clause arguably is of dual purpose.
Firstly it empowers
the employer to make necessary
changes to the agreed terms and conditions in a contract and secondly
it facilitates an amendment to contract
and thereby ensures
payment and other rights to the contractor. From the outset it may seem that this arrangement or provision
is a straightforward deal, however, when it comes to exercising such rights by employers or contractors the actual problems of interpretation or right and wrong arises.
Variation is a broad topic and when it comes to omission or works and certain additions, it becomes very debatable. In this paper, I will discuss key topics
such as types of variations, valuation and payment for variation, consequences of variation
and review provisions for variations under UAE Law.
VARIATION CLAUSE AND DEFINITION IN FIDIC
Most standard forms of contract
provide variation clauses. In FIDIC Red book, Variation is defined
as any change to the works which is instructed or approved
as per provision in clause 13. There is further clarity attempted in cl 13.1, however there is not clear cut answer as to what all may constitute a variation
and it can be said that the definition is quite generic
and not very helpful1. It may be argued that is left up to the interpretation of parties
who are required
to reach an agreement whether certain matters constitute a variation
after considering the specifics
of circumstances. All such instructions may not constitute a variation
order, different categories of variations are explained
the following sections
of this paper.
McGoldrick, FIDIC – The Management of Variations, Construction Law, (2007)
18 6 cons. Law 17
May 2013 Page 1 of 11
Limitations to the
right to vary
A variation may be initiated prior to issue of TOC by means of direction instruction or by requesting a proposal
from contractor for proposed additional works and then proceeding
with it2. The contractor shall be bound by
such instruction; conversely
the only ground for non-acceptance of such instruction can be issue related
to ready availability of goods required
for variation3. Other limitations to vary the contract include the required
changes falling outside the scope of contract
or variation clause and also
works not being capable of being
carried out4. As held in Beaufort Developments v Gilbert Ash and Others, the changes to the contract
shall be within the limits
the parties have agreed
to in their contract5.
TYPES OF VARIATIONS
There are many types of variations. These may be initiated
by the engineer or the contractor or due to requirements arisen due to unforeseen situations. Determining whether certain works constitutes varied works requires in depth understanding of contract and scope of work. Following
section describes the types of variations usually encountered under construction contracts
based on FIDIC Red Book.
Engineer or Employer Initiated Changes
A variations clause allows the employer to unilaterally change elements of contract
and this ensures ability of contract
to respond to practical
needs of the project6. These changes could be any of
the following types.
Additional works or modifications
Additional works or modifications related to scope change, quantity
change, regulatory change, quality
or specification change, methodology or design
change, substitution, changes related to technical
innovation, changes to prescribed levels etc. These changes
will help adapt to
requirement of the project.
However, there are limitations to what may constitute
a variation in strict contract terms:
Red Book (1st edn, 1999), Clause
Red Book (1st edn, 1999), Clause 13.1
4 L C Ren, Variation
in Construction contract, Construction Management Guide, http://www.cmguide.org/archives/2634, accessed on 07 May 2013
5 Beaufort Developments (NI) Ltd v. Gilbert-Ash (NI) Ltd and Others 1998
2 All ER 778, 798j
6 A V Jaeger and G S Hok, FIDIC – A Guide for Practitioner (Springer, Heidelberg 2010)
May 2013 Page 2 of 11
A fundamental change
to the agreed scope of work or agreed methodologies cannot
be recognized as a true nature of variation7.
All changes to quantities do not necessary become a variation8.
Deletion, de-scoping etc are included in this category. A negative
variation order is issued when due to change in requirements, certain
parts of scope is required to be deleted or omitted. This
type of variation
order thus reduces the value of contract. In
case such omission is significant in quantity,
the contractor may claim for loss of profit had such works been carried out9. Omission of work shall not be with intention
of completion or works by the employer or by others10 and if this is the case, it will be a clear case of breach of contract
and an invalid variation order11. Further to Wraight Ltd v P H and T Holdings12, it seems that loss of profit on omitted
works is claimable
as direct loss.
Acceleration order or Sequence changes.
If due to unforeseen requirements, the employer
wishes to complete
the work prior to the agreed
completion date, such instruction may be given.
However, this may require the contractor to employ additional resources in terms of labour, supervision, overtime,
equipment etc. which may substantially increase the agreed
or estimated cost of works. The employer may directly
instruct works or
request the contractor to
provide a proposal