Variations are often the cause of disputes in the building and construction industry. In most cases, the work has been completed, but the proper process has not been followed. When this happens, you may find that you struggle to get paid or you end up writing off the cost to maintain the client relationship. Or worse, you find yourself in a dispute and the job stalls.
The good news? These issues are preventable.
This article examines variations to building contracts and addresses what they are, how they are lawfully effected, and the consequences of not following the proper procedure.
What is a variation?
A variation to a building contract has a specific meaning. Often the word is defined in the definitions section of the HIA and Master Builders contracts. Definitions vary between contracts, so it is important to pay attention to what constitutes a variation under the particular contract.
In a Master Builders Queensland commercial cost plus contract, a variation:
“whether deemed or otherwise, means to vary the Works by:
- changing the work to be carried out, including the deletion of work from the Works; or
- changing the manner in which work is to be carried out.”
In a Master Builders Queensland residential renovation contract, a variation means:
“to vary the Works by agreement as set out in Clause 24.3 or as deemed or otherwise provided under the Contract.”
Finally, in a Queensland New Homes Construction Contract, a variation means:
- an omission, addition or change to the works; or
- a change in the manner of carrying out the works.
In the above examples, it is important to note that a valid variation is a variation to the Works (as defined in the relevant contract).
If the scope of the works does not need to change, and you are seeking to increase the cost of the works, simply issuing a variation document to increase those costs will be effective unless the relevant contract specifically provides that the builder/contractor may vary the cost of the works under the contract or otherwise provides a rise and fall clause.
How to effect a lawful variation of the contract
In most standard building contracts, there is a clause setting out the process for effecting a variation of the works.
Those clauses stipulate what information must be included in a variation document and it is important that the relevant information is included.
Typically, a variation must be agreed to in writing before the builder/contractor may start works which are contemplated by the variation.
Although the variation must be agreed in writing, there is no reason why an owner and a builder/contractor cannot discuss the need for a variation verbally and then follow up by committing that variation to writing in accordance with the terms of the relevant contract.
Consequences of not following the proper procedure
The problem with handshake variations and emails going back and forth between the builder and the owner is that when push comes to shove, it is difficult to determine what the builder was required to do and is able to get paid for.
An owner may sometimes assert that certain variation works were not agreed to and, if the builder does not have the variation documented properly, this can cause significant issues regarding your entitlement to payment for that work.
It is always crucial for builders and contractors to ensure that if there is to be any variation to the works they are performing, they have that variation agreed in writing to avoid disputes down the track.
If you have an issue on one of your jobs, feel free to reach out for a free and confidential initial call.
Tagged in: Builder, building works, commercial building contracts, contract, HIA, master builders, procedure, variations