Contract clinic: When is a variation not a variation?

Contract clinic: variation
In our latest contract clinic, a reader asks if an instruction to fit specific door hinges is a variation. Paul Gibbons responds.

The question

The architect on our project has issued an instruction to install specific hinges to doors on our project, but they claim this is not a variation. Is this correct  and, if so, what can we do?

The answer

Variations often cause conflict in construction projects. But what looks like a variation may not always be a variation. If a change on a project is essential to the performance of the contract, and is not defined in the bills of quantity or specifications, it may be a new instruction but not a variation under the contract.

First, the definition: a variation is any alteration to the original work as set out in the contract. This could take the form of an addition, omission or substitution. Whether your variation is a change or a compensation event depends on one very important thing: the construction contract used.

On your project, it will also depend upon what your contract says. Are there any terms defining what is included and what is not included in the scope of works? What is in the other documents that form the basis of the contract? Are there references in the project specification or method of measurement around inclusions for ironmongery or hinges? Do bills of quantity exist defining such items?

If nothing is defined, you may need to consider whether the instruction is reasonable. It is possible, but unlikely, that an instruction or, more importantly, valuation could be unreasonable. In Henry Boot v Alstom Combined Cycles, the terms of the contract were important: “The rates and prices in the Bill of Quantities shall be used as the basis for valuation so far as may be reasonable failing which a fair valuation shall be made.”

Fair and reasonable

This was fine, and that line or something similar is often seen in contracts. The challenge came in deciding what was fair and reasonable. The court said: “It is one of the skills of tendering for a construction contract… to anticipate where there may be departures from the estimated quantities or item descriptions which might prove to be to the contractor’s advantage.”

The courts appear to accept there will always be an element of risk in a construction contract. The parties accept that risk when they sign up for the project. Change may play to either side’s advantage or disadvantage, but that does not make the bargain unfair in law. In a 2019 case in Hong Kong, the contractor recovered costs for plant standing idle because of a change to the project, even though the idle plant did not cost them any money.

Unless there is a clear contractual reason the new hinges should not be used, even if they were not listed in the bill of quantities or specification, it is possible they will not be a contractual variation. It is more likely that you will have to accept the cost, even if the hinges are the finest hinges money can buy, and there are hundreds of doors involved.

Paul Gibbons is CEO of Decipher Consulting

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