WHEN ARE “VARIATIONS” REALLY VARIATIONS
This short blog addresses some takeaways on variation works from the Privy Council decision of Uniform Building Contractors Ltd v The Water and Sewerage Authority of Trinidad and Tobago [2026] UKPC 2.
Background. In Uniform Building Contractors Ltd v The Water and Sewerage Authority of Trinidad and Tobago [2026] UKPC 2 (the “Judgment“), the Privy Council considered whether a contractor under a contract which included the FIDIC Yellow Book (1999 Edition) for use in design and build projects was entitled to additional payment for works said to have been instructed as variations.
The four disputed items were:
Laying pipes in the roadway rather than the verge (including cutting of the asphalt surface);
Removal of excavated material which were deemed to be unsuitable as backfill;
Importation of suitable backfill; and
Carrying out night work.
The Court of Appeal had found these to be variations and awarded TT$13,915,215.46, together with interest and costs. The Privy Council reversed the Court of Appeal’s decision and dismissed the contractor’s claims (Judgment [1]-[12]; [88]).
In this short blog, we focus on the parts of the Privy Council’s decision dealing with variations.
Whether work is a “variation” is a matter of contract. The Privy Council emphasised that whether work constitutes a variation is “primarily a function of the contract terms” (Judgment [15]). And at Judgment [16], the Privy Council set out its task in the Judgment as follows:
“Accordingly, the Board's task is fourfold. First, it must consider the nature and scope of the general terms of the contract between the parties, to see what might have been expressly or impliedly included in the agreed lump sum. Secondly, against that background, and by reference to certain of the specific terms of the contract, an analysis is required of whether or not the four disputed items were variations, as defined in the contract. Thirdly, it is necessary to analyse the procedural failings on the part of UBC and the extent to which they bar UBC from making any claim for the four disputed items in any event. Finally, the Board will consider the general issue of fairness and, in particular, how and to what extent the question of waiver and estoppel arose, or could have arisen, in this case.”
This approach is a very succinct, and useful, summary of the steps that a contractor (or a legal counsel advising a contractor) should take in determining whether, and how, to claim for variations under a construction contract.
Lump sum, design‑and‑build contract. This was a lump sum contract under the FIDIC Yellow Book, with extensive provisions deeming the contractor to have, among others (Judgment [19] - [22]):
Satisfied itself as to site conditions;
Taken responsibility for both preliminary and final design; and
Allowed for all work necessary for proper execution and completion of the works (paras 46–49).
It followed from the above that, as set out in Judgment [23], “… An underestimate of the work required to meet the contractual requirements of a lump sum contract cannot be a variation: it will be "precisely the thing which [the contractor] took the chance of" … a useful test to determine whether an item of work constitutes a variation in a lump sum contract is whether it is "expressly or impliedly included in the work for which the lump sum is payable".“
Therefore, if the work is expressly or impliedly included in the scope of the lump sum, it cannot be a variation, even if it turns out to be more onerous or expensive than the contractor anticipated (paras 42–45). In other words, contractors should not assume that a change in how work is carried out, or increased cost, automatically equates to a variation. The starting point is always the allocation of risk and scope in the contract documents.
Against that background, the Board held as follows:
Cutting and excavating of the asphalt roadway. Based on Judgment [34] - [38], it appeared that this claim arose because the preliminary design showed the pipelines in the verge, whereas the final design required the pipelines to go into the roadway. However, as both the preliminary and final design fell within the contractor’s responsibility, this could not amount to a variation (Judgment [34]). Further, as set out in Judgment [35] - [38], the contract expressly envisaged the cutting of asphalt and excavation and reinstatement of the roadway: it therefore was not a variation as it fell within the scope of the Employer’s Requirements and/or the Works.
Disposal of Unsuitable Material and Importation of Suitable Fill. The Privy Council found that the claim was “bound to fail, because excavation in any kind of material, and the need to import proper backfill if the excavated material was considered unsuitable, were both part of UB'C’s obligations pursuant to the specifications and the Bill of Quantities“ at Judgment [39].
Night Work. As set out in Judgment [44], the case for night work centered on disputed items (i) - (iii). Since those items were not variations, this claim failed as “[i]f the night work was carried out as consequences of items of work which, on the Board’s analysis, UBC were always obliged to undertake pursuant to the contract, then the night work could not itself be a variation.”
In short, when it comes to a design and build contract, it is important to go back to the contract, including the relevant specifications and bills of quantities, to see what exactly had been allocated. It is not a variation if the alleged additional works in question fell within the original scope.
Oral instruction? The Judgment also dealt with oral instructions. We set out Judgment [54] below:
“54. Just pausing there, this was not a situation in which UBC had made suggestions to vary the work in order to save money or otherwise improve efficiency. So clause 13.2 has no relevance; this is a case in which UBC seek to rely on an instruction issued under clause 13.1. Clause 3.3 required all such instructions to be given by the Engineer in writing. However, the Board would not be prepared to say that the mere fact that the relevant instruction (if there had been one) was oral, not written, meant that the instruction was automatically invalid. An oral instruction may not be in accordance with the contract, but if it was intended to bind the contractor, the breach could be waived by both parties. In truth, such debates are increasingly rare these days, because there are plenty of ways in which an oral instruction can be recorded in writing by the contractor. The most common is the contractor's use of a written form (usually called a "Confirmation of Verbal Instruction" (or COVI)), which the contractor sends to the Engineer. That allows the Engineer the opportunity to respond and to raise any issues there and then about the alleged oral instruction.” (emphasis added in bold)
Often, contractors will seek to rely on oral instructions to claim for variations, which then leads to a dispute over whether there was any such oral instructions and what the oral instructions actually instructed.
However, as the Privy Council noted, there are many ways to record an oral instruction. As such, if oral instructions were issued, contractors should take the appropriate steps to record (and confirm) such oral instructions contemporaneously.
Procedural compliance matters. For users of the FIDIC Yellow Book (1999 Edition), Judgment [55] - [69] is important as, at the risk of over-simplification, it sets out how to go about claiming a variation if there was no written instructions, as well as the conditions precedent involved.
We will just highlight a two points.
At Judgment [61], the Privy Council held that Clause 20.1 of the FIDIC 1999 Form “… is in classic condition precedent form: "if the Contractor fails to give notice within 28 days of it becoming apparent that a claim had arisen...the Contractor shall not be entitled to additional payment and the Employer shall be discharged of any further liability..." (emphasis supplied).“
Then, at Judgment [64], addressing the reference to the Appellate Division of the High Court of Singapore’s case of Vim Engineering Pte Ltd v Deluge Fire Protection (S.E.A.) Pte Ltd [2023] SGHC(A) 2, the Privy Council stated that “… that was not a case concerned with the FIDIC conditions at all. Moreover, the provision in issue was simply a requirement for written instructions and, as the court there noted, that was not a "stringent" clause requiring strict compliance. The court went on to observe at para 33 that the relevant clause "does not state that if there are no written instructions for variations from Deluge's project manager, Vim will forfeit the right to any payment or is otherwise barred from claiming payment for work that it considered a variation". That reiterates the point the Board has already made in para 61 above, that a condition precedent usually needs an "if X, then Y" formulation. The clause in Vim Engineering did not have such words, but clause 20.1 does.“
As stated by the Privy Council, a condition precedent usually needs an “If X, then Y“ formulation. So, this is a useful guide for determining whether your contract has imposed a condition precedent, or a less “stringent“ clause that does not require strict compliance.
Concluding observations. While it is beyond the scope of this brief blog to address all the points raised in the Judgment (which we urge interested readers to read in full), we hope that the above gives readers a flavour of what are the common issues, and points to look out for, when approaching variations.
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication.