Keeping excellent paperwork is essential to running a sustainable building construction business. This means keeping up to date with the requirements of your contracts including variation notices.
Discrepancies over variations can cause a lot of legal headaches for a builder. On the flip side, keeping contacts up to date protect a contractor’s rights. This is why it is vital every step of a project is contractually signed off.
Some building contracts require that if the builder receives instructions from the owner/principal or their representatives, and the builder believes the instruction is a variation, they must provide a notice to the owner/principal within a specific number of days.
Some owner/principals think a conversation and a handshake is enough to get the job, with its few changes here and there, done. However, don’t be mistaken. A payment for a variation is not legally binding if it was not made in writing.
What’s more both parties have to agree to changes in a project – particularly on the price and scope of works. Most construction contracts do not allow for a claim for variation works if the owner/principal did not provide written instructions or approval. Also, a builder cannot be forced to undertake work if he does not consent contractually. Specific to home building, it is required by the Home Building Act 1989 (NSW) that variations are agreed to by both parties in writing.
Finally, it is imperative an agreement to a change variation is in place before commencing the work and these are the important elements to include:
- The work to be performed including the scope and specifications.
- The additional costs
- Any effect (delays) the works will have on the construction program
- Details of the instructions, legal requirements or other circumstances that are the cause of performing the variations.
Keeping up to date with your contracts and other paperwork will keep you compliant, improve your cash flow and ultimately save you time. Equally important is how you communicate with your clients every step of the way. We recently wrote about this here: 5 ways to build trust with your construction client
Other articles relating to building contract standards you might also be interested in:
- 5 Common Pitfalls with Australian Standard Contracts for Small Builders in Residential Construction
- Contract Standards for Commercial Building Contractors
- Get Paid with Security of Payments Software