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.
The Prime Minister announced on Tuesday 22 September a new range of restrictions to protect us from the Covid crisis, some of which will apply to charities.
Following the end of the possession stay on 21 September, Helen Tucker & Rebecca Sembuuze from our housing litigation team discuss the most recent guidance, priority cases and what to expect in court.
Covid-19 has resulted, on the whole, in a marked co-operation between contracting authorities and their suppliers as everybody focuses on maintaining delivery as far as possible.
Employment Tribunal rules in favour of claimants in minimum wage case – has the interpretation of “working time” changed?
As we enter a recession, we have been here before, and a key question is what did we learn and how can we benefit from that learning?
It is anticipated that as lockdown restrictions ease, and particularly with children and young adults returning to education, cases of meningitis will start to rise.
As we continue to emerge from lockdown measures and deal with local measures and the short and long term economic impact of Covid-19, local authorities will need to re-assess how services will be delivered for years to come.
The Government first announced plans for a shared ownership right to buy in October 2019. At the time the sector raised concerns about the impact the plans would have on housing associations ability to borrow. An election and a pandemic later the Government announced, during the CIH Housing Festival last week, the return of the right to shared ownership as part of its Affordable Homes Programme (AHP).
Two final pieces of the possession jigsaw have been published on 15 September 2020. Mr Justice Knowles’ working group on possession proceedings has issued its guidance on the “overall arrangements” for possession proceedings.
One change proposed by the Building Safety Bill is the introduction of a duty holder regime, which will see statutory responsibility for the safety of higher risk buildings placed on key individuals
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.