Most contracts will include some form of mechanism or procedure allowing the parties to change the goods, works and services being provided.
There are a number of myths about variation clauses because a simple express clause such as this in NEC4 “The Project Manager may give an instruction which changes the Scope” does not really define the limits of how the PM can change the project.
For example:
- Under MF/1, changes are any alteration to the works, whether by addition, modification or omission
- Under NEC4, there is no definition of a change
- Under JCT 2016 DB, changes include changes to the works documents including addition, omission or substitution; as well as restrictions or obligations on access, space, hours or order.
It is critical that you understand what can/not be changed, which may require a combination of reading the express terms in your contract, understanding the implied limits on a variation clause (see myths post), and knowing how that clause has been interpreted in the past.
In Strachan & Henshaw (which considered the variation clause in MF/1) the court did not allow a contractor to recover its costs associated with an instruction to move its tea cabins. Although it lost productivity, that type of instruction is not within the MF/1 definition of a change and the contractor’s claim failed.
What should you do?
As scope creep is a huge cause of disputes, you need to arm yourself with the knowledge to decide if something is a change by
- reading the scope and the works documents
- understanding the types of changes permitted by any change clause and common law
- using the mechanisms correctly (read more).
Case: Strachan & Henshaw Ltd v Stein Industrie (UK) Ltd & Anor [1997] EWCA Civ 2940
