Construction Professional

Enigma variations

When is a variation a variation? Michael Sergeant, author of a new book on the subject, explains the legal minefi eld.

WHEN THE PARTIES to a contract turn their attention to resolving a variation account at the end of a project, they will often be able to negotiate away those items where the only difference between them relates to how the variation should be valued. What are typically more diffi cult to resolve are disputes “on principle”. These involve disagreement as to whether the work in question is a variation, or whether it is part of the contracted scope of works the contractor was obliged to undertake. This issue is common due to the nature

of construction works, while the way the construction “product” is described in a contract is complex and can often be uncertain. The description of the works, such as

specifi cations, drawings and pricing, will be established in a set of technical documents. Typically, there will not only be contradictions between these documents, but contradictions within the documents themselves. There may also be gaps in the scope as well as ambiguities in technical descriptions. To cap it off, the technical scope may involve works that simply cannot be built — for example, by specifying equipment that can no longer be purchased. How are the parties supposed to make

sense of this morass of contradictory information and work out what precisely the original contract scope is, and therefore what is extra? The fi rst thing the parties will often do in this situation is to look at the contract interpretation clause setting out a priority of documents. This may, for example, say that the specifi cation takes priority over the drawings (for example JCT clause 2.15). However, this does not mean that a description of works in a higher priority document trumps anything in the lower priority document. The way the courts (and adjudicators)

interpret contracts is much more subtle. They will look at the whole of the contract to see if the documents can be construed together to resolve ambiguities. Ultimately, they will try to determine what

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the common intention of the parties was. There are hundreds of published judgments in which the case between the parties depends on the interpretation of the confl icting contractual provisions and ambiguities. These cases will often provide useful precedents for parties seeking to make sense of contradictions in the scope. For example, such precedents have found that handwritten words in a contract document will be given more weight than typed words. Or that a document specifi cally produced for a contract will be given more weight than a set of pre-printed conditions. A contract scope will normally not describe the works to the last detail. For example, a drawing may show a door but not the hinges that will attach it to the frame. The courts will treat such “extra” work as implicitly necessary to achieve the scope. But the dividing line between what is implicitly required and what is an intentional gap in the contractor’s scope is often unclear. A drawing may show an aperture in a wall but no door. But is it implicit that a door needed to be installed — perhaps the employer wanted a walk- through, or planned to use a different contractor for this work? The obligations of the contractor in

relation to how it builds the works may add an additional layer of complexity. For example, a design and build contractor may be obliged to correct defi ciencies in the scope to ensure that the design works. This may mean the contractor has an obligation to change the scope to deliver works that are fi t for purpose. This may not then constitute a variation under the contract. What amounts to a variation may therefore depend on the contractor’s design responsibility, which may depend, in turn, on whether there are performance guarantees or a simple “reasonable skill and care” obligation. The most signifi cant disputes about the

entitlement to be paid for a variation will typically turn on the issues described above rather than disagreements about the applicable rate.

Five things to know about...

... hiring a linguist to boost exports 1

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The dividing line between what is implicitly required and what is an intentional gap in the contractor’s scope is often unclear

What is the idea? Postgraduates for International Business (P4IB) is a new UK Trade & Investment (UKTI) initiative that aims to marry up the language and cultural needs of exporting businesses around the country with local university students.

Why is it important? Companies that engage with their

clients in a culturally and linguistically sensitive way are likely to do better in overseas trade. However, surveys conducted over the years consistently show that exporting businesses feel that a lack of language and culture skills may be holding them back. So it’s important that companies have access to foreign language speaking people who can help them with their various exporting related needs.

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What scope is there for construction companies to improve exports?

The industrial strategy published in July 2013 sets out the global picture for construction: ● The global construction industry is set to grow by 4.3% a year until 2025, primarily in emerging economies. ● Global growth in green and sustainable building construction will be on average 22.8% a year between 2012 and 2017. ● The global population is forecast by the UN to increase to around 9 billion over the next 40 years, from the current fi gure of 7.2 billion. To be able to compete on the world stage,

UK construction companies will need to continue innovating and become more internationalised to adapt their business models and practices in ways that add value to the goods and services they offer.

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Construction Contract Variations by Michael Sergeant and Max Wieliczko, both partners in the construction team at law fi rm Holman Fenwick Willan, is published by Informa

Will the scheme make a difference? The scheme is very much in its infancy

so we don’t have any success stories yet. However, we have placed students with local companies in the past which has proved extremely successful. For example, we found a Ugandan student for a company in Leicester which felt that its product was well suited to Uganda but needed help to undertake market research. The language and cultural help the student was able to give enabled the company to get a toe-hold in the market which led quickly to sales.

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How can you get involved? Any company interested in accessing the service should get in touch with their local UKTI contact, which can be found at www.gov.uk/ukti and following the links.

By Suzannah Hutton, language and culture adviser, UK Trade & Investment