The latent conditions clause in various general conditions of contract have traditionally proved to be a source of significant disputes in tunnelling contracts, even when extensive geotechnical investigations have been carried out at the tunnel site and a report of these investigations provided with the tender documents, informing the contractor of the nature and extent of subsurface conditions likely to be met with during execution of the works. This paper discusses the contractual aspects of the new latent conditions clause in the recent Australian Standard AS 2124-1986, General Conditions of Contract, in relation to tunnelling contracts. A comparison of this new clause is made with other latent conditions clauses in general conditions of contract in use in Australia and other commonwealth countries. It is seen that the new latent conditions clause in the recent Australian Standard 2124-1986 has, by providing for a reasonable apportionment of risks, attempted to minimize contractual disputes relating to latent conditions in tunnelling contracts and to provide a satisfactory basis for quick and efficient settlement of such disputes should they arise during execution of these contracts.