25 May 2016

A contractor gets paid an agreed price for delivery of an agreed scope of works by an agreed time.

That is of the essence of lump sum construction contracts.

However, it is virtually never the case that these three essential elements: scope, price and time, look the same at the end of the job as they did at the start.

Site instructions from the head contractor/principal will change the scope of the works; extension of time (EOT) claims will change the time for completion and variation orders will change the contract price.

Typically, under a lump sum construction contract, the head contractor/principal can instruct the contractor to do extra work and to omit certain parts of the original scope of works at any time.  The only limit is that the scope cannot be varied so much that the works as varied no longer look anything like the works under the original contract.  To take an extreme example, a principal cannot, by site instruction or variation (unless the contractor agrees), change timber works in a 3-storey apartment block into steelworks in a 10-storey apartment block because these are two completely different work scopes.

Outside of these extreme examples, the principal/head contractor will generally be free to vary the work scope, without needing the contractor to buy into the change, just by giving the direction to do extra work or omit some part of the work.  The contractor, however, is not so free to extend time or increase the contract price.  These rights are generally available under construction contracts but they are limited by time bars and procedural bars.

Time bars refer to the strict time limits that apply to EOT and price variation claims.  They are clauses in a construction contract that simply say, if you do not claim your EOT or price variation on time, then you cannot make that claim at all.  The effect of these time bars are strict and absolute.  This means that, no matter how much longer it takes you or how much more it costs you to do additional work as directed by the head contractor/principal, you do not get more time or more money to do that additional work if you do not make your claims within the time limits under the contract.

Procedural bars work the same way.  They basically say that an EOT or price variation will be claimed in a particular way under the contract and if you try and claim them in a different way, then your claim will be invalid.  Some contracts prescribe a particular form to be used in claiming EOTs/price variations.  If a form is prescribed, use it.  Some contracts prescribe specific information to be included in an EOT/price variation claim.  If specific information is prescribed, give it.

The courts have been unsympathetic to contractors who have missed out on their rights to claim more time and money because their claims were late or deficient under the contract.  This is one are where good, early legal advice is essential.  We can advise you about how to protect your rights when your head contractor/principal directs you to do more work than you bargained for and we can prepare the paperwork that you need to give on time and properly to make sure you don’t miss anything important.

This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.

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