Variations will inevitably arise on a construction site.
Subcontractors are often forced to pursue variation claims in an adjudication application to recover payment from a contractor.
In our experience, contractors invariably dispute claims for variations on two grounds. Firstly, the subcontractor has failed to comply with the terms of the construction contract and obtain the written consent of the contractor prior to doing the variations. Secondly, the subcontractor has failed to provide the relevant information and supporting documents required by the terms of the construction contract to substantiate the variation claims.
All standard construction contracts have clauses that provide for variations. The clause will set out what the subcontractor has to do to be entitled to a variation claim. This will include what notice has to be sent to the contractor requesting approval for a variation, when the notice must be sent and what information must be set out in the notice. Such a clause will also stipulate that a subcontractor is not entitled to a variation, unless the subcontractor has written approval from the contractor authorising the subcontractor to undertake the variation work, prior to the subcontractor undertaking the variation work.
Subcontractors must ensure that they strictly comply with these contractual requirements when pursuing a variation. A failure to strictly comply with these requirements may disentitle a subcontractor to payment for variations. This may leave a subcontractor substantially out of pocket and the prospect of having to sue or make an adjudication application to recover payment for variations.
If subcontractors comply with the contractual requirements for variations then disputes are less likely to arise in respect of variations.
If you have not complied with the contractual requirements for variations then recovery of monies owing for variations in an adjudication application will be more difficult and complex. It is still possible to claim for variations in circumstances where you have not complied with the terms of the contract. You have to be able to demonstrate that you are still entitled to payment for variations because of the conduct of the contractor including, the contractor has waived the right to rely upon strict compliance with the terms of the contract, the contractor had knowledge of the variation work being done and has received the benefit of the variation work. Evidence of these matters has to be put before an Adjudicator in an adjudication application in the form of statements of evidence and written submissions.
Chapter 3 of the Building Industry Fairness (Security of Payment) Act 2017 is set to commence 1 July 2018. Stay tuned for our bulletin that will provide an overview of the framework and processes for payment claims, payment schedules and adjudication applications.
If you require further information or assistance in respect of a dispute concerning variations, please contact Justin Mathews of our office on 07 5574 0111 or via email at justinm@qbmlaw.com.au.
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