Construction Contract Variations

Michael Sergeant, Max Wieliczko

• Publisher: Informa Law from Routledge
• Year: 2014
• ISBN:
  9781317685159
• Edition: 1
• Topic: Law
• Subtopic: Construction Law
• Index: Law

Changes to the work on construction projects are a common cause of dispute. Such variations lead to thousands of claims in the UK every year and many more internationally. Liability for variations is not only relevant to claims for sums due for extra work but this is also an important underlying factor in many other construction disputes, such as delay, disruption, defects and project termination. This is the first book to deal exclusively with variations in construction contracts and provide the detailed and comprehensive coverage that it demands.

Construction Contract Variations analyses the issues that arise in determining whether certain work is a variation, the contractor's obligation to undertake such work as well as its right to be paid. It deals with the employer's power to vary and the extent of its duties to approve changes. The book also analyses the role of the consultant in the process and the valuation of variations. It reviews these topics by reference to a range of construction contracts.

This is an essential guide for practitioners and industry professionals who advise on these issues and have a role in managing, directing and compensating change. Participants in the construction industry will find this book an invaluable guide, as will specialists and students of construction law, project management and quantity surveying.

CHAPTER ONE

OVERVIEW

SECTION A: INTRODUCTION

SECTION B: QUESTIONS CONCERNING THE NATURE OF VARIATIONS

SECTION C: SUMMARY OF CONTENT BY CHAPTER

SECTION A: INTRODUCTION

1.1 Variations to the work undertaken on construction contracts is a wide topic involving numerous issues. The purpose of this chapter is to provide an introduction to the topic and to highlight some of themes that run through this book.

1.2 Section B of this chapter poses, and answers, a number of high-level questions relating to variations. In considering these issues, reference is made to he sections of this book which deal in more detail with the particular topics raised. In this way, this section provides a useful introduction to particular issues which run across a number of chapters.

1.3 Section C of this chapter contains a brief review of the content of each chapter, highlighting the particular topics covered by the sections within each chapter. For those unfamiliar with this book, this may provide a useful starting point in identifying where the topic they are researching is covered.

SECTION B: QUESTIONS CONCERNING THE NATURE OF VARIATIONS

1.4 This section considers a number of questions concerning variations as a means of giving an overview of some of the topics covered by this book.

What variations are covered by this book?

1.5 This book considers, in broad terms, changes to the works that are undertaken on a construction project.¹

1.6 A contract may specify, not only the permanent works, but also the way that they are required to be built.² The contractor will have an obligation to follow the specified works unless changes are sanctioned by the employer.

1.7 The most common way of instigating change is for the employer to exercise its unilateral power to vary the works, by operating the variation mechanism incorporated in the contract. This is the principal subject covered by this book.

1.8 Changes to the works can, however, be sanctioned in a variety of other ways, and this book also considers these alternative situations.³

1.9 A construction contract may contain provisions that allow the employer to direct, or approve, changes to the works without a variation being instructed under the contract mechanism – for example, using powers the employer may have to alter the sequence of construction, or the nature of the temporary works, under another contract provision.⁴ Alternatively, the contract may allow the contractor to change the way it undertakes works on the occurrence of specified events, without prior permission or instruction from the employer.⁵

1.10 Changes to the works may be permitted by the employer without a variation being instructed under the contract.⁶ The parties may simply agree a change to the scope, possibly as part of a wider renegotiation of the contract.⁷

1.11 The employer’s desire to procure additional works may be satisfied by entering into a new contract with the contractor.⁸ The employer may, however, seek to let the new work to a substitute contractor.⁹

1.12 The additional work may not be undertaken under a contract at all, in which case the contractor may have a right to be paid on a claim in restitution.¹⁰

1.13 The extent and nature of changes to construction work considered by this book are therefore much wider than simply variations to the permanent works instructed under the contract mechanism.

Why are variations made to the works?

1.14 A variation may arise because the employer decides it wants something different from the original plan. Alternatively, the change may be driven by construction issues relating to the build process: either because the works can be improved, or the cost and/or time of the project can be reduced, or because the defined scope cannot be built.

1.15 With the first category of change, the variation arises from a desire to change the finished product.¹¹ This desire can arise as a result of a number of factors. The employer may simply change its mind, perhaps for aesthetic reasons. The change may instead be required for commercial reasons, perhaps because the market has changed since the original design was formulated or because it is considered that a variation will result in a more valuable end product.

1.16 The second category of variation arises because of technical adjustments to how the project is built. The employer will still want the project as originally conceived, or as close to it as possible.

1.17 Such changes may be introduced to make it quicker or cheaper to build and the cost of such variations may therefore be borne by the contractor.¹²

1.18 Such changes may need to be made because they are necessary in order to progress and complete the project. This can arise for two reasons. The scope as described in the contract may be inadequate such that it cannot be built, or alternatively, an event may occur during the course of the project which means that the contract scope can no longer be built.¹³

1.19 Inadequacies with the technical scope of works contained in a contract are far from uncommon. This can occur because, for various reasons, insufficient time has been spent on developing the technical scope,¹⁴ or because of inadequacies with the approach taken by the employer in managing the preparation of the contract documents.¹⁵

1.20 It will often be possible to construe the contract documents in such a way as to resolve inconsistencies and errors.¹⁶ However, in certain circumstances, the design of the works as described in the technical documents will be such that it cannot be built, and a variation to the design will need to be instructed.¹⁷

1.21 The design, as contained in the contract, may have been adequate at the time it was prepared, but subsequent events may mean that it can no longer be followed. For example, the contractor’s defective work during construction may mean that the design of the scheme needs to be changed.¹⁸

1.22 Any problems inherent in the contract documents themselves, or as a result of events that result in the original design becoming unbuildable, can be the contractual responsibility of either the employer or the contractor, depending on the contract.

1.23 Where the risk is the liability of the employer, then it may instruct a variation in order to escape a problem for which it would otherwise be responsible. The employer may, for example, instruct a variation where its design would otherwise be defective. Or, the employer may be responsible for inaccurate site data upon which the contractor has relied, and the employer may agree to vary the design in order to resolve the problem.

1.24 If the employer refuses to issue an instruction, where the contract design cannot otherwise be built, then the project can reach an impasse.¹⁹ The contractor may understandably not wish to implement a change if no instruction has been issued. Various contract mechanisms may exist entitling the contractor to be paid for work u...