Vary your building contract correctly and avoid unnecessary costs

August 1, 2018

A variation clause in a building contract governs the process when a person requests their builder/contractor to make a change to the original construction plan. Having a variation clause is crucial to limiting a cost blowout, but it is often misunderstood and not used correctly by builders and contractors.

What is a variation?

A variation is not something that has been done by fault of the builder/contractor. If this is the case, you should not have to pay for it unless you have agreed to. If you make a request for a variation that is outside the scope of the contract that you originally agreed to, then this will amount to a variation, and an extra cost will generally apply.

What makes a variation valid?

Schedule 2 of the Home Building Act 1989 (NSW) (the “Act”) deals with what terms should be included within a building contract and states that any agreement to vary a contract requires:

  1. It to be in writing; and
  2. For it to be signed by both parties, or someone on their behalf.

Whenever there is a variation it is imperative that this process is followed. By ensuring the variation is in writing and signed, you have a complete record if anything eventuates in the future. Completing this process should also mean any extra costs are accounted for at this time, and not later on. Depending on the contract, we would expect that a variation also include:

  1. A written description of the work to be performed;
  2. Plans that specify the work to be performed; and
  3. The estimated costs required for labour and material.

What to do when invalid variations arise?

If you believe there has been an invalid variation to your contract which has not satisfied the above requirements then it may be unenforceable under section 10 of the Act. If this is the case, the builder/contractor will not be entitled to damages or to enforce other remedies for breach of contract.

The first step in determining whether the variation is invalid is to try and resolve it with the builder/contractor. If this is unsuccessful then a building complaint can be made to Fair Trading NSW or the NSW Civil and Administrative Tribunal. If you believe you have an invalid variation and need help assessing its enforceability then we can help you through the process.

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