Rise-and-fall clauses in building contracts
What a rise-and-fall or price-escalation clause actually does, why it matters in a fixed-price contract, and the questions to ask before you sign.
A fixed-price contract sounds like it locks everything in, but the detail matters. A rise-and-fall clause, sometimes called a price-escalation clause, lets the builder pass on certain increases in the price of materials or labour after you have signed. Some contracts have them, some do not, and understanding yours is one of the most important things you can do before committing. This applies to building contracts in both SA and Victoria.
What the clause does
When materials or labour jump in price after you sign, a rise-and-fall clause decides who wears that increase. Without one, the builder carries the risk under a genuine fixed price. With one, some or all of the increase can be passed to you, depending on how the clause is written. Neither is automatically wrong, but you need to know which you are agreeing to.
Why it matters more now
After a stretch of volatile supply costs, builders are understandably cautious about locking in prices far ahead. That makes these clauses more common and more important to read. A clause with clear triggers, caps and a duty to evidence any increase is far fairer to you than an open-ended one that can pass on anything.
The questions to ask
Ask plainly whether your contract contains a rise-and-fall or price-escalation clause, and if so, what can trigger it, whether there is a cap, and whether the builder must prove the increase. Also finalise your soil report and engineering before signing, because unresolved site conditions are a common route to post-contract variations that have nothing to do with escalation clauses.
What to look for in the clause
- A true fixed price with no rise-and-fall is the most certain for you
- If a clause exists, clear limits and triggers beat open-ended ones
- A requirement for the builder to evidence any increase
- A cap or threshold before the clause can apply
- Open-ended clauses that pass on any increase with no cap
- Vague wording about what counts as a trigger
- No obligation to prove the increase actually occurred
- Large sections left as provisional sums or allowances
A genuine fixed price with no rise-and-fall gives you the most certainty, but if a clause is present it is not necessarily a dealbreaker. What matters is that it has clear triggers, a cap, and a duty on the builder to evidence any increase. Read it, ask about it directly, and get your site conditions settled before you sign.
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Match me with 3 buildersCommon questions
What is a rise-and-fall clause?
It is a clause in a building contract, sometimes called a price-escalation clause, that lets the builder pass on certain increases in material or labour costs after you have signed. Without one, the builder carries that risk under a genuine fixed price.
Should I avoid a contract with a rise-and-fall clause?
Not necessarily. A true fixed price with no clause is the most certain for you, but a clause with clear triggers, a cap and a duty to evidence increases can still be fair. The danger is open-ended clauses with no limits.
How do I protect myself from price increases?
Read whether your contract has a rise-and-fall clause and what can trigger it, look for caps and evidence requirements, and finalise your soil report and engineering before signing so site conditions do not become separate variations.
Are rise-and-fall clauses common in Australia?
They have become more common after a period of volatile supply costs, as builders manage the risk of locking in prices far ahead. That is exactly why it is worth checking your own contract carefully in both SA and Victoria.