Variation of the contract: Overview, definition, and example
What is variation of the contract?
Variation of the contract refers to a formal change or modification to the terms of an existing contract. This can include alterations to specific clauses, timelines, payment terms, scope of work, or other material conditions. A variation might occur due to unforeseen circumstances, mutual agreement between the parties, or the need to adapt to changing business conditions. To be legally enforceable, variations typically need to be agreed upon by both parties and documented in writing, often through a formal amendment or addendum to the original contract. Depending on the nature of the contract, variations can also require specific procedures to be followed, such as obtaining approval from relevant stakeholders or authorities.
Why is variation of the contract important?
Variation of the contract is important because it provides flexibility for businesses and individuals to adjust agreements to meet changing circumstances or needs. Contracts may need to be varied for a range of reasons, such as changes in market conditions, delays in performance, or new legal or regulatory requirements. Without a clear process for variation, contracts may become outdated or unworkable, leading to disputes, missed opportunities, or inefficiencies. A properly executed variation ensures that the contract remains valid and relevant, and that both parties are in agreement with the changes made, which helps to preserve the relationship and avoid conflicts.
Understanding variation of the contract through an example
For example, a construction company enters into a contract with a client to build a commercial property. Midway through the project, the client requests a change to the design that requires additional materials and labor, thus extending the timeline. The construction company agrees to this change, and the terms of the contract are varied to reflect the new scope of work, additional costs, and adjusted completion date. Both parties sign an addendum to the contract that outlines the new terms. This variation ensures that both the contractor and client are clear on the updated expectations and responsibilities.
In another example, a supplier enters into a supply agreement with a retailer to deliver a set quantity of goods over a period of six months. After three months, the retailer requests to increase the quantity of goods to meet customer demand. The supplier agrees to the change, and both parties formally vary the contract to reflect the increased order quantity and adjusted pricing structure. This variation allows the retailer to meet their needs while ensuring the supplier is fairly compensated for the additional products.
An example of a variation of the contract clause
Here’s how a variation of the contract clause might appear in an agreement:
“Any change or modification to the terms of this Agreement shall be made in writing and signed by both Parties. No oral amendments or variations shall be valid unless documented and agreed to by both Parties. Any variation of the scope, price, or timeline must be communicated in writing and shall be subject to approval by the appropriate management of both Parties before implementation.”
Conclusion
Variation of the contract is a critical process that allows parties to modify or adapt the terms of their agreement to accommodate changing circumstances, needs, or expectations. It ensures that the contract remains relevant and enforceable while protecting both parties’ interests. By documenting variations in writing and ensuring mutual agreement, businesses and individuals can maintain clarity and avoid disputes when changes are necessary. A well-defined process for variation is essential for maintaining flexible, functional, and legally sound agreements.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.