CREDIT: Jason Farnell, Commercial Risk Management
Those who can do, and those who can’t … compromise?
Perhaps it is a feature of the London developer-led construction & property market, but it does seem to me to be prevalent – I am of course referring to the practice of entering into Deeds of Variation (Dov).
By this, I mean that a Contract, entered into by the Parties as a deed, will be modified by a deed created specifically for the purpose. The DoV will usually compromise issues relating to say the Date for Completion; the Contractor’s exposure to liquidated damages; valuation of change; adjustment of the Contract Sum; Contract scope; or a combination of all of the above and more.
The difficulty I have with the concept of a DoV is that both bespoke and standard contracts will have carefully drafted provisions for dealing with all of those matters which a DoV might be specifically created to deal with – in short, why don’t the Parties (and their representatives) simply operate the Contract?
The cynics amongst you might question whether Project Managers and Contract Administrators might choose not to operate the provisions available to them, but perhaps its better to leave that to speculation.
From my experience I have not yet seen a DoV that has operated to fill the void it was created for. Advocates would say that a DoV brings certainty and is “a line in the sand”; a “recalibration of the Contract clock”, setting it to zero as a point from which further developments and changes on the project can be measured. That is the point in essence then – to re-draw the contract and start again.
Even if I were to accept this as being the case, DoVs take time to negotiate and execute and in the time from when it is first muted up until when the Parties agree and sign it, there will undoubtedly have been further change, which is not captured by the DoV. There is usually however the vaguaries of drafting with such phrases as “everything known about, or which ought reasonably to have been known about at the effective date of this DoV” – such all too common catch-all drafting undermines any prospect of ‘certainty’.
There is also then the matter of ‘behaviour’; the respective project teams invariably view the prospect of an executed DoV as being a ‘cure all’; from having a complex account to administer, with change to value and culpability and entitlement to determine; their work is done! Consequently notices are not submitted either timeously or at all; correspondence goes undrafted; and records are not properly maintained. The ‘certainty’ created by the DoV is short-lived. Like London buses, one DoV will usually be followed in short order by a second!
The perceived advantage of expedience is in all probability just that – a poor substitute for proper and contemporaneous administration of the contract mechanisms.
If you want advice on how a Deed of Variation could benefit you on your project, or other means of contract administration our Partner, Commercial Risk Management, can provide you with expert support at discounted rates, just visit their page here.