Ltd v Murphy [2024] QCAT 605, and the builder lost.

Within this article, our expert building & construction lawyers will explain what went wrong in Murphy, and the practical steps every Queensland builder must take to protect themselves.. Alternatively, watch our youtube video (here).

The Legal Framework: Schedule 1B of the QBCC Act

Schedule 1B of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) governs all domestic building contracts in Queensland. It applies to any domestic building work over $3,300 and imposes mandatory obligations on builders that cannot be contracted out of.

For a Level 2 regulated contract (any domestic building work valued at $20,000 or more), the builder must:

• Provide a written contract signed by both parties before work commences.
• Give the owner the QBCC Consumer Building Guide before they sign the contract.
• Provide the owner with a signed copy of the entire contract (including plans and specifications) within 5 business days of entering the contract.

Failure to comply with any of these obligations does not just expose the builder to QBCC fines, demerit points, and disciplinary action. It also activates the owner's right to withdraw from the contract under section 35(3) of Schedule 1B, a right that remains open indefinitely until the deficiency is cured.

The Withdrawal Right: How It Works

Section 35 of Schedule 1B gives the building owner three distinct withdrawal rights:

• Section 35(1): 5 business days from receiving a signed copy of the contract from the builder.
• Section 35(2): 5 business days from receiving the Consumer Building Guide, if it was not provided before the signed contract.
• Section 35(3): At any time, if 5 business days have passed since the contract was entered into and the owner has still not received a signed copy of the contract and the Consumer Building Guide.

Section 35(3) is the most dangerous provision for builders. It has no time limit. If you never provide the required documents, the owner's right to withdraw never expires, even after works are complete, possession has been taken, and the final invoice has been issued.

What Happened in Murphy: A Cautionary Tale

In Number One Quality Homes Pty Ltd v Murphy [2024] QCAT 605, Member Scott-Mackenzie delivered a decision that every Queensland builder should read carefully.

The Facts

The facts were agreed between the parties:

• The builder (NOQH) entered a Master Builders Cost Plus Level 2 residential contract in September 2017 for construction of a granny flat and home at Buderim on the Sunshine Coast.
• The builder never provided the owners with a signed copy of the full contract or the Consumer Building Guide.
• Works were substantially complete by May 2018. The owners took possession in June 2018.
• The owners paid $651,440.32 across 11 progress payments.
• In October 2018, four months after taking possession and after receipt of the final invoice for $62,244.56, the owners served a withdrawal notice under section 35(3).

The Builder's Defence

The builder argued that the owners should be estopped from exercising the withdrawal right. Mr Murphy was an experienced building industry professional who had directed companies holding QBCC builder licences and had constructed hundreds of homes. The builder contended that Mr Murphy's conduct (signing without the documents, never asking for them, making all progress payments, taking possession, and waiting four months before withdrawing) amounted to a representation that he did not need or want the documents, and that it would be unconscionable for the owners to rely on the builder's non-compliance.

The Decision

The Tribunal held, as a matter of law, that estoppel cannot operate against the statutory withdrawal right in section 35(3). The QBCC Act is consumer protection legislation. Section 108D expressly prohibits contracting out of the Act. The exceptions to the withdrawal right in sections 36 and 39 are exhaustive. Parliament deliberately defined them and did not include the owner's industry experience or conduct among them. No matter how sophisticated the owner, no matter how clearly their conduct may have indicated they did not need the documents, the statutory right cannot be extinguished by conduct or agreement.

The builder was ordered to refund $28,373.92 to the owners. The final invoice of $62,244.56 was irrecoverable.

The Quote Acceptance Trap

A common misconception among Queensland builders is that these obligations only apply where a formal written contract has been executed. They do not. A contract formed by acceptance of a quote (the most common arrangement in the residential renovation and construction market) is still a domestic building contract for the purposes of Schedule 1B if it involves domestic building work over $3,300.

The practical consequences are significant. Where a builder commences work on the basis of an accepted quote without issuing a compliant written contract:

• The builder is in breach of Schedule 1B and exposed to QBCC disciplinary action from day one.
• The owner's right to withdraw under section 35(3) is activated from the moment 5 business days pass after the contract is formed.
• That right remains continuously open regardless of how much work is done or how much has been paid.
• Issuing a formal contract late, after works have commenced or been completed, does not retroactively cure the non-compliance or extinguish the accrued withdrawal right.

The Financial Consequences of a Valid Withdrawal

Where an owner validly withdraws under section 35, section 38 of Schedule 1B governs the financial consequences. The builder's recovery is capped at the retainable amount, which is the sum of:

• $100 (only where the withdrawal is under section 35(1)); plus
• Reasonable out-of-pocket expenses incurred before the withdrawal notice was served.

Out-of-pocket expenses will likely capture materials purchased, subcontractor invoices paid, and employee wages directly attributable to the project. What it does not capture is the builder's own time as a sole operator, profit margin, or head office overheads. In a worst case scenario, a builder who has completed the entire job could find themselves entitled to recover only their direct costs, with their margin lost entirely.

In Murphy, the agreed out-of-pocket expenses were $623,066.40 against a total amount paid of $651,440.32. The difference of $28,373.92 was refunded to the owners. The builder received nothing for his profit margin on a project that took over nine months to complete.

Can a Solicitor's Letter Constitute a Valid Withdrawal Notice?

Section 37(2) of Schedule 1B defines a withdrawal notice as a written notice signed by the building owner. This raises an important and unresolved question: can a solicitor sign the notice on behalf of the owner?

There is a compelling argument that personal signature by the owner is required. Parliament used the phrase 'signed by or on behalf of each of the parties' when dealing with the contract itself in section 14(2) of Schedule 1B, but deliberately omitted that language from section 37(2) when defining the withdrawal notice. That drafting contrast, within the same Schedule, strongly suggests the owner's personal signature is a strict requirement that cannot be satisfied by an agent's signature.

This point has not been authoritatively decided in Queensland. Owners' solicitors will argue that general agency principles apply and that a properly authorised solicitor can sign on behalf of their client. Builders should be aware, however, that where a withdrawal notice is signed only by a solicitor (without the owner's own signature), there are reasonable grounds to challenge its validity, and that challenge should be raised promptly in writing before any opportunity to cure the defect arises.

The withdrawal notice must also comply with section 37(2) in terms of content: it must state that the building owner withdraws from the contract and must identify the specific section of Schedule 1B under which withdrawal is being made. A general letter asserting dissatisfaction with the work or threatening to withdraw is not sufficient.

The Only Defences Available to a Builder

Following Murphy, the circumstances in which a builder can defeat a withdrawal notice are narrow. The only statutory exceptions under section 36 are:

• Prior contract exception: The parties previously had a regulated building contract on substantially the same terms for substantially the same services at the same site.
• Legal advice exception: The owner received formal independent legal advice about the contract from a practising lawyer before signing, or told the builder they had done so.

These exceptions are exhaustive. As confirmed in Murphy, a builder cannot rely on estoppel, the owner's industry experience, the owner's conduct, or any other equitable or common law principle to defeat the withdrawal right. The only way to extinguish the right is to comply with the statutory obligations in the first place.

What Builders Must Do: A Practical Checklist

To protect your profit margin and comply with Schedule 1B, every Queensland builder undertaking domestic building work over $3,300 should follow this process without exception:

• Before signing: Provide the QBCC Consumer Building Guide to the owner before they sign anything.
• At signing: Use a compliant written contract, not just a quote, signed by both parties, dated, and containing all mandatory elements required by section 13 or 14 of Schedule 1B.
• Within 5 business days: Provide the owner with a signed copy of the entire contract including all plans and specifications.
• Keep proof: Document that the Consumer Building Guide and signed contract were provided. Obtain a signed acknowledgement from the owner if possible.
• Do not start work: Until the contract is properly executed and the required documents have been provided and acknowledged.

Key Takeaways for Builders

1. A contract formed by quote acceptance is still a domestic building contract subject to Schedule 1B.
2. The owner's right to withdraw under section 35(3) has no time limit if you never provide the required documents.
3. Estoppel, the owner's experience, and their conduct are irrelevant. Murphy confirmed this definitively.
4. On a valid withdrawal, your recovery is limited to out-of-pocket expenses. Your profit margin is gone.
5. A withdrawal notice signed only by a solicitor may be challengeable. Do not rely on that alone.

Get Advice Early

If you have received a withdrawal notice, or if you are a builder who has commenced work without a compliant written contract, the time to act is now. The decisions you make in the first days after receiving a notice, including whether to challenge its validity, how to respond on the record, and how to quantify your out-of-pocket expenses, can make a material difference to your financial exposure.

Odyssey Legal acts for builders and contractors across Queensland in QBCC disputes, contract enforcement, and domestic building litigation. We offer plain English advice, transparent pricing, and real experience in the Queensland building industry.

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Frequently Asked Questions

Q: Does Schedule 1B of the QBCC Act apply to contracts formed by acceptance of a quote?

A: Yes. Any contract for domestic building work valued above $3,300 is a domestic building contract subject to Schedule 1B, regardless of whether a formal written contract document exists. A contract formed by acceptance of a quote is not exempt. If the builder has not provided a compliant written contract and the Consumer Building Guide, the withdrawal right under section 35(3) applies from the moment five business days pass after the contract is formed.

Q: How long does the owner have to exercise the withdrawal right under section 35(3)?

A: There is no time limit. Section 35(3) of Schedule 1B remains open indefinitely for as long as the builder has not provided both a signed copy of the contract and the Consumer Building Guide. This right does not expire when works are completed, when the owner takes possession, or when the final invoice is issued. It remains open until the required documents are provided.

Q: Can the owner be estopped from exercising the withdrawal right if they have experienced building industry professionals?

A: No. Murphy confirmed that estoppel cannot operate against the statutory withdrawal right. The QBCC Act is consumer protection legislation and section 108D prohibits contracting out of its provisions. The owner's industry experience, conduct, payment history, and silence are all legally irrelevant. The only way a builder can defeat the withdrawal right is to rely on one of the two exhaustive statutory exceptions in section 36.

Q: If an owner validly withdraws, what can the builder recover?

A: Under section 38 of Schedule 1B, the builder can only recover their reasonable out-of-pocket expenses incurred before the withdrawal notice was served. This includes materials purchased, subcontractor invoices paid, and employee wages directly attributable to the project. It does not include the builder's own time as a sole operator, profit margin, or head office overheads. The builder's profit margin is not recoverable.

Q: Is a withdrawal notice signed only by the owner's solicitor valid?

A: This is an unresolved question in Queensland. Section 37(2) of Schedule 1B defines a withdrawal notice as a written notice 'signed by the building owner', which is different from the contract execution language in section 14(2) that allows signing 'by or on behalf of each of the parties'. That deliberate drafting contrast provides a basis to challenge a notice signed only by a solicitor. Builders who receive such a notice should raise the challenge promptly in writing before any opportunity to cure arises.

Q: Does issuing a formal contract after work has commenced fix the problem?

A: No. Issuing a compliant written contract after works have commenced does not retroactively cure the non-compliance with Schedule 1B. The owner's withdrawal right, once accrued, is not extinguished by the later provision of documents. Builders in this position remain at risk until the matter is formally resolved.

Q: What are the two statutory defences to a withdrawal notice?

A: The only defences are set out in section 36 of Schedule 1B. The first is the prior contract exception: the parties previously had a regulated building contract on substantially the same terms for substantially the same services at the same site. The second is the legal advice exception: the owner received formal independent legal advice about the contract from a practising lawyer before signing, or told the builder they had done so. No other defences are available, including estoppel or the owner's conduct.