In the fourth part of our series on contract management pitfalls, we look at the risks arising from varying the terms of construction contracts.
You might think that having negotiated a contract, it would not be necessary to vary the terms during delivery of the works or services. However, there are occasions when it is appropriate to vary contractual mechanisms. For example, adjusting key performance indicators (KPIs) and incentives, or adjusting the final account mechanism if works are due to continue beyond the expiry of a term service contract.
We often see disputes arise out of a misunderstanding of the consequences of a variation, or where one party wishes to revert to the original contract terms.
The case of Mears Limited v Shoreline Housing [2015] 1396 (TCC) highlights some of the difficulties that can arise. In this case, the parties agreed to change the schedule of rates contained within the contract (with the new rates referred to as the “Composite Rates”), but they didn’t agree a formal contractual variation. A dispute arose as to the correct value due to Mears, with Mears calculating payment based on the Composite Rates and Shoreline applying the rates tendered by Mears in the schedule of rates. The Technology and Construction Court agreed with Mears that the Composite Rates applied, requiring Shoreline to pay the higher rates.
How to manage the risk
There are two ways to mitigate the risks of contract variations:
It is also important to consider whether the variation has any implications under the Public Contracts Regulations 2015. Seeking support from legal advisers to review (or draft) the variations and comment on the procurement implications of any variation, can also assist in managing the risks.
If you have any questions regarding the issues raised in this briefing or would like to find out more about our bespoke client training programme, please contact Kieran Binnie or Andrew Lancaster.
Anthony Collins Solicitors scooped ‘Excellence in Client Service - Private Clients’ at Birmingham Law Society’s 2021 Legal Awards.
Anthony Collins Solicitors (ACS) has appointed a new partner to its Manchester office in a move to grow its presence in the North West.
The monthly round-up from the Anthony Collins Solicitors charities team
A party seeking to restrict another's commercial activities must consider whether such terms are normal in similar, factual and contractual circumstances.
This ebriefing considers the Government’s proposals for challenges, as set out in Chapter 7 of the Green Paper entitled 'Fast and fair challenges'.
We’re delighted to announce that we have been ranked in the top five national legal advisers in the Top 3000 Charities 2021 directory.
The Law Commission published its report on Technical Issues in Charity Law in September 2017 following a public consultation.
Changing charitable purposes and amending governing documents.
To receive invitations to our events, as well as information and articles on legal issues and sector developments that are of interest to you, please sign up to Newsroom.