Contract Variation During Covid-19: What To Be Aware Of

You may have agreed to vary the terms of a contract due to the impact of the recent Covid-19 pandemic. If so, it is important to check whether that variation has been made correctly to ensure that it is enforceable in the future.

What is a “variation”?

A variation to a contract occurs where parties agree to do something differently than to what was originally agreed. Some examples of variations include changes to:

1. payment conditions;

2. dates for performance;

3. reduction or increase in level of supply;

4. additional work to be completed.

How can I vary a contract?

A contract can be varied in writing or simply orally.

Generally, in order for there to be a variation to an existing contract, the following elements are required:

1. All parties must agree;

2. There must be an intention between the parties to enter into a legally binding agreement to change the terms of the existing contract;

3. The parties must comply with any requirements regarding the form of the variation which are provided for by legislation, or as set out in the terms of the actual contract; and

4. There must be “consideration” or a benefit that is provided in exchange for performance. If there is no consideration being provided, then a deed needs to be entered into. 

The first port of call is to check the terms of the existing contract. This may prescribe how the variation can be made. Many contracts will contain “no oral variation” clauses.

In order to avoid any uncertainty, we recommend that variations are recorded in writing and where possible signed off by all parties. It will be equally important that the terms of the variation are set out clearly and the terms of the existing contract are considered in light of the proposed variation.

If you have any queries about how to vary your contract or wish to record a variation of contract, please contact us.

Author: Natalie Kong

Disclaimer

The above information is of a general nature only. The information in this article does in no way constitute legal advice and all readers should contact a law firm for advice relating to your specific circumstances.