Even though this subject has been written about extensively on this platform, key considerations and ideas behind building contract variations ought to be restated as they are critical to have in mind when dealing with the common issue of variations.
The idea behind a variation is that it is something different to the originally agreed ‘scope’ of or the brief for work. If it was included within the original scope, it is not a variation.
This sounds simple. However it can be surprising how often a dispute occurs as to what is or was not included in the original scope. This can be a matter of interpretation and sometimes it is arguable that either party may be correct in their interpretation. The situation may well require a court or a tribunal to ‘impose’ their own interpretation on the parties.
Further complicating matters are items of work which are not specifically referred to in the contract but which may reasonably be considered an indispensable part of the works within scope.
It is a fundamental principle of contract law that as to the terms of the contract the parties are ‘as one’ as to all of the terms or at least the essential terms of the contract. In reality, though, parties rarely say that they are in agreement although of course their signature arguably indicates that they are. That leaves open the potential for hidden agendas and ‘hidden’ misunderstandings as to what the terms are and what was or is included in the ‘scope’ or the ‘brief.’
Human affairs being what they are, it is just about impossible to avoid people disputing about nearly anything in life, but in particular building works rights, obligations and liabilities. Variations to contract are a fertile ground for dispute. For example, is a change in quality rather than quality a variation? And what about changes in levels lines and positions? The answer, albeit unhelpful, is that yes these things can be variations but it depends on all of the circumstances.
As an example of the consequences of a dispute as to a variation, if a party insists on their interpretation of the contract in respect of a variation, it can result in that party being in breach of the contract and entitling the other party to terminate it. In a worst-case scenario, the parties can then end up in court or a tribunal. This can be costly, time consuming and stressful, not to mention the potentially irreparable damage to the relationship between the parties.
Even if there is agreement as to certain variations, there are restrictions the law imposes upon them. One is that if the variation fundamentally alters the whole scope of the works then a court or a tribunal may ‘strike it down’ and rule it invalid. Also, it cannot be that a builder just says they are going to get someone else or some other unrelated business entity or individual entirely to do the same works. The identity of contracting parties is fundamental.
The next important issue is that there are procedures to abide by as to how a variation comes into place, such as that they are required to be in writing and preferably signed by both parties. The contract itself often prescribes the necessary procedure. These procedures are often not followed, whether through inadvertence or a sheer refusal to follow the procedure. If the procedure isn’t followed by one party, the other party is often permitted to not abide by the variation as in, depending on who is at fault, not pay for the variation or not do the variation and the works associated with it.
A court or a tribunal again may have to step in and resolve the disputed issues.
Of course, variations to the scope of the works or services can be required to occur in the sense that circumstances arise outside the control of the parties. A common example is latent conditions. These are conditions on or in the site that the parties did not know about when entering into the contract and that they had no way reasonably of knowing about by inquiries or conducting investigations.
Similarly, fundamental changes such as changes in relevant law and weather conditions can mean that the law says in effect that the site conditions have altered to an extent that something in fairness needs to be altered as to the parties’ rights and obligations. That is separate from periods of time allowed as a matter of course in most residential building contracts so that time is in a sense automatically extended or extra time is allowed for as far as completion is concerned.
The above is a mere snapshot of some key issues that variations to building contracts throw up. More could be written but space doesn’t allow.
Of course, professional advice should be sought in cases of issues causing doubt, confusion and disputation.