Rise-and-fall clause (building contract)
Rise-and-fall clause allows a fixed-price contract to adjust for material cost movements. Restricted in Vic on contracts under $500K. NSW: must be in writing.
Ask Chalkline about this →A rise-and-fall clause in a building contract is an optional provision that allows the contract price to adjust upward (or in theory downward) for movements in the cost of materials during the construction period. It is the contractual mechanism that protects a builder from the risk that a price quoted in early design becomes uneconomic 12 to 18 months later when steel, concrete, timber, or other major inputs have risen materially in the meantime. Without a rise-and-fall clause in a fixed-price contract, the builder wears every cost increase, no matter how large or how outside their control.
Where the clause applies in Australian residential:
| Contract form | Default rise-and-fall? | Notes |
|---|---|---|
| HIA New Home Construction (NSW) | No, included as optional Schedule 2 amendment | Must be elected at contract formation; mid-build addition is a variation |
| HIA Fixed Price | No, optional | Schedule provides the formula |
| HIA Cost Plus | Not applicable | Owner pays actual costs; no fixed price to escalate |
| ABIC Simple Works (SW-2018) | No, optional | Architect-administered; rise-and-fall is a project-specific election |
| MBA Standard Residential Contract | No, optional | Similar opt-in pattern |
State-specific restrictions:
- Vic (Domestic Building Contracts Act 1995): rise-and-fall clauses are restricted on contracts under $500,000 for cost-plus and certain price-rise components. The Act sets specific conditions for any allowable adjustment. Vic builders working under $500K largely cannot use a general rise-and-fall.
- NSW (Home Building Act 1989): rise-and-fall is permitted but must be in writing, fully disclosed, and the formula must be specified. Schedule 2 of the HBA Schedule has been the subject of repeated court challenge on opaque formulas.
- Qld: rise-and-fall permitted under contract, subject to QBCC disclosure rules.
Typical formula structure:
A common rise-and-fall formula bases adjustment on:
- Specified base materials (commonly steel, concrete, timber, cladding, fixtures).
- Published price indices at the start and at the date of triggering material delivery (e.g. ABS Producer Price Indexes; Rawlinson’s Construction Handbook tables).
- Adjustment cap: often 5 to 10% of contract sum.
- Trigger threshold: e.g. adjustment only applies if the index has moved more than 3%.
Why builders should know about it:
- Volatile periods: 2021-2023 saw 30 to 100% increases in many residential materials. Builders with fixed-price contracts and no rise-and-fall went into administration; builders with rise-and-fall passed costs through.
- Disclosure obligation: under the Home Building Act, the rise-and-fall clause must be disclosed to the owner at contract signing. Hidden or unilateral clauses are unenforceable.
- Owner pushback: owners commonly object to rise-and-fall; the builder loses some price-certainty value when explaining. Some volume builders absorb the risk to keep the contract simpler.
Owner protection considerations:
- Set a clear upper cap (e.g. “rise-and-fall not to exceed 10% of contract sum”).
- Require documentation of the cost movement (supplier invoices, published index data).
- Both directions: a true rise-and-fall clause adjusts down if material prices fall, not just up.
Also known as: price escalation clause; cost escalation; variation for materials (sometimes, loose); contract price adjustment.
Category: Contracts & commercial.
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Last updated: 2026-05-16. Verified: 2026-05-16. Quarterly review for currency.