DEALING WITH VARIATIONS E.M.M.B. EKANAYAKE BSc(Hons)QS, MRICS, MCIArb, MAACEI (Chartered Quantity Surveyor & Claims/Contracts Specialist) by Under FIDIC 04 th Edition or Similar Forms

Why Do We Need a Variation Clause in a Contracts? Variation Clause in a contract would allow a party to vary the terms stated in the contract, with no need for fresh consideration. Thus, it is easier for changes to contracts to be made. Examples: Variation Clause in an employment contract, where the employer will be able to vary the salary of an employee Price Variation Clause that allows for fluctuation in prices of goods sold or services rendered Interest rates Variation Clause which allows banks to increase or decrease for loans and savings accounts, depending on the economic environment NB: We do not change the Terms by way of Variations in Construction Contracts

6 WH + 1 HO WHO can issue variations? WHAT can be changed? WHEN can variations be issued? WHICH can be changed in a Contract? WHY do we require variations? WHERE can we issue variations? HOW do we issue variations?

Clause 51.1 of FIDIC 04 th Edition The Engineer shall make any variation of the form, quality, quantity of the Works or any part thereof that may, in his opinion, be necessary and for that purpose, or if for any other reason it shall, in his, opinion, be appropriate, he shall have the authority to instruct the Contractor to do and the Contractor shall do any of the following: (a) increase or decrease the quantity of any work included in the Contract, (b) omit any such work (but not if the omitted work is to be carried out by the Employer or any other contractor) (c) change the character or quality or kind of any work, (d) change the levels, lines, position and dimensions of any part of the Works, (e) execute additional works of any kind necessary for the completion of Works, or (f) change any specified sequence or timing of construction of any part of the Works. No such variation shall any way vitiate or invalidate the Contract, but the effect, if any, of all such variations shall be valued in accordance with Clause 52. Provided that where the issue of an instruction to vary the Works is necessary by some default of or breach of contract by the Contractor or for which he is responsible, any additional cost attributable to such default shall be borne by the Contractor..

Commencement and Expiry of Engineer’s Authority to Order Variations Clause 49.2 : To the intent that the Works shall,... (b) Execute all such work of amendment, reconstruction, and remedying defects, shrinkages or other faults as the Engineer may, during the Defects Liability Period or within 14 days after its expiration as a result of an inspection made by or on helaf of the Engineer prior to its expiration, instruct the Contractor to execute. Is the Engineer empowered to order variations under Letter of Intent/ LOI?

Disagreement Regarding a Contract’s Meaning When there is a disagreement regarding a contract’s meaning, the dispute is considered a “question of law” as opposed to a dispute that involves “opposing factual views” or question of fact. Questions of facts – what caused water proof to leak and who was responsible for a delay, technical experts decide the questions of facts Questions of law – Judges decide questions of law Arbitrators decide questions of law and questions of facts in arbitration proceedings.

Clause 12.1 Sufficiency of Tender – FIDIC 87 The Contractor shall be deemed to have satisfied himself as to the correctness and sufficiency of the Tender and of the rates and prices stated in the Pricing Document, all of which shall, except insofar as it is otherwise provided in the Contract, cover all his obligations under the Contract (including those in respect of the supply of goods, materials, Plant or services or of contingencies for which there is a Provisional Sum) and all matters and things necessary for the proper execution and completion of the Works and the remedying of any defects therein.

What if there is a pre-contractual duty on the Contractor to inquire discrepancies/ ambiguities at the time of tendering? Should we resort to document priority by default? Or Analysis the situation further with respect to pre-contractual obligations?

Legal Definition of Ambiguity A statement or clause is ambiguous when it has two or more meanings, each of which may be adopted without distortion of the language. The law has classified ambiguity into two types: patent and latent. Patent ambiguity is ambiguity that results from the language of the instrument; whereas latent ambiguity only become apparent when the contractual language is applied to the factual situation. Moreover, if an ambiguity is ‘immediately apparent’, it is considered a patent ambiguity. one that is ‘so glaring as to raise a duty to inquire. This is to say that a patent ambiguity is an inconsistency that a contractor should have recognized at once and its existence would be readily apparent to a reasonable person reviewing contract documents. It is the obviousness of a discrepancy that imposes the duty to inquire, not actual knowledge Latent ambiguities –This imposes no duty to inquire upon the contractor.

Patent Ambiguity Patent ambiguity is that ambiguity which is apparent on the face of an instrument to any one perusing it, even if he be unacquainted with the circumstances of the parties. In the case of a patent ambiguity “parol evidence” is admissible to explain only what has been written, not what it was intended to write. For example, where a bill was drawn in figures for $245 and in words for two hundred dollars, evidence that "and forty-five" had been omitted by mistake may be rejected. But where it appears from the general context of the instrument what the parties really meant, the instrument will be construed as if there was no ambiguity

Latent Ambiguity Latent ambiguity is where the wording of an instrument is on the face of it clear and intelligible, but may, at the same time, apply equally to two different things or subject matters, as where a legacy is given "to my nephew, John," and the testator is shown to have two nephews of that name. A latent ambiguity may be explained by parol evidence, for, as the ambiguity has been brought about by circumstances extraneous to the instrument, the explanation must necessarily be sought for from such circumstances

QUESTIONS? Any Question related to claims/ contract administration/ legal implication upon contracts