Variations to contracts

Sometimes when you are doing a job as a tradie, the scope of the work can change, so knowing how to manage changes can help you save time and money. Learn about what a variation to a contract is and what you should do to help prevent disputes between you and your client.

Watch: Learn how to manage variations

Video transcript: Variations to contract

[Audio/ Visual: Upbeat music starts playing with blue introduction screen with white business.govt.nz logo. The word “presents” in smaller, thinner lettering is beneath the logo. These words disappear and are replaced with white text “Tips for tradies e-learning series”. These disappear. White text saying “How to manage a variation to a contract” then appears in the centre of the screen. Music continues to play throughout the entire video.]

[Visual: The screen changes to a profile shot of the presenter, standing in a tool shed. In the bottom right is the business.govt.nz logo which remains there until the end of the video.]

Contracts are an important part of any building project. But what happens when the work changes from what’s in the contract?

When working on a building project, it’s natural for things to change over time for one reason or another.

[Visual: Camera cuts to an upper body shot of the presenter on the left side of the screen. The words “Variation to an original contract” pop up on the right side of the screen and disappear after a few seconds.]

In this video, we’ll cover what a variation to an original contract is, and how to manage it.

First, let’s define what variation is.

[Visual: The word “Variation” pops up in bold. Below this, the words “Any change to the original job” pop up. All words disappear after a few seconds].

Variation refers to any proposed change to the original job.

[Visual: Camera cuts to a profile shot of the presenter].

Changes can mean you might end up doing work that wasn’t initially planned for – meaning you put in more time and effort without getting more money for your extra mahi (work).

Because of this, it’s important to understand variations and have a plan in place for if they happen.

Here are some common examples of variations.

[Visual: the screen turns opaque white. A title “Examples of variations” pops up at the top of the screen. A cartoon pops up of two men shaking hands. Below the title, a bullet point pops up saying “Changes to the terms agreed in the contract”.]

Changes to the terms agreed in the contract, like when the work will be completed or when payments are due,

[Visual: the bullet point changes to say “changes to the level of quality and finish”]

Changes to the level of quality and finish for the agreed project price,

[Visual: the bullet point changes to say “changes to the size or complexity of the job or the products to be used”].

Changes to the size or complexity of the job, or the products to be used,

[Visual: the bullet point changes to say “unforeseen circumstances that lead to additional work or delays”].

And unforeseen circumstances that lead to additional work or delays.

[Visual: all text and graphics disappear. The camera cuts back to a profile shot of the presenter].

So, how might you prepare for this? Well, first, if you’re working in construction, it’s a legal requirement to have a contract if the building work is valued over $30,000.

[Visual: a cartoon contract shows up on the right side of the screen with the number “$30,000” above it. This disappears after a few seconds].

Even if your work is under 30 grand, it’s a good idea to have one, in case any issues arise.

[Visual: the camera cuts to an upper body shot of the presenter on the left side of the screen.
Inside your building contract, there should be a section on how variations are to be dealt with. This includes how you or your client will propose the changes,

[Visual: the words “how to propose changes” pops up on screen. After a few seconds, these change to “how they’ll be agreed on”].

and how they’ll be agreed on before the contract is updated.

[Visual: the camera cuts to a profile shot of the presenter].

Even if you don’t have a contract for work over $30,000 or it’s incomplete, the law provides default contract terms, including for variations.

[Visual: a thumbnail image pops up on the right side of the screen for the “How to prepare a quote video” from this “Tips for tradies” microcourse].

To learn more about building contracts, watch our ‘How to prepare a quote’ video in this micro-course.

What’s important when it comes to contract variations is having an ongoing awareness of what’s happening on a project, including changes that stray from what was originally planned.

[Visual: the screen cuts to show a man on a building site wearing a hi vis jacket and hardhat tapping on a tablet. The background is the wooden framework for a building with a construction table and saw in front of the man].

You can help your client by documenting as much information as possible at the beginning and during the building process,

[Visual: the camera cuts to show a man and woman on a construction site, looking at a paper plan for the building. Both people are wearing hardhats].

and checking in with them regularly.

[Visual: the camera cuts to an upper body shot of the presenter].

If you do require a variation to be made, the first step is to make clear your proposed changes to your client.

Most variation clauses require the variation to be recorded in writing.

[Visual: the camera cuts to a profile shot of the presenter].

This can be done in a short email, explaining that variation to your contract is needed.

Here are four steps to make a variation to a contract:

[Visual: the screen turns opaque white. A title pops up “How to make a variation to a contract”. A cartoon of a man and woman talking to each other pops up in the bottom right of the screen. A numbered bullet point pops up saying “Step 1 State what is changing and the new terms” and stays in place.]

Clearly state the specific terms of the contract that are being changed and what the new terms will be.

[Visual: a second bullet point shows up below Step 1, saying “Step 2 State what else might change in the contract because of the new change eg. amount charged” and stays in place.]

Consider any changes required to other parts of the contract as a result. This may include changing the amount charged if more work is required.

[Visual: a third bullet point shows up below Step 2, saying “Step 3 Be specific on when the variation will come into effect” and stays in place.]

Be specific on when the variation will come into effect.

[Visual: a fourth bullet point shows up below Step 3, saying “Step 4 Confirm no other changes are being made”. All four bullet points disappear from screen.]

And finally, confirm that nothing else in the contract is being amended, other than your proposed changes.

[Visual: the camera cuts to a profile shot of the presenter.]

Having clear and fair terms around variations in your contract will save you time and help prevent disputes, also helping you to look after your clients and contractors, to ensure everyone is on the same page during a project.

[Visual: Blue outro screen appears with the business.govt.nz logo in the centre of the screen. This logo disappears and the Ministry of Business, Innovation, and Employment logo appears on the left-hand side and the Te Kāwanatanga o Aotearoa, New Zealand Government logo appears on the right-hand side.]

[Video ends]

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Head back to the e-learning series to find more tips for tradies to help you in business.

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