Validity issues of variation order in construction contracts

Abstract

The construction contract is a set of agreement that binds the parties, either between the employer and contractor or contractor and sub contractor. Currently, there are many kinds of contract form that may be used in construction depending on the nature of construction work. Usually, the form of contract is used to protect interest of the parties and will contain various elements including variation order (VO) clause. The variation order clause will usually permit the party, normally the employer, to carry out variation, modification, alteration, addition or omission to the current scope of work as stipulated in the contract provision. The process of VO need to be made in a proper manner for validity purposes and failure to do so will cause problems to the existing contract. In light of that, the objectives of this research are to determine the circumstances for variation order issued and to determine the causes of invalid variation order. The research methodology adopted was based on legal case analysis for which nine construction cases was obtained from the Lexis Nexis data base. Case law analysis is carried out to identify the issues on the validity of variation order, which may bring about an invalid variation order. The first objective shows that there are many circumstances identified that may lead or to cause the variation order (VO) to be issued in construction contracts. Some of these circumstances may be attributed to lack of detail or planning at the pre-contract stage. The second objective confirmed that a lot of invalid variation order (VO) are caused by procedurally invalid variation order. Some of these procedures were not complied with such as written instructions, omissions were not properly carried out, cardinal changes and no provision for variation was provided in the contract. In summary, it can be concluded that if the process of variation order (VO) is conducted in good manner and follow the procedure stated in the contract, the validity issues may not arise and interest of the parties are protected.