Not Every Instruction Is a Variation: Changing the Work Without Losing the Bargain

On construction projects around the world, instructions arrive every week. Some confirm what the drawings already required. Some correct an error or resolve a discrepancy between documents. Some genuinely change the work: a different material, an extra room, a deeper foundation, a new sequence of working. And some are given orally, beside an excavation or in a site meeting, and never written down. To the people on site these can all feel like the same thing, an instruction to do something. Contractually they are not the same thing at all.

The difference matters because a construction contract is a bargain. The contractor agreed to deliver a defined body of work for a stated price, and the employer agreed to pay that price. Changing the work during construction is normal, and the standard forms expect it. But the bargain survives change only if each change is made under the contract: by someone with the power to make it, within the scope the parties had in mind, and with a clear basis for payment. Treating every instruction as a variation inflates the account. Treating an informal request as if no written-order rule existed invites a dispute. Either way, the bargain quietly unravels.

This comprehensive blog will explore why a variation needs both a contract and a reserved power to vary it, how to tell an instruction that merely clarifies from one that changes the work, and when an obligation to pay for extra work actually arises. We will examine why oral instructions are a recurring source of dispute, why the valuation of a variation has to be read in the form actually used rather than applied from habit, and how a simple record of authority and consequence keeps the bargain visible. Whether you are a client, contract administrator, quantity surveyor, contractor or project manager, understanding what makes a change a variation is key to changing the work without losing the bargain.

1. First, There Must Be a Contract to Vary

The starting point sounds obvious. For there to be a variation to a contract, there must first be a contract in existence. A variation is a change to an existing bargain. If no bargain has yet been concluded, there is nothing to vary.

A less comfortable observation follows: a surprising number of parties involved in projects are not in fact in a contractual relationship with each other. The reason is practical rather than legal. Contractors are increasingly told to start work before negotiations are completed, usually on the basis of a letter of intent. Work begins, drawings are revised, and instructions are issued, all while the formal contract remains unsigned. Each of those instructions is treated on site as a variation, yet the legal framework that would make it one may not yet exist.

The problem of late signing is illustrated by Trollope & Colls Ltd v Atomic Power Constructions Ltd (1962). In that case, work started on site some months after the tender, the formal contract was agreed considerably later, and variations were issued during the work in the meantime. The contractor argued that, because no contract existed when the work was done, it should be paid on a reasonable-value basis. The court held that the contract, once agreed, operated retrospectively, so the price was the original tender adjusted under the contract to take account of the variations. The retrospective effect was not an express term; it was implied to give the contract business efficacy. The essential warning is that, although the contract was held to be retrospective there, it should not be assumed that this will always be so.

The point for practice is not a theory of contract formation. It is that the absence or lateness of a signed contract is a problem for variation entitlement. Where a contract is later concluded and is found to cover the earlier work, instructions issued before signature may be brought within its variation machinery. Where it is not, an instruction given before any contract exists is not a variation of a bargain. It is a request that needs its own agreement, and the question of what is payable for it has to be answered on some other basis. A second example of late signing involved a contract signed after delivery had begun was stated to take effect from an earlier letter of intent; there, the appeal court treated even a large increase in drawings as variations to be dealt with under the contract, because the changes did not transform the work into something beyond the parties' contemplation. In both cases, the outcome depended on what the contract, once concluded, was found to cover.

Once a contract exists, a second requirement follows. The contract governs the relationship between the parties, and if either party wants to be able to modify that relationship later, the right to do so must be reserved in the original contract. Without such a reservation, any modification must be negotiated as a separate contract. This is why the standard forms all contain variation clauses, and why entitlement is best treated as a sequence of linked questions rather than a single judgement on site: is there a contract, has a power to vary been reserved and used within the work anticipated, and has an obligation to pay arisen?

Figure 1: No contract, no variation: the three linked questions of variation entitlement, in which a broken first link (no contract yet, or late signing still unresolved) stops the sequence before power or payment can be considered.

2. Not Every Instruction Is a Variation

Most contracts provide for the contract administrator to issue instructions while the works are in progress. Their purpose is to give the contractor in writing either new information, changes to the contract, or the correction of errors in it. The instruction clause may be short, but it is used many times during a contract, and it is the mechanism by which the contractor may receive additional payment in the final account.

It does not follow that every instruction carries additional payment. Not all architect's instructions are variations. Many site instructions merely clarify a situation or cover some aspect already contained in the project documentation. An instruction that tells the contractor how a detail shown on the drawings is to be built, or which of two consistent documents to follow, may give new information without changing what was bought.

To amount to a variation, the work must be something additional to what was contracted for, and the way to find out is to examine the original specification. The question is what the contract already required, not what the site team now wishes had been drawn. Difficulty arises where the work is described only in general terms. Older cases show that where a contractor undertakes to deliver something complete, items that are clearly necessary to achieve that result may be inferred as part of the original obligation, even if they are not separately described. In such a case, an instruction to provide the item does not create extra work; it identifies work that was always included.

Bills of quantities change the analysis in a useful way. Where firm bills prepared on behalf of the employer form part of the contract documents, an error in them will be adjusted to the correct quantity, and anything in addition to them will be extra work dealt with under the variation clause, if there is one. The bill therefore helps define the bargain: it records what was priced, so that a departure from it can be seen.

There is also an outer limit. Even where the contract contains a variation clause, any variation must fall within the scope of the work anticipated at the time the contract was made. Blue Circle Industries plc v Holland Dredging (UK) Ltd (1987) is authority for the statement that a variation is something which bears some relationship to the work of which it is a variation. The power to vary in most contracts is wide, but it is not unlimited. If a change, or a series of changes, were to alter the scope or nature of the work completely, it would probably be held to be outside the contemplation of the parties. Such work is not a variation at all and would need a separate agreement.

A practical test is to ask whether the instruction alters the design, quality or quantity of what was contracted for, or whether it only explains it. The JCT 05 Standard Building Contract defined a variation in those terms, as the alteration or modification of the design, quality or quantity of the works, including the addition, omission or substitution of work and changes to the kind or standard of materials. It also extended the definition to the addition, alteration or omission of certain obligations or restrictions imposed by the employer, such as access to the site, limitations of working space or hours, and the order of working. There is an important boundary here: it is the contractor's obligations that can be varied in this way, not its rights, and the terms of the contract themselves can be changed only by agreement between the parties.

Figure 2: Clarify or change? One instruction, three possible outcomes: a clarification within the original specification, a variation that is additional to what was contracted and within anticipated scope, or a barred branch of work outside anticipated scope that needs a separate agreement (JCT 05 definitions).

3. There Must Be a Power, and There Must Be an Obligation to Pay

A variation clause gives someone the power to change the work. The power must be reserved in the contract, and it is exercised by the person the contract names. The consequence of its absence is plain: without a variation clause, the contractor would be entitled to refuse any alteration to the work, and an employer who varied the work regardless would effectively be in breach of contract and liable in damages. The courts do not imply a variation clause merely because one would be useful for completing the project. An owner or consultant cannot create a right to vary by informal habit if the contract does not confer it.

Power is only half the question. Where the contractor has carried out extra work, it is entitled to payment only if the client has an obligation to pay. If a contractor decides on its own initiative to use materials of a superior quality, at a superior price, or to carry out additional work that nobody asked for, it is not entitled to payment. Authorisation must come from the client or the client's agent, and the standard forms usually require it in writing.

The written-order rule is not always the end of the matter. Molloy v Leibe (1910) illustrates an implied obligation. There, the contract provided that extra work would not be paid for without a written order, signed and endorsed in a particular way. Extra work was carried out without such orders; some was instructed in writing by the architect and some orally. The client was present on site and involved with the work to such an extent that he should have been aware of the extras. The contractor was held entitled to payment under the common law rule that, where work is carried out at the request of one party, there is an implied promise to pay for it.

Alongside the implied obligation sits an argument from waiver or estoppel. If the client, or its authorised agent, orally requests work to be done contrary to the written-order provisions of the contract, it may be said to have waived that requirement, or to be estopped from denying its promise to pay. It is an argument that may be made, not a guaranteed outcome. Its practical significance is that an oral request from the client's side can reopen a question the written-order clause was meant to settle.

Payment also depends on the kind of contract. Under a lump-sum contract, the contractor is entitled only to the contract price. To establish a claim for extras, it must show that the contract provides for them, or that some new contract has been entered into. If the contractor accepts orders it was entitled to refuse, it risks having to prove that the work falls outside the terms of the contract. Quantity is a related source of argument. A widely accepted view is that a significant variation in the quantity of work warrants a fair price, but there is no hard and fast rule about what "significant" means. A significant change in one item may not be significant in another, the decision is often left to the quantity surveyor or engineer, and each situation must be looked at on its merits. Some forms gave their own guidance on rates for changed quantities; there is no general threshold, and none should be assumed.

All of this explains why written confirmation is a control point and not a formality. Variations are commonly made by amended drawings, letters or oral site instructions. The JCT 05 form set out a procedure by which an oral instruction could be confirmed in writing by either side, and allowed the architect to confirm one later, before the final certificate, so that the final account could be prepared accurately with an audit trail to follow. A contractor that receives what purports to be an instruction may also ask under which clause it is issued, and the answer must be in writing.

4. Valuation Follows the Form, Not a Single Habit

Once an instruction is accepted as a variation, it must be valued. It is tempting to treat this as a single professional habit: use the bill rates where they fit, adjust them where they nearly fit, and agree a fair rate where nothing fits. That is indeed a widely accepted view for traditionally procured contracts. Work the same as in the original scheme is valued at bill or schedule rates; similar work at rates based on the original rates; work with no comparable item at an agreed or reasonable rate; and work that cannot be measured and valued may be dealt with at daywork rates. It may also be better to agree the value of varied work before the instruction is issued, and that many contracts provide for this.

But the forms themselves must be read. Comparing how different standard forms define and value a variation reveals real differences in who orders the change, what it may cover and how its price is fixed.

Under the JCT 05 Standard Building Contract, a variation is an alteration or modification of the design, quality or quantity of the works, together with changes to certain employer-imposed obligations and restrictions. Valuation is governed by the rules in clauses 5.6 to 5.10, and the form also allows the contractor to submit a lump-sum quotation for a variation, which can take into account any direct loss and expense. Under the ICE 7th edition, the engineer orders variations that are, in the engineer's opinion, necessary for completion, and may order others that are desirable; the engineer may also ask the contractor for a quotation and an estimate of any delay, with the aim of agreeing value and delay consequences before the work starts where possible. The FIDIC Red Book framed variations in terms of the form, quality or quantity of the works, ordered by the engineer, and valued at contract rates where applicable or on their basis so far as reasonable. GC/Works/1 (1998) provided a ladder in clause 42: valuation at bill rates for similar work, then at rates deduced from the bills, then at fair rates having regard to current market prices, and finally on a daywork basis.

The point of the comparison is not to provide a manual for every form. It is to show that "fair valuation" is not a free-floating professional instinct. It is a form-specific procedure, with its own order of methods, its own decision-maker, and its own route for quotations. The same physical change could be valued differently, by a different person, under a different timetable, depending on which form the parties signed. The form actually used has to be read.

Whatever form is used, valuation is easier when the tender was well prepared. If variations were never issued on lump-sum contracts there would be no need for a breakdown of the tender sum, but that this rarely happens. Contract documents should therefore provide a comprehensive breakdown of prices, with bills or schedules of rates priced in detail, so that varied work can be valued. Valuing changes in quantity or quality rarely poses great problems, provided there is sufficient pricing information in the contract documents.

One further link must be named and then set aside. A major area of dispute is the disruptive effect of a variation. Loss and expense incurred because of a variation is dealt with in the same way, and at the same time, as contractual claims, using the same heads and procedures. Disruption is therefore connected to the valuation of a change, but its assessment is a separate exercise.

Figure 3: The same change, different form rules: four standard forms, each with its own definition of a variation and its own valuation route; read the form actually used (JCT 05, ICE 7th, FIDIC Red Book, GC/Works/1 1998).

5. Keep a Register of Authority, Not Only of Cost

Most project teams keep a list of variations and their estimated cost. Far fewer keep a record of authority. Good management procedures are needed so that requirements for notices, approvals and reporting are followed, and so that the parties are kept informed of the effect of variations on final cost and completion date. A sound process includes authority levels, standard documentation for issuing variations, request-for-estimate and request-for-variation forms, authorisation forms, and a variation register. It also helps to channel all variations through one person, so that orders are not given to different workers with no chance of keeping a complete list.

Applying the three-step test, a register becomes far more useful if it records three things for every instruction. The first is what was asked, in the words used and by whom. The second is the contractual power under which it was given, by clause, or the absence of any power. The third is the consequence: a clarification within the original specification, a variation within the anticipated scope, or a matter for a separate agreement. Cost follows from that classification; it should not replace it.

The matching discipline on site is written confirmation of oral instructions. The contractor, for its part, must keep a careful check on drawings, information and details received and note any change from the contract drawings, because those are what the price was based on. The contractor should request a variation as soon as it is, or could reasonably be, aware of a change, since delay could affect its right to payment, and it need not wait until the cost is known. Early notification often serves both client and contractor.

The register should also record the contractor's response. Under the JCT 05 form, the contractor was generally obliged to comply with properly issued instructions, but it need not comply with an instruction requiring a variation if it had made a reasonable objection in writing, and compliance could also wait on the acceptance of a quotation where one had been submitted. What counts as a reasonable objection is always a matter of debate. Recording the objection, the clause relied on and the reply turns that debate into evidence rather than recollection.

Consider how quickly the bargain can blur on a mid-sized building project. During a site walk, the client's project director looks into a foundation trench and asks the groundworks foreman to "just deepen it a little here". No written instruction is issued, and the architect is not present. The contractor does the work. Months later, at the final account, three questions are disputed. Was the deeper trench already required by the specification and drawings, so that it was never extra work? Did the project director have any power under the contract to vary the works, or was the architect the only person who could issue instructions? And if the work was extra and the director had no power, did the client's presence and request on site give rise to an implied obligation to pay, or to an argument that the written-order requirement had been waived? The answers are conditional. If the specification already required that depth, there was no variation. If it did not, entitlement depends on power and on an obligation to pay, and an implied promise or a waiver argument may or may not succeed on the facts. A register entry, made on the day and confirmed in writing, would have settled most of this before anyone needed to argue it.

If a variation also affects time, the time consequence is a separate assessment and should be recorded as such, not folded into the cost.

Figure 4: Instruction, authority, consequence: three fields for each recorded instruction, namely what was asked, the contractual power or its absence, and the consequence as a clarification, a variation within scope or a matter for a separate agreement.

Conclusion

A variation is not simply any instruction that costs money. It presupposes a contract; it needs a power to vary that the contract reserves and that is used within the scope of work the parties anticipated; and it gives rise to payment only where the client has an obligation to pay. Many instructions do none of this. They clarify what was already required, correct an error, or explain a detail, and they leave the bargain where it was.

The places where disputes begin are predictable. Work starts before the contract is signed. Instructions are given orally, by someone whose authority is unclear, contrary to a written-order rule. Quantities change by an amount someone calls significant, without any agreed threshold for what significant means. And valuation is approached as a single professional habit rather than as the procedure of the form the parties actually signed.

None of these problems is solved by goodwill alone, and none is solved by refusing all change. The remedy is a visible written record. Each instruction should be captured with what was asked, the power under which it was given and its consequence, and oral instructions should be confirmed in writing while memories are fresh.