Construction Contract Variations

413 Pages·2014·2.201 MB·English

by  Michael Sergeant, Max Wieliczko

CONSTRUCTION CONTRACT VARIATIONS
Changes to the work on construction projects are a common cause of dispute. Such variations lead to
thousands of claims in the UK every year and many more internationally. Liability for variations is
not only relevant to claims for sums due for extra work, but is also an important underlying factor in
many other construction disputes such as delay, disruption, defects and project termination. This is
the first book to deal exclusively with variations in construction contracts and provide the detailed and
comprehensive coverage that it demands.
Construction Contract Variations analyses the issues that arise in determining whether certain work is
a variation, the contractor’s obligation to undertake such work, as well as its right to be paid. It deals
with the employer’s power to vary and the extent of its duties to approve changes. The book also analy-
ses the role of the consultant in the process and the valuation of variations. It reviews these topics by
reference to a range of construction contracts.
This is an essential guide for practitioners and industry professionals who advise on these issues and
have a role in managing, directing and compensating change. Participants in the construction industry
will find this book an invaluable guide, as will specialists and students of construction law, project
management and quantity surveying.
Michael Sergeant graduated in law from Manchester University in 1991, qualified as a solicitor in
1995, and has specialised in construction law ever since. He became a partner at the construction law
niche practice Winward Fearon in 2001, which merged to become Maxwell Winward in 2007. In April
2013, the Maxwell Winward construction team moved to Holman Fenwick Willan LLP, where he is
now a partner, based in London but with extensive involvement on international projects. During the
course of his career he has acted for a range of clients, including contractors, employers and consult-
ants, and on a wide variety of projects from retail development to transport infrastructure through
to energy facilities. His work involves him in advising at all stages of the construction process, from
procurement through to dealing with the problems that arise during the life cycle of a project.
Max Wieliczko studied law at University College London. He has worked exclusively as a construc-
tion lawyer since 1987, providing advice in relation to all aspects of project procurement, delivery,
dispute avoidance and resolution. Before moving to Holman Fenwick Willan LLP in April 2013 he
headed up the construction group at Winward Fearon, and then Maxwell Winward. Max is based in
London, but advises project sponsors, and major international construction companies in relation to
projects around the globe, both on- and offshore. His work has a particular focus on heavy engineering,
including oil and gas production, tunnelling and infrastructure, all manner of process plants, including
energy from waste facilities, power stations and wind farms.
CONSTRUCTION PRACTICE SERIES
Construction Law
Julian Bailey
(2011)
Remedies in Construction Law
Roger ter Haar QC and Camilla ter Haar
(2010)
The Law of Construction Disputes
Cyril Chern
(2010)
FIDIC Contracts: Law and Practice
Ellis Baker, Ben Mellors, Scott Chalmers and Anthony Lavers
(2009)
Construction Insurance and UK Construction Contracts
Marshall Levine and Roger ter Haar QC
(2008)
Construction Insurance
Marshall Levine and Roger ter Haar QC
(1991)
CONSTRUCTION
CONTRACT VARIATIONS
By
MICHAEL SERGEANT
MAX WIELICZKO
HOLMAN FE NWICK W ILLAN L LP
First published 2014
by Informa Law from Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Informa Law from Routledge
711 Third Avenue, New York, NY 10017
Informa Law from Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2014 Informa UK Ltd
The rights of the Michael Sergeant and Max Wieliczko to be identified as authors of this work has
been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form
or by any electronic, mechanical, or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or retrieval system, without permission
in writing from the publishers.
Whilst every effort has been made to ensure that the information contained in this book is correct,
neither the author nor Informa Law can accept any responsibility for any errors or omissions or for
any consequences arising therefrom.
Trademark notice: Product or corporate names may be trademarks or registered trademarks, and
are used only for identification and explanation without intent to infringe.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
A catalog record for this book has been requested
ISBN: 978-1-84311-950-0
eISBN: 978-1-31577-468-8
Typeset in 10/12 Erhardt MT Pro by
Servis Filmsetting Ltd, Stockport, Manchester
The authors’ royalties from this book are being donated to the construction
industry charity, The Lighthouse Club.
This page intentionally left blank
PREFACE
Variations, as a subject, has been largely ignored. Whilst there are specialist books on many
other areas of construction law, there are no specialist books on this subject.1 The construc-
tion law bibles, Keating and Hudson, deal with the subject as well as the inevitable constraints
of space will allow, with Keating giving 20 pages to the topic and Hudson 70 pages. By having
the opportunity to devote an entire book to the topic we have been able to analyse the prob-
lems and issues that arise in much more detail and from first principles. We have been able
to look at variations in conjunction with other subjects, where the general texts have consid-
ered them separately. For example, we have been able to consider the interpretation of the
contract, and in particular the defined scope of works, specifically in the context of changes
that may need to be made.
This subject has perhaps been neglected because of a perception that disputes about
variations are disputes about valuation, and that they are low value and straightforward.
Valuation is an important element of the subject and one this book covers, but variations
as a topic involves many other issues. Perhaps the most important of these is the whole
question whether certain work is within the scope, and therefore part of the contractor’s
obligation to construct the works, or whether it is outside the scope and therefore is work
that the employer needs to instruct as an extra. When parties are seeking to resolve a varia-
tion account, a disagreement on this point will often be described as a difference in principle
because, once resolved, there may be no difference on quantum. The question whether
or not work is part of the contract scope is the underlying substantive issue on a wide
range of disputes. Delay and disruption disputes will often have this point at their core.
Disagreements over defects often depend on whether the contractor is obliged to correct a
failure of the design, or whether the corrective work is extra and therefore something that
the employer should instruct. Variations are therefore at the heart of many of the largest
and most intractable disputes and the subject is much broader than disagreements about the
correct rate to be applied. Chapter 1 contains an overview of the subject matter of this book
which highlights further the breadth of the subject.
Max and I chose to write on this subject precisely because we felt it had been unduly
ignored. Our aim has been to add something new to the current texts on construction law,
rather than produce a book that synthesizes what has been written before on a well-trodden
topic. This has brought its own challenges. Because comparatively little has previously been
written on variations, we have spent significantly more time researching and analysing the
subject than would have been required had we tackled a topic that had already been covered
in detail by specialist texts.
Writing this book has been an enormous challenge. Max and I started the process in 2009
and had initially planned to complete it within two years. Perhaps inevitably, this coincided
with a very busy period of work for clients, with the result that our deadline was put back
1. Variations in Construction Contracts by Peter Hibberd is the only book we are aware of that seeks to cover a
similar field, but it is written from a quantity surveying perspective. It was published in 1986, is relatively short, and
principally concerns valuation.
vii
preface
on several occasions. Not only has the last few years seen us involved in a number of very
substantial projects, many of them overseas, but we have also moved firm. Our construction
law team had enjoyed a number of successful years at Winward Fearon (latterly Maxwell
Winward), but by 2012 we had reached the point where so much of our work was located
outside the UK that we needed to be part of a firm with an international reach. In April 2013,
we moved our team to Holman Fenwick Willan LLP, which, with 14 offices worldwide, has
the global footprint we needed. Whilst the move has been a further diversion, we have been
greatly supported by our new colleagues at the firm.
In undertaking this work, I would like to thank the construction law team at Holman
Fenwick Willan LLP for all their help. In particular Huw Wilkins, James Plant and Richard
Booth who all helped with in depth research, and also Tim Atwood, Victoria Nichols,
Katherine Doran, Adam Wortman and Joanne Button. The views and comments of Nick
Longley and Robert Blundell, my fellow partners in the Holman Fenwick Willan LLP con-
struction team, have also been much appreciated. Thanks also to my fellow partner, Anthony
Woolich, who specialises in competition law, for his input in relation to procurement legisla-
tion. Last, but not least, many thanks to my secretary, Lyanda Watson, for her patience and
attention to detail with the many last-minute manuscript changes to the text.
Michael Sergeant, lead author
Holman Fenwick Willan LLP
viii
OUTLINE CONTENTS
Preface v
Table of Cases xviii
Table of Legislation xxvi
CHAPTER 1: OVERVIEW 1
CHAPTER 2: EMPLOYER APPROVAL 17
CHAPTER 3: SCOPE 33
CHAPTER 4: CONTRACTOR’S OBLIGATIONS IN RESPECT OF THE
WORKS 105
CHAPTER 5: POWER TO VARY 129
CHAPTER 6: VARIATIONS REQUIRED BECAUSE OF CONTRACTOR
RISK 175
CHAPTER 7: DUTY TO VARY 187
CHAPTER 8: VARIATION INSTRUCTIONS 207
CHAPTER 9: CHANGE IN THE ABSENCE OF A VARIATION
INSTRUCTION 233
CHAPTER 10: VALUATION PROCESS 295
CHAPTER 11: ENTITLEMENT TO MONEY 323
CHAPTER 12: ENTITLEMENT TO TIME 363
Index 379
ix