Variations Arising Under a Construction Contract

In construction projects, variations are changes or modifications to the originally agreed-upon work. These variations are common due to the complex and dynamic nature of construction and engineering works. Understanding how variations are managed and compensated is crucial for both contractors and employers.

What are Variations or Extra Work?

Variations can include additions, omissions, or substitutions to the original scope of work. They are often necessary due to changes in the employer’s requirements or unforeseen site conditions. For example:

• Employer’s Needs: The employer may decide to change the design, use different materials, or add new features.

• Site Conditions: The contractor may encounter unexpected site conditions requiring additional work.

Contractor's Obligation to Comply with Instructions

Contractors are generally obligated to comply with instructions for variations as specified in the contract. However, they should ensure that such instructions are formally documented and authorised by the appropriate parties.

Can a Contractor Object to an Instruction?

In some cases, a contractor may have grounds to object to an instruction, particularly if it involves substantial changes not covered under the original contract terms or if it imposes unreasonable demands. Contractors should review the contract terms and consult with legal counsel if they believe an instruction is unjustified or constitutes a variation of the contract.

Determining if the Work is Included in the Contract

Before proceeding with any instructed work, contractors must determine whether the work is already included in the original contract. This assessment can prevent disputes over what constitutes a variation versus what was initially agreed upon.

Lump Sum Contracts

In lump sum contracts, the contractor agrees to complete the work for a fixed price. Variations under such contracts must be clearly defined and agreed upon, as they can affect the overall project cost and schedule.

Measurement and Value Contracts

Measurement and value contracts involve payment based on the quantities of work completed. Variations in these contracts are measured and valued according to agreed rates, making it essential to have accurate and detailed records of the work performed.

Pricing Errors in the Bill of Quantities

If there are pricing errors in the bill of quantities, it can lead to disputes over variations. Both parties should review and agree on the corrected quantities and prices to avoid conflicts.

Authority to Instruct Variations

Only authorised agents or representatives of the employer can instruct variations. Contractors must ensure that any instructions for variations come from duly authorised personnel to avoid issues of non-payment or disputes over unauthorized work.

Consequences of Omitted Work

Instructions to omit work must be handled carefully, as they can impact the project’s overall scope and cost. The cost consequences of omitted work should be assessed and agreed upon by both parties to ensure fair compensation.

Contractor's Entitlement to Payment for Variations

Contractors are entitled to be paid for variations as long as they comply with the contract terms and provide the necessary notices. It is important to follow the contract’s provisions for documenting and agreeing upon variations to ensure payment.

Notice Provisions and Conditions Precedent to Payment

Most contracts include notice provisions requiring the contractor to notify the employer of any variations within a specified time frame. Failing to provide timely notice can result in the contractor losing their entitlement to payment for the variation.

Valuation of Variations

Variations are typically valued based on the contract’s agreed rates or a fair market value if no rates are specified. Accurate valuation is crucial for ensuring that contractors are fairly compensated for the additional work.

Other Contractual Remedies for Contractors

Contractors may have other remedies available, such as claims for an extension of time or additional costs due to variations. Understanding these remedies and how to apply them can help contractors manage variations effectively.

Conclusion

Variations are an inevitable part of construction projects, and managing them effectively is key to the successful completion of the project. By understanding the legal and contractual implications of variations, both contractors and employers can navigate these changes smoothly and ensure fair compensation and project delivery.

For further information or assistance with managing variations in construction contracts, please contact our legal team. We are here to provide guidance and support to help you navigate these complexities and protect your interests.

The content of this article is valid as of the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Klitos Platis by email at klitos@kleanthousplatis.com.