"Difference Between Claims and Variations in Construction Industry"
By Justin Cotton, Associate, Rigby Cooke Lawyers LEGAL Exchanging Cross Bows for Muskets? Is there more sting in the changes to Security of Payment legislation? The Building and Construction Industry Security then the work will be classified as a class 2 Adjudication of Payment (Amendment) Act 2006 took effect variation. These are claimable only in certain Adjudication has been increased in scope, and is as at 30 March 2007. Under the amended Act, circumstances. The original contract value must not now available even when the Respondent has not changes will apply to all payment claims served exceed $5 million (unless the contract does not provided a valid payment schedule within time or after 30 March 2007, but only to contracts entered provide any method for resolving disputes). If the at all. into after that date. total sum claimed for variations exceeds 10% of Also, a Respondent will get a “second bite at the Prior to the amendments, payment claims were for the contract value, then the maximum for further cherry” by being allowed to provide new reasons progress payments only. The recent amendments claimable variations is capped at a contract value in its Adjudication Response (which have not mean the Act now also applies to final payment of $150,000 (rather than $5 million). been relied upon before) to justify the difference claims, “milestone” and one-off payments. This is The amended Act introduces a new category between claimed sums and scheduled sums. The a significant change. of “excluded” amounts that includes: Claimant’s time to respond, however, will only be Variations • claims for latent conditions and prolongation two working days. Some variations will now not be allowed as part of costs; Also, a reminder notice must be given to the a payment claim. Variations that are fully agreed • claims for breach of contract or arising in Respondent within ten days after the original due between the parties as to the amount owing, and connection with the contract; date for payment, even though the Respondent where it is agreed the work is properly described as had originally neglected to provide a payment • ‘non-claimable’ variations. a variation (class 1 variations) can be included and Consequently almost all unresolved variation schedule. dealt with. claims, where the original contract value is more These changes will have a significant impact on However, where there is no agreement as to: than $5 million, will be excluded under the Act. claims, and the adjudication process. You need • whether the work is a “variation”; to be aware of your legal obligations. Also, where the original contract sum is between • whether the contractor is entitled to payment for it; $150,000 and $5 million, a large proportion of This article contains general information and should not be • the value or the method of valuing the variation; acted upon without specific professional advice based on unresolved variation claims will be excluded. your own circumstances. • the time when payment is due; Ad Positional 41