Common contract pitfalls Part 1: When wet weather isn't a variation

This article examines when additional costs may, and may not, give rise to a variation entitlement.

Recent QCAT cases and common contract pitfalls: Part 1

Builders often contact HIA seeking advice on day-to-day contract administration issues. Occasionally, these disputes escalate to the Queensland Civil and Administrative Tribunal (the Tribunal), where the Tribunal is required to determine whether the contract has been correctly interpreted and applied.

In this series, we look at recent QCAT decisions and the practical lessons they offer builders.

Wet weather delays – not every extra cost is a variation

In the case, the dispute arose after wet conditions made it difficult for the builder to install underground water tanks in the manner originally anticipated under the contract. Rather than claiming an extension of time, the builder engaged cranes and additional labour to get the tanks in, then sought to recover those costs from the owner as a variation.

The builder argued the variation was justified on the basis that the site conditions were unforeseen and outside of its control, and that the proper, standard sequencing of construction required the tanks to be installed at a certain point in the build, although the Tribunal ultimately rejected that evidence.

The owner disputed the builder's entitlement to the variation, arguing that installation of the tanks formed part of the fixed-price scope of work, and that how the builder chose to do that was a matter for the builder. The owner also argued there had been no agreement to pay the additional costs. In particular, a one-word text message stating "OK" merely acknowledged receipt of the builder's message and did not constitute approval of the variation.

The Tribunal agreed with the owner and found that while the wet weather created genuine difficulties, the contract dealt with weather-related impacts through the extensions of time provisions. Because the contract expressly dealt with wet weather through these clauses, the builder could not disregard it and seek to rely on broader variation provisions to charge for the cost of working through the wet weather.

In other words, the builder may have been entitled to additional time to complete the works, but not additional payment.

The dispute escalated when the owner refused to pay the claimed variation and the builder suspended works. The builder later refused to recommence unless payment was made.

The Tribunal ultimately found that the suspension was not contractually permitted, the owner's subsequent termination of the contract was valid, and the builder was ordered to pay more than $21,000 in damages.

Key takeaway

This decision highlights an important distinction between a delay event and a variation. 
A variation generally arises where the scope of work changes. By contrast, an extension of time deals with circumstances that affect how long it takes to perform work already included in the contract. While some events may entitle a builder to additional time, they will not necessarily create an entitlement to additional payment.

What builders can do

When unexpected site conditions arise:

• Check whether the issue changes the scope of works or simply affects the time required to complete them.
• Review the extension of time provisions in your contract.
• Don’t assume a variation is available just because additional costs are incurred, or because unforeseen circumstances arise – check whether a more specific clause already covers the situation. 
• Ensure variations are in writing, in the agreed format, before proceeding.
• Avoid suspending works unless you have a clear contractual right to do so.
• Seek advice if you are unsure whether a variation entitlement exists.

Next in this series, we explore a recent QCAT decision highlighting a little-known provision of the QBCC Act that can result in two separate contracts being treated as a single contract.

To find out more, contact HIA's Contracts and Compliance team

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The above is intended to provide general information in summary form. The content does not constitute specific advice and should not be relied upon as such. Formal advice should be sought by members and customers with respect to particular matters before taking action.