"Variation" can be a scary word in the building industry. Disagreements about variations are a common cause of disputes and litigation. Despite this, variations can be a helpful tool for owners and building contractors to make changes to the scope of works without risking termination. It is important to understand the variation clause in your building contract before you sign it so that you comply with its requirements and avoid unexpected costs and difficulties.
What is a variation?
In a building contract, the scope of works is typically set out in attached specifications, plans or brief, which form part of the contract. A variation is change to the scope of works in the contract after the contract has been signed. A variation can be used to correct omissions to the original scope of works or make changes that arise during the build.
Common examples of variations include:
- Additional materials and their installation
- Additional work to comply with government regulations
- Changes in price of materials
- Additional certification and design
- Changes to the plans
How to apply for a variation
Most building contracts contain a variation clause allowing both the building contractor and homeowner to vary the scope of works during construction. These clauses can vary between contracts, so it is important to review your contract to understand the steps required to apply for a variation under the contract.
If the owner is seeking to vary the scope of works, they usually need to send a request to the building contractor. The next step will require the building contractor to consent to the amendment and provide an offer. That offer may include a description of the changes, revised designs and drawings, pricing changes and/or extension of time applications. The homeowner can agree to the offer through signed written acceptance. Alternatively, the homeowner may dispute the offer which may require reliance on any dispute resolution clauses in the contract.
In most cases, the building contractor will apply for a variation of the scope of works to meet government regulations or where latent conditions arise. When this occurs, the homeowner is usually unable to unreasonably withhold consent to any variation request.
Parties to building contracts must also be aware of any time restrictions in replying to requests and offers of variation. Failing to comply time limits under variation clauses can result in serious consequences.
Although the contract specifies the procedure that should be followed for variations, the Home Building Act (the Act) sets out mandatory formalities for most residential building contracts. The Act requires that a contract to undertake home building work must include a clause to ensure that any agreement to vary the contract, or to vary the plans and specifications for work to be done under the contract, must be in writing and signed by or on behalf of each party.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.