Clients who deny liability for a Variation in a Building Contract…

Have you ever been engaged to undertake a residential renovation building project? If so, did you and the client enter into a written Building Contract prior to renovation works starting? It is mandatory to have a written contract for any building work worth $30,000 or more.

How often during the course of the build have the client’s expectations (and scope of instructions) changed? This is extremely common. Usually there would be a discussion and verbal agreement that the works would be varied in accordance with the client’s new instructions.

However, once the building works had been completed the client sometimes attempts to avoid payment for the varied works, denying that they had instructed the builder to undertake them.

How could this happen?

A variation (sometimes referred to as a variation instruction, variation order (VO) or change order), is an alteration to the scope of works in a construction contract in the form of an addition, substitution or omission from the original scope of works.

Usually your Building Contract will outline how a Variation is to be made. It will almost certainly be in writing and agreed between the parties. If the builder did not insist on documenting and having the client sign off the requested variation(s) there will be no valid proof of the changes. Therefore when the client challenges their validity, the builder had no clear evidence that the client had instructed them to complete them.

This can lead to a significant dispute between the parties resulting in significant cost to establish the variations. The cost of this, both financial and in time, is a big drain on your resources.

How can this situation be avoided?

Always document Variations (large and small) and have your client sign them to evidence their agreement to them.

This is imperative if your Building or Construction contract expressly requires Variations to be recorded in writing. However, even if it is not required by your contract, it is still “best practice.”  This usually avoids having to chase payment for the varied works undertaken, wasting valuable time and money.

If you are involved in a dispute or want to avoid one arising it pays to take advice from a professional experienced in the Construction Contracts Act.

Alan Knowsley