When is a Variation not a “Variation” in a Building Contract?

Recently a builder was engaged to undertake a residential renovation building project. The client and builder entered into a written Building Contract prior to renovation works starting.

During the course of the build, the client’s expectations (and scope of instructions) changed. There was 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 attempted 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. This was the situation in the above example, but the builder did not insist on documenting and having his client sign off the requested variation(s). Therefore when the client challenged their validity, he had no clear evidence that the client had instructed him to complete them.

This led to a significant dispute between the parties which resulted in significant cost to establish the variations. The cost of this, both financial and in time, was a major drain on 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.”  The builder would not have needed to chase payment for the varied works he undertook, wasting valuable time and money, if he had taken this step.

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
Commercial Lawyer