Negative Variations

NEGATIVE VARIATIONS IN CONSTRUCTION CONTRACTS
The principal will normally have the opportunity to request a change to the work's scope under a
construction contract. But modifications go beyond merely expanding or decreasing the bounds
of the works. A negative version of the contract would be created if the principal want to limit
the job's scope and, thus, the contract's value. The contract will determine if it is possible to
negatively vary the scope of work. Negative revisions that significantly alter the scope or nature
of the work may be interpreted as a repudiation of the contract and provide the contractor the
right to cancel in the absence of a clear right under the contract.
There are supposedly three different kinds of consequences that could take place due to the
variation orders- Cost Overruns, Time Overruns, Professional Relations.
1. Cost Overruns-
Although it is generally acknowledged that variance can have a detrimental influence on

construction projects' budget and time, these effects vary from project to project. Variants that
harm a project or reduce owner value are considered detrimental. Variation orders result in cost
overruns, according to numerous researches. Variation orders significantly increased project
costs, according to a study looking at how they affected institutional building projects. In
actuality, variation orders affect cost both directly and indirectly.
2. Time Overruns-
Clients want their construction projects to be finished by the deadlines given. In order to save
money, projects are expected to be completed as fast as feasible. Construction project completion
times and prices were severely impacted by variation orders that were issued during various
project phases. Project time overruns are caused by a variety of factors, including variant orders.
In direct proportion to productivity losses, the frequency of variation orders rises. Therefore,
decreased production indicates time loss and ensuing delays.
3. Professional Relations-
Contractual parties may disagree as a result of variation orders. When contractors disagree with
the client's consultant's assessment of the value of variation orders, misunderstandings may
result. The designer's professionalism may be harmed by the numerous revision orders brought
on by design flaws or omissions. Overall talking, variation orders can raise costs associated with
communication, unplanned site meetings, labour during waiting periods, travel expenses, costs
associated with idle plant machinery, material charges for the construction work and many other
things.
 But there are certain things which cannot be varied during the construction project and
would not be considered valid variation. In the case of Chadmax Plastic Pty Limited v
Hansen and Yuncken (SA) Pty Limited (1984), it was held that, Although the principle
has the ability to modify the scope of work set forth in the contract, the principal shall not
do so in order to exclude all or a material portion of the work for which the contractor is
engaged.
 The High Court ruled in Carr v. JA Berriman Pty Ltd (1953) that leaving out parts of a
contract so the principal can hire a different third party to finish the work is not a
legitimate variation unless the contract expressly allows for it. This circumstance
provided more proof that a principal cannot arbitrarily decide to fire a contractor. Any
variation-permitting provision shall only take effect with respect to modifications of the
works made by the Principal.
 A verbal agreement or the acts of the parties may alter the terms of the agreement, even if
the contract itself contains a "no oral variation" clause. This position has recently been
clarified and confirmed by the Court of Appeal in a case involving Globe Motors and
RW Lucas Varity Electric Steering Ltd. [2016] EWCA Civ 396. A lawsuit that was filed
later in 2016 by MWB Business Exchange Centers and Rock Advertising cemented that
stance.
It is the responsibility of the parties to a building contract to ensure that the rules controlling
variations are clear and address the issue of negative variants outlined above. This must contain a
procedure that enables the parties to agree on the dollar amount of any unfavorable changes and
the extent to which works may be eliminated from the project's scope.
Generally, there exist two mechanisms- Amendments to the contractual provision and variations
of the actual work instructed by and employer. Amendments/Changes to construction contracts
are often made by written agreement between the parties, and they only apply to the contract's
clauses that do not specify the specifics of the work to be done. On the other hand, variations/
changes to the way the work is done will typically be made in accordance with a process for
modifications that has been outlined in the contract's terms. As long as the change is made in
accordance with the correct procedure, the contract's actual terms do not need to be altered.
Therefore, in order for that amendment to go into effect, it is not necessary to demonstrate that
consideration has been given.
INTERNATIONAL PERSPECTIVE-
1. Abbey Development Limited v. PP Brickworks
In order to avoid depriving the contractor of its contractual right to complete the work and realise
any profits that may be made at that time, the Court concluded that terms permitting an owner to
amend the work must be carefully read. Reasonable, clear language is needed to remove work
from the contractor in order to have it completed by someone else. This is true regardless of the
possibility that hiring the contractor will cost the employer more money than hiring someone
else, though there may be other considerations, such as timing and trust in the original contractor.
The justification for these decisions is in my judgment to be found in fundamental principles. A
contract for the execution of work confers on the contractor not only the duty to carry out the
work but the corresponding right to be able to complete the work which it contracted to carry
out. To take away or to vary the work is an intrusion into and an infringement of that right and is
a breach of contract. (The work has to be defined sufficiently for there to be a right to execute it.)
Such clauses enable an owner to remove work from a contractor, just as they oblige the
contractor to carry out additional work or to make alterations in the work, none of which could
be achieved without the consent of the contractor.
Provisions entitling an owner to vary the works have therefore to be construed carefully so as not
to deprive the contractor of its contractual right to the opportunity to complete the works and
realise such profit as may then be made. They are not in the same category as exemption clauses.
The Arbitrator held that, “Just as the approach to variations clauses must be one which respects a
contractor's right to complete the works which it has undertaken to do, and therefore clear words
are required for an intrusion, so too with termination provisions. If they are to take away the
contractor's right to finish the work, they themselves not only must be read clearly and carefully,
but, if they are to be operated, they must be plainly and carefully operated.”

Negative Variations

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NEGATIVE VARIATIONS IN CONSTRUCTION CONTRACTS

Although it is generally acknowledged that variance can have a detrimental influence on

1. Abbey Development Limited v. PP Brickworks

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