It’s necessary to define the scope of work accurately in construction contracts as it is the work that the contractor will be responsible for and liable for after the agreement has terminated. This article will explore what the concept of scope of work means in a construction contract, as well as the impact and process of varying it.
What is a Construction Contract?
A construction contract is an agreement between a principal and a contractor for the construction of work for a project. There may also be a head contract under which this contract is part of as well as subcontractor agreements between the contractor and sub-contractors.
What is the Scope of Work?
The scope of works is the work that the contractor is required to undertake under the construction contract. One of the major issues that arise with the scope of work is where the parties require variations outside of what was stipulated.
The principal could request the changes (for example, they seek a change in the design) or the contractor may apply for the modification (for example, they need to undertake additional work to complete the scope of work).
In some situations, the law will require the contractor to perform work outside the specified scope to complete the work.
Variations and Scope of Work
Variations to the scope of work usually mean that the principal can request that the contractor do less or more, or do only a portion of the specified scope of work.
It is important for principals to have a well-drafted variations clause in the event they need to request any changes to the original scope of work. Requesting variations is not a common law right, and the agreement must include such requests to be valid.
Contractors should also ensure that the principal will adequately pay her or him for variations that arise. Any variations the principal requests outside their contractual rights may be considered a breach of the contract and could lead to the contractor electing to terminate the contract.
It is also important to consider the difference between making a small variation and completely changing the scope of work. The principal will usually not be able to do the latter. The principal is also not permitted to remove some portion of work from the scope, and then pass that work on to another contractor unless stipulated in the contract. Principals should ensure that this is included in the contract if that was their intention.
In certain circumstances, the contractor also has the right to refuse to undertake work entirely or on a quantum meruit basis. This right usually exists when the principal requests work that is not the type of work considered by the contract and is out of the ordinary and unexpected. For example, this might be if the principal asks the contractor to conduct work outside of the principal’s area of construction.
Process of Variation
The process of varying the scope of works is usually set out in a lot of detail in the contract. It typically addresses the process by which the contractor must notify the principal if they believe the variation requires additional fees outside the initial quote.
There is usually a timeframe that the contractor must adhere, and they must also provide reasons why the variation requires extra fees. Also, the contractor must typically notify the principal if they believe a variation is necessary and must seek approval before making any alterations or undertaking any work.
It is best practice to have the scope of work clearly defined in the construction contract. Broadly-drafted scope of work clauses can lead to a greater number of disputes around variations and claims for variations. Where the scope of work is unclear, it will be much harder to argue that the work the principal is doing is outside the agreed scope.
A vital element of construction contracts is a clearly defined scope of work clause. This scope of work may be based on a proposal already provided to the principal. However, you should still ensure that the scope of works is sufficiently detailed and covers any new issues or works that may have arisen.
If you are a contractor or a principal and have any further questions about drafting or reviewing construction contracts, get in touch with our specialist building and construction lawyers on 1300 544 755.