Get it in writing so you can get paid for variations!
Posted on March 09, 2022
Variations are an area where disputes often arise. Commonly the owner refuses to pay the builder for variations which have been raised late in the project.
There can be many reasons for this, for example, the owner may consider the work defective, or they may say that they did not ask for extra work to be done. We have even seen cases where the owners have simply refused to pay variations by claiming that they did not know the extra work was a variation.
These disputes are usually resolved between the parties but sometimes particularly where variations are of significant value owners are reluctant to hand over their money without a fight, and that can mean costly litigation.
Variations are changes to the scope of work under the building contract. Sometimes the changes are at the request of either the owner or the builder (we call these unforced variations) and other times they are forced on the parties (we call these forced variations).
If at all possible, you should do your best to get variations written up and signed. This will reduce the scope for disagreement and argument. Unforced variations are obvious ones to get in writing.
Forced variations are often hard to document before the work is done. That is because the work might be urgent or it may be impossible to quote the work – a good example is rock breaking.
It is for this reason that the price for a forced variation will generally be the cost of the extra work plus a maximum of 15% for profit and overheads (note that as a matter of law you cannot charge more than this percentage for domestic building variations).
Whilst it is not a legal requirement in South Australia that variations must be in writing, it is sometimes the case that the building contract will require variations to be in writing. You should check the building contract as there may be clauses there that tell you what steps you must take or the procedures you must follow to document variations.
A failure to record or document variations in writing can make it difficult for you to claim payment for a variation. That is because there may be very little evidence available to prove what was agreed. Getting variations in writing is also important because it will provide evidence where it is necessary to seek an extension of time for completion of the building works because of the additional works.
If you don’t get a signed variation, you may still be able to recover payment under what is known as “quantum meruit”. However, this is a more tricky topic for another time!
The key take-away is that builders should ensure that they adopt better contract administration procedures by ensuring that where variations are requested by the owners, there is a documented process to record what was agreed between the parties. If the scope or price of a forced variation cannot be agreed before the work is done, make sure you keep track of your actual cost for the variation so you can send an invoice for that work. Finally, don’t leave variation invoices to the end of the project! Each time you issue a progress claim consider issuing an invoice for any variations that you have done up to that date.
