REALWorld Law

Construction

Variations

How are variations to the specification for engineering or construction works normally dealt with?

Angola

Angola

Private works contracts

The owner is allowed to change the scope of the works provided that its variations do not exceed 20 percent of the total price of the works, that the associated costs are paid to the contractor and that the date for completion of the works is extended. If the variations exceed 20 percent, they have to be agreed between the parties. If the changes result in a decrease of cost or work, the contractor is entitled to the agreed price with deduction of the amount saved on expenses.

Variations requested by the contractor require the owner’s consent or acceptance and the owner will not be liable for any additional costs arising from variations if they are attributable to the contractor.

If the variations are necessary and are caused by a third party or due to technical requirements, parties must agree on the price and time for completion of works, otherwise the court will decide. The contractor may terminate the construction contract if the cost of the variations exceeds 20 percent of the total works price.

Public works contracts

The additional works ordered by the owner must be the result of unpredictable circumstances and

  • Non-technical or capable of being costed separately under the contract, or
  • Necessary to the completion of the works

The contractor is required to execute additional works unless he exercises the right to terminate the contract. The owner can also determine the reduction of the works scope. When, as result of variations, there is a decrease of more than 20 percent of the initial price, the contractor may terminate the contract.

Variations requested by the contractor require the owner’s consent. If those variations result in savings, the contractor is entitled to half of its value.

Australia

Australia

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

  • Employer-led changes: Under most standard form contracts, the employer has the right to request variations to the works, for which the building contractor is entitled to additional time and money. The building contractor is also entitled to raise reasonable objections to material changes.
  • Contractor-driven changes: Where variations are necessary due to the building contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract. The contractor is also liable for any delays caused to the project by these variations, and where the variation means that the work has not been carried out in accordance with the contract.
Belgium

Belgium

A modification or alteration of the specification of an engineering or construction contract can only occur by contractual agreement between the parties. A change in the scope of the specification (for example where the extent of the works is increased or decreased) will commonly be contractually determined in engineering and construction contracts relating to major projects.

Where there is no contractual arrangement concerning a variation, and where the specification of an engineering or construction contract is unilaterally and to a major extent varied by the principal, Article 1794 of the Belgian Civil Code may apply. This article places an obligation on the principal in the event of a unilateral termination of a contract for the delivery of work, in order to compensate the contractor (ie the engineer or the contractor) for his expenses, his work and all that he could have earned if the contract had not been terminated.

Bosnia-Herzegovina

Bosnia-Herzegovina

Any changes to the specification for engineering or construction work should normally be concluded in writing in the form of an appendix to the original agreement. These changes must be approved by relevant administrative bodies through a re-issue of the relevant urban permit and construction permit, before any such changes can be actually be implemented.

Canada

Canada

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

  • Employer-led changes: Under most standard form contracts, the employer has the right to request variations to the works, for which the building contractor is entitled to additional time and money. The building contractor is also entitled to raise reasonable objections to material changes.

  • Contractor-driven changes: Where variations are necessary due to the building contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract. The contractor is also liable for any delays caused to the project by these variations, and where the variation means that the work has not been carried out in accordance with the contract.

China

China

The way in which variations are dealt with varies from agreement to agreement. Construction agreements generally provide that any variations require employer approval. Variations are generally assessed on the basis of either agreed rates or government specified rates.

Croatia

Croatia

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

  • Employer-led changes: Under most standard form contracts, the employer has the right to request variations to the works, for which the contractor is entitled to additional time and money. The contractor is also entitled to raise reasonable objections to material changes
  • Contractor-driven changes: Where variations are necessary due to the contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract. He is also liable for any delays caused to the project by these variations and where the variation means that the work has not been carried out in accordance with the contract

In case of 'turnkey contracts', the agreed price includes all unforeseeable and surplus works, but the deficiency of works does not have an impact on the agreed price, unless the change of the scope of works has either been agreed by the contractual parties or has been caused by the client.

Czech Republic

Czech Republic

There are specific provisions which deal with these questions. In general, we can divide them into two groups: there can be changes on the part of the client and changes on the part of the contractor. The client is usually entitled to request variations to the project. This gives the contractor the right to claim reasonable increased expenses and additional time for completion. If there are changes on the contractor's part due to the contractor’s default such as errors, delays, defects etc, then, in most cases, the client is not obliged to provide additional payments or time. The contractor is liable for any damage and delays it causes to the project. Unavoidable events, however may suspend a contractor’s liability.

Denmark

Denmark

Under the general conditions in the standard construction contracts, AB 18 and ABT 18, the employer has the right to request variations to the works. The building contractor is entitled to undertake such alterations, unless the employer included special conditions, which justify that the performance of the work be undertaken by others. If the contractor is entitled to undertake alterations the contractor will also be entitled to additional payments and time.

If variations are made because of the contractor's error, delay or default, the contractor will not be entitled to additional time or payment.

Even when AB 18 and ABT 18 are not agreed between the parties, the provisions above are commonly found in most construction contracts.

France

France

The contractual mechanisms used to deal with variations to the works differ depending on why the variation is requested:

  • Owner-led changes: Under most standard-form contracts, the owner has the right to request variations to the works, and the building contractor is entitled to additional time and money accordingly. The building contractor is also entitled to raise reasonable objections to material changes.
  • Contractor-driven changes: Where variations are necessary due to an error, delay or default by the building contractor, the contractor is not usually entitled to additional time or money under the contract. He is also liable for any delays caused to the project by these variations, and for any consequential non-compliance with the contract.
Germany

Germany

The scope of works and services to be provided by the contractor depends on the specifications (Leistungsverzeichnis) which usually give all necessary information.

In principle variations can be made in the scope of the performance set out in the specifications at any time. Agreements on supplementary performance or variations or follow-up orders (Nachträge) are of great practical importance. However, subsequent modifications to the scope of performance or to other circumstances may lead to a change in the contractor’s right to remuneration. Under the contracting rules for the procurement of public works (VOB/B) the following five reasons may result in a contractor being entitled to demand additional remuneration:

  1. Change orders by the principal that is now also expressly regulated in Sec. 650b German Civil Code
  2. Additional work subsequently requested by the principal
  3. Work which deviates from the contractually agreed specifications and which the contractor performs without any instructions from the principal if the principal subsequently approves the work or if the work was necessary to perform the contract
  4. Changes in the quantity of work of more than 10 percent in a unit price contract if either of the contracting parties demands this
  5. Hindrance and disruption of the progress of the works caused by the principal

In view of such potential additional claims, variations should be kept to a minimum by means of careful planning in advance.

Hong Kong

Hong Kong

All forms of standard contracts commonly used in Hong Kong provide for the architect/contract administrator to order variations. In general, instructions to the contractor to carry out works which fall within the scope of works as set out in the contract will not constitute a variation and are part of the contractor's contract price.

Most standard form contracts contain complex mechanisms for valuation of and payment for variations. The Agreement and Schedule of Conditions of Building Contract for Use in Hong Kong – Standard Form of Building Contract (Private Edition) (HKIS) provides for variations to be valued in accordance with the prices in the contracts bills (namely, bills of quantity) for "work of similar character executed under similar conditions". Therefore, as long as the varied works are similar to works which are priced in the contract bills, the prices (or rates) as contained in the contract bills must be used, even if the result would be unduly profitable or unprofitable for the contractor. This is because the rates or prices are agreed by the parties and they are not entitled to vary them unilaterally.

However, if the subject of variation is not within the scope of the bills of quantity, the parties may have to agree on the price of such works. Failing which, the price may be determined by a neutral third party who will then fix a reasonable and fair price for such works.

Hungary

Hungary

As a general rule, the employer may instruct the contractor and request variations to the construction works. If the requested variations affect the original technical specifications, the contractor may become entitled to additional fee(s) and extra time for completion.

Ireland

Ireland

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

Employer-led changes

Under most standard form contracts, the employer has the right to request variations to the works by way of instruction via the architect (under the RIAI form of building agreements), for which the building contractor is entitled to additional time and money.

Contractor-driven changes

Where variations are necessary due to the building contractor's error, omission, delay or default, the contractor is not usually entitled to additional time or money under the contract. The contractor is liable for any delay caused to the project by these variations.

Italy

Italy

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested.

Agreed variations

The contractor cannot vary the contract’s agreed technical specifications unless authorized by the client in writing. The client can request the removal of unauthorized variations. Even if the variations have been expressly authorized, if the price of the entire work is determined as a lump sum amount, the contractor cannot receive any consideration for the variations or additions, unless agreed otherwise.

Necessary variations

Variations to the technical specifications can be made and the relevant costs determined by a judge if both:

  • the variations are necessary to complete the work according to the best practice and the law, and
  • the parties do not reach an agreement

In practice, these variations are only made due to changes in the law during the construction.

If the cost of the necessary variations exceeds one sixth of the agreed total price, the contractor can withdraw from the contract and receive, depending on the circumstances, a reasonable indemnity. The client can also terminate the contract if the variations are material. However, the parties often agree that the costs of the necessary variations are divided between the parties and that the contractor waives its right to terminate the contract if variation exceeds the above limit.

Variations ordered by the client

Variations ordered by the client cannot:

  • exceed one sixth of the contract price, or
  • entail material changes to the nature of the works or in the quantity of each portion of the works

Even if agreed as a lump sum, the contractor can request compensation for the extra costs arising from these variations.

Japan

Japan

The standard construction contract form includes a provision to deal with variations to the works and specifies which party may request variations:

  • Variation ordered by owner – Under the standard construction contract form, the owner has the right to request variations to the works, and the contractor is entitled to additional time and money accordingly; and
  • Variation driven by contractor – Under the standard construction contract form, the contractor does not have the right to request variations to the works.
Netherlands

Netherlands

It is possible to make variations to the works while they are being carried out, either at the instruction of the client, or with the clients consent - at the instigation of the contractor. In the latter case, the design responsibility will, in principle, be borne by the contractor. Any addition to or reduction in cost as a consequence of these variations should be agreed on by the parties. Additional rules regarding these costs apply depending on the general conditions or legal regime which applies.

Nigeria

Nigeria

Standard form construction contracts usually contain provisions which guide the parties’ relationship in the event that a variation is required and matters such as variations, the formalities, valuation of the works and payment for the variation works would be covered thereunder.

Generally, where the variation is authorized by the employer, the contractor is usually entitled to claim payments for the variation and may request for an extension of time to carry out the variation works. Unauthorized variations by the contractor will amount to a breach of contract for which damages are recoverable by the employer.

Norway

Norway

Contractual mechanisms for dealing with variations to the works vary depending on the reasons for the requested variation:

Employer-led changes

Under most standard-form contracts, the employer has a right to ask for variations to the works, for which the building contractor is entitled to an extension of time and compensation for extra costs. However, there is normally a limit to the scope of variations the employer is entitled to ask for. The contractor will not normally be obliged to undertake variations that would result in additional costs that would exceed 15% of the contract price or undertake changes that are of a substantially different nature to the work that was originally agreed.

Contractor-driven changes

Where variations are necessary due to the building contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract. He is liable for any delays caused to the project by these variations, and where the variation means that the work has not been carried out in accordance with the contract.

Poland

Poland

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested. Most contracts will provide that the client has the right to request variations to the works, for which the building contractor is entitled to additional time and money. The building contractor is also entitled to raise reasonable objections to material changes. Where variations are necessary due to the building contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract. The contractor is also liable for any delays caused to the project by these variations, and where the variation means that the work has not been carried out in accordance with the contract.

Portugal

Portugal

The Civil Code (applicable to private works contracts) allows the employer to change the scope of the works provided that its variations do not exceed 1/5 of the total amount of the works, that the associated costs are paid to the contractor and that constitute more than 1/5 of the total works at the date for completion of the works is extended. If the variations exceed they have to be agreed between the parties (and they may not, therefore, be acceptable to the contractor). Variations requested by the contractor require the employer’s consent or acceptance. The employer will not be liable for any additional costs arising from variations if the same are attributable to the contractor. If the variations are necessary and caused by a third party or due to technical requirements, parties must agree on the price and time for completion of works, otherwise the court will decide. On the other hand, the contractor may terminate the construction contract if the cost of the variations exceeds 20% of the total construction cost.

The Decree-Law No. 149/2012, of 12 July 2012, which amended Public Contracts Code, introduced changes to the legal framework concerning this matter. Now, the employer can not order the execution of additional works by the contractor if the price of the works, including previous additional works, exceeds 40% (instead of 5%) of the contractual price of initial works. The additional works must be the result of unpredictable circumstances and (i) non-technical or financial detachable from the contract or (ii) necessary to the completion of the works. Different from the additional works are the works necessary to meet design errors or omissions. The employer can not order the execution of such works by the contractor if their price, including previous works of the same type, exceeds 5% of the contractual price of initial works (in some cases 10%). In both situations of works variation the price and the date for completion of works must or may be revised in accordance with the rules set in Public Contracts Code and in some cases the contractor as the right to terminate the contract.

Romania

Romania

Normally variations to the specification for engineering or construction works may be requested by the engineer at any time prior to the issue of the completion minutes.

Such variations may include:

  • Changes to the quantities of any item of work included in the construction contract (however, such changes do not necessarily constitute a variation)
  • Changes to the quality and other characteristics of any item of work
  • Changes to the levels, positions and/or dimensions of any part of the works
  • The omission of any work unless it is to be carried out by others
  • Any additional work, materials or services necessary for the permanent works, including any associated tests carried out at completion, the drilling of boreholes and other testing and exploratory work
  • Changes to the sequence or timing of the execution of the works

Where the engineer requests a variation the contractor must respond in writing as soon as practicable, either giving reasons why he cannot comply (if this is the case) or by submitting:

  • A description of the proposed work to be performed and a programme for executing it
  • The contractor’s proposals for any necessary modifications to the programme and to the time for completion
  • The contractor’s proposal for the valuation of the variation

The engineer shall, as soon as practicable, approve, disapprove or make comments on the contractor’s response. Normally, each instruction to execute a variation, with any requirement for adjusting costs, is issued by the engineer to the contractor who then approves it.

Russia

Russia

Variations initiated by the contractor

As a general rule the contractor is not entitled to cancel or change any part of the works unilaterally. If the contractor discovers that certain additional works that were not anticipated in the initial specification need to be undertaken, the contractor must inform the client immediately and suspend the works until it receives further instructions from the client. Where variations are required as a result of the contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract.

Variations initiated by the client

The client has the right to request variations to the works provided that such variations do not lead to the increase in the initial cost estimate by more than ten per cent and do not change the nature of works to be carried out by the contractor. Other variations must be agreed with the contractor.

Slovak Republic

Slovak Republic

Variations to the specification for engineering or construction works will affect the price.

If the contract for work is under the Civil Code, it has to be differentiated between a fixed price and a price on estimation. An increase of the fixed price can be pursued only with the consent of the client, otherwise it is entitled to withdraw from the contract. In the case of a price on estimation, the contractor shall inform the client of any substantial excess of the price (by at least 10 percent to 20 percent of the original price) in writing. If it neglects to do so, it is not entitled to the increased payment. After notification of a new increased price, the client is entitled to withdraw from the contract. The withdrawal has no effect on the obligation to pay the price works already carried out according to the price previously determined.

The Commercial Code distinguishes between quantitative and qualitative changes to the works, with the following effect on the price of the works:

  • If, following the conclusion of the contract, the parties agree on a diminution of the scope of works, but cannot agree on the effect of such change on the price, the client is obliged to pay a reasonably decreased price. If, similarly, the parties agree an extension of the scope of works, the client will pay a reasonably increased price.
  • If, following the conclusion of the contract, the parties agree to change the works, but fail to agree on the effect on the price, the employer will be obliged to pay a higher or a lower price according to the change(s), whilst taking into account the difference in the level of activities and the reasonable costs associated with the change to the works.

The changes to the specification for engineering or construction works will most commonly be reflected in the contract for work or construction contract. Therefore, it is advisable to conclude an addendum to the contract for work in writing with precise specification of the variations.

Spain

Spain

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

Developer led changes

The developer may request reasonable changes to the works at any time. After such a request, the contractor gives an estimate of the additional time and money involved in the variation and the developer is normally free to hire another contractor at a reduced price to carry out the works. In such cases it is very important to agree with the general contractor in advance any coordination fee to which it may be entitled should new contractors become involved in the works.

Contractor driven changes

Where variations are necessary because of the building contractor's error, delay or default, the contractor is not usually entitled to any additional time or money under the contract. He is also liable for any delays caused to the project by these variations, or where the variation means that the work has not been carried out in accordance with the contract.

Changes imposed by law

If the general contractor assumes responsibility for design, the obligation to adapt the works in the event of a change in the law is imposed on the contractor. Liability for this obligation is, in any case, usually capped.

Sweden

Sweden

Under the General Conditions for Contracts - AB 04 and ABT 06 - the contractor has a right and a duty to carry out alterations and additions to the construction works. Even if the alterations or the additional works are not prescribed by the employer, the contractor may be entitled to compensation for carrying out the work if the construction site or any other data is found to differ from what the employer has represented or from what the contractor has the right to assume.

Thailand

Thailand

Variations to the scope of the works can be made pursuant to the parties agreement in the construction contract.

United Arab Emirates - Abu Dhabi

United Arab Emirates - Abu Dhabi

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

Employer-led changes

The standard position is that the employer has the right to request variations to the works, for which the building contractor is entitled to additional time and money.

Contractor-driven changes

Where variations are necessary due to the building contractor’s error, delay or default, the contractor is not usually entitled to additional time or money under the contract. The contractor is also liable for any delays caused to the project by these variations, and where the variation means that the work has not been carried out in accordance with the contract.

United Arab Emirates - Dubai

United Arab Emirates - Dubai

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

Employer-led changes

The standard position is that the employer has the right to request variations to the works, for which the building contractor is entitled to additional time and money. The building contractor is also entitled to raise reasonable objections to material changes.

Contractor-driven changes

Where variations are necessary due to the building contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract. The contractor is also liable for any delays caused to the project by these variations, and where the variation means that the work has not been carried out in accordance with the contract.

UK - England and Wales UK - England and Wales

UK - England and Wales

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

  • Employer-led changes: Under most standard form contracts, the employer has the right to request variations to the works, for which the building contractor is entitled to additional time and money. The building contractor is also entitled to raise reasonable objections to material changes
  • Contractor-driven changes: Where variations are necessary due to the building contractor’s error, delay or default, the contractor is not usually entitled to additional time or money under the contract. He is also liable for any delays caused to the project by these variations, and where the variation means that the work has not been carried out in accordance with the contract
UK - Scotland

UK - Scotland

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

Employer-led changes

Under most standard form contracts, the employer has the right to request variations to the works, for which the building contractor is entitled to additional time and money. The building contractor is also entitled to raise reasonable objections to material changes.

Contractor-driven changes

Where variations are necessary due to the building contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract. He is also liable for any delays caused to the project by these variations, and where the variation means that the work has not been carried out in accordance with the contract.

Ukraine

Ukraine

As a general rule, all variations to the specification for engineering or construction works must be agreed by the parties.

According to Ukrainian legislation, if the contractor discovers the necessity for extra works that are not envisaged by the design documentation, the contractor is obliged to inform the developer about the issue. If the developer fails to decide whether it is necessary to carry out those works within a reasonable time, the contractor is entitled to suspend execution of construction works. In case of emergency (eg if non-performance of such works could entail damage to the construction works or other damage), additional works can be performed by the contractor without prior consent from the developer.

Additionally, under the Civil Code of Ukraine, a developer is entitled to amend a design documentation at any time provided that additional works necessary due to such amendments would not exceed 10 percent of the estimated price of the construction works stipulated by the design documentation prior to amendment.

United States

United States

Generally, changes to the work can be made to the drawings and specifications by using one of three methods, as follows:

Minor changes ordered by architect

Construction contracts typically provide that the design professional may make minor changes in the work without change to the contract time or contract price. For example, the AIA A201 General Conditions of the Contract for Construction gives the architect the authority to order minor changes as long as those changes do not require adjustments to the contact price or contract time and are consistent with the contract documents. Changes meeting those criteria are binding on both owner and contractor.

Change order agreed to by all parties

If the change is more extensive than a minor change to the work, then the change can be made by a written amendment to the construction contract, known as a change order. A change order provides for variations in the work where the architect, owner, and contractor agree as to the scope of the changed work and any increase or decrease to the contract price or time. The compensation for changed work might be a lump sum agreed upon at the time the need for change in work arises, or unit prices already provided for in the construction contract, or the cost of the work plus a fee, which fee is a percentage set forth in the construction contract to be applied to the cost of the work. Generally, the architect prepares the written change order and all parties execute it. As stated in payment, the change order should set forth all of the details of the work, including the scope, cost, and time of the changed work.

Construction change directive issued by owner

If the parties cannot agree on the changed work, the owner may unilaterally order a change in the work by issuing a construction change directive signed only by the owner. The method of calculating the contractor’s compensation for changed work in the event the parties cannot reach agreement should be set forth in the contract and that calculation is then applied to the changed work should the need arise. For example, a common method of calculating compensation for changed work absent mutual agreement is to pay the contractor the cost of the work plus a percentage of such cost for profit and overhead. The AIA A201 General Conditions of the Contract for Construction uses that approach, providing that the contractor is entitled to the sum of the costs of the following: labor, equipment, material, supplies, supervision, premium for any additional insurance coverage required and additional field office costs. The contractor also is entitled to a percentage of the foregoing sum as compensation for profit and overhead.

Cardinal changes

Variations to specifications that far exceed the scope of the work are known as cardinal changes. A contractor cannot be forced to perform a cardinal change; rather, a cardinal change constitutes a breach of the contract. Whether a change is a cardinal change is decided on a case-by-case basis, but an example might be adding a fourth story to building that initially was to be three stories. The contractor generally cannot be forced to perform changed work that far exceeds the scope of the work.

Zimbabwe

Zimbabwe

Variations are normally dealt with in the construction contract agreed between the parties, which will prescribe the scope and nature of the allowable variations as well as the procedure to be adopted where a variation to the works is requested. Should the contract not address variations to the works, the parties would need to agree in writing, in keeping with the contract’s non-variation clause. To the extent that the variations are within the scope of any authorised plans or permits from the local authority or other such inspector, these variations will require the aforementioned persons’ approval.