A request for a variation to the scope of works or services under a building contract is common in the construction industry. All too often however, a variation becomes the subject of a building dispute which may need to be argued between the parties’ lawyers and, possibly in tribunal or court proceedings.
Variations may affect a construction contract between a builder and another building contractor, or a home building contract between a builder and homeowner. The variation may be requested, by any party, or become necessary because of changes to building regulations or due to latent site conditions that are materially different than anticipated.
No matter what triggers a variation to a building project, it is important for all variations to be documented and signed by the parties.
Variations to construction contracts – builders / subcontractors
The process for requesting, negotiating and documenting a variation for construction work may be set out in the agreement between a principal and contractor. Contractors requesting variations will generally have a timeframe within which the request must be made and should follow the contractual terms for variations to avoid subsequent payment disputes.
Variations should not be undertaken until approval is received from the principal and a written agreement is in place. Occasionally, however, where strict compliance with the contractual processes for variations is not commercially efficient (such as to avoid delay or wastage) and a contractor is subsequently refused payment for the variation, he or she may have a quantum meruit claim. This is a claim based on the law of restitution which may allow the builder to be awarded a reasonable sum for work carried out that is not provided for in the contract.
Variations to home building contracts
The Home Building Act 1989 (NSW) provides that any agreement to vary a home building contract, or the plans and specifications must be in writing and signed by the builder and homeowner. A builder who fails to comply with this requirement risks losing the right to sue for damages under the contract or to enforce it.
Variations requested by homeowners typically include changes to plans, aesthetic alterations, additional work or changes to materials and finishes.
The importance of documenting variations and having the agreement signed by the parties cannot be overstated, even where the parties are familiar or have an ongoing business relationship. Our building and construction team can help negotiate and document variations to avoid later disputes or assist with pursuing claims for variations for which payment has been refused.