Busting Your Variation Myths

A contract for the execution of work confers on the contractor not only the duty to carry out the work but the corresponding right to be able to complete the work which it contracted to carry out… contracts contain provisions to enable the employer to vary the work in order to achieve lawfully what could be achieved without breaking the contract or by a separate further agreement with the contractor

Most construction contracts contain mechanisms and procedures allowing the scope of the project to change: by adding more work, changing or substituting works and/or reducing the scope of the works.

During a workshop with contract administrators, I spotted some myths about variations that do not reflect current standard forms or English law.

Top 5 Myths

The truth about variations is explained from the perspective of the contract administrator.

Myth 1: I can issue variations even if the contract does not include a procedure or right to do so.

Answer 1: If there is no variation clause in the contract, neither partner has any right to change the project – each partner is only obliged to complete the obligations as originally described and can refuse to do anything else! (Abbey v PP 2003). Any instruction could form the basis of a new (and parallel) contract.

Myth 2: I can order the contractor to omit works that we both agree are no longer needed.

Answer 2: You can only omit works if the definition of a change or variation in your contract expressly includes reducing the scope of work (SWI v P&I Data).

Myth 3: I can order the contractor to omit works to give them to a cheaper/better/quicker/more competent rival.

Answer 3: A variations clause can only be used to omit works that are no longer needed. Omitting works to pass them to another contractor is not allowed (Amec v Cadmus 1997) as it smacks of terminating the contract without a proper reason (termination for convenience or at will).

Myth 4: I can order works outside the scope of the original project using the variation procedure.

Answer 4: Works which are ‘so peculiar so unexpected and so different from what [the parties] reckoned or calculated on’ are not a variation (Thorn v London 1876). If the contractor could refuse to do those works then they are not properly a variation but a new contract.

Myth 5: I can order works which change the character of the contract using the variation procedure.

Answer 5: If the new works are of a different nature, then you need a new contract eg a dredging contract cannot be varied to include building a marina (Costain v Zanen 1996) or a nature reserve.

What should you do?

As a contract administrator, read your contract carefully to understand the limits on your authority. Do not go beyond it!

As a contractor, if you are unclear whether it is a permitted change, ask thecontract administrator to confirm which clause her instruction relates to.

Under some standard form contracts, like MF/1, a contract administrator is limited in the total value of variations she can order, precisely to prevent the misuse of the variation mechanism. Whilst it is intended to minimise the need for a new contract for every change to the intended works, it is not a panacea!

Quote: Abbey Developments Ltd v PP Brickwork Ltd [2003] EWHC 1987 (TCC).

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