20
Variations
LEGAL
The limits on what the client and the contractor can ask for. Variations to the scope and specifications of the building project as originally agreed, occur on virtually every project, and they complicate what would otherwise be a straightforward process. Variations occur for a variety of reasons, including the discovery during construction that aspects of the design are impractical or can be improved upon, site conditions proving to be more difficult than anticipated, clients changing their mind about structural or aesthetic components part-way through, some of the intended materials becoming unavailable, or the Council insisting on changes. In the larger commercial projects in the highly competitive construction sector, contractors often underbid to secure the job and then hope to make up the deficit in variation claims. There is a rigid process for directing and pricing variations, and either party can end up missing out if they fail to follow the rules. The project then becomes a fractious contest where competing teams of designers, quantity surveyors and lawyers battle it out on a more or less continuous basis from commencement to practical completion. In the residential sector, the process is a little less formal and changes are often requested by the clients or recommended by the contractor, on the spot and without any formal documentation or pricing. In both fixed price projects and cost reimbursement projects, these variations are often
responsible for the price ballooning out beyond the parties’ expectations, frequently leading to payments being withheld and disputes having to be resolved.
Variations aren’t automatic It might surprise you to know that under the common law, a variation that is insisted upon by just one of the parties, is unlawful. That is because a deal is a deal, and the deal the parties struck at the outset of the project was to build – and pay for – the structure that was originally designed and specified. Unless you have a contract that allows for variations, or you both agree, then the clients cannot make the builder deviate from the plans and specifications, and neither can the builder do so at his own discretion. For that reason, and because there is usually a sensible reason for variations, all of the standardform building contracts in common use in New Zealand allow the client to require the contractor to carry out variations to some extent or other. The contractor is then entitled (or obliged, in the case of variations which make the job cheaper) to adjust his charges accordingly, and to claim an extension of time. However, even if there is a variation clause in the building contract, there are still limits on what the building owner can demand of the contractor – unless the contract makes it very clear that there are no such limits. If that isn’t made clear, then the common law will not permit the owner to direct variations that place an unreasonable burden on the contractor or require the contractor to do something well outside the general nature of the responsibilities the builder took on at the outset.
