On this page
Education Hub / SQE2 / Practice Areas/

Variation

Topic

Variation of Contract Terms

Variation of contract terms refers to any change or modification made to an existing contract. These changes can alter the rights and obligations of the parties involved and can include additions, deletions, or adjustments to the contract's terms. For a variation to be legally binding, certain legal principles must be adhered to, including mutual agreement and consideration. The variation must be clear and precise to avoid any ambiguity or disputes regarding the parties' obligations.

Requirements for a Valid Variation

For a contract variation to be legally enforceable, it must meet several key requirements:

  • ★ Mutual Agreement: All parties to the contract must agree to the variation. This agreement must be mutual and can be evidenced through express or implied consent.
  • ★ Consideration: Generally, consideration is required for a variation to be binding. Each party must provide something of value, or there must be a practical benefit to the promisee. In some cases, a variation can be executed as a deed, which does not require consideration.
  • ★ Formalities: If the original contract specifies a particular method or form for variations, these formalities must be followed. For instance, a clause may require that all variations be in writing and signed by both parties.
  • ★ Certainty: The terms of the variation must be clear and precise. Ambiguous or vague variations may not be enforceable, as they can lead to misunderstandings about the parties' obligations.

Methods of Variation

There are several ways in which a contract can be varied:

  • ★ Written Agreement: The most common method of varying a contract is through a written agreement, signed by all parties. This provides clear evidence of the variation and the parties' consent.
  • ★ Oral Agreement: Contracts can also be varied orally. However, proving the terms and consent can be challenging, especially if the original contract requires variations to be in writing.
  • ★ Conduct: Parties can vary a contract through their actions or conduct, indicating acceptance of new terms. For example, if one party begins performing under new terms and the other party accepts this performance, the contract may be considered varied.

Case Law

Requirement of Consideration - Stilk v Myrick (1809)

In this case, the court ruled that a promise to pay extra wages to sailors for performing their existing duties was not enforceable due to lack of fresh consideration. The sailors were already bound by their original contract to perform the voyage, so the promise of additional payment was not supported by new consideration.

Practical Benefit - Williams v Roffey Bros & Nicholls (Contractors) Ltd (1990)

In this case, the court found that a practical benefit could constitute sufficient consideration for a variation. The defendant promised additional payment to the plaintiff to complete work on time, avoiding penalties. The court held that the practical benefit of avoiding penalties was sufficient consideration for the variation.

Examples

Example 1 - Written Variation

Scenario:

A company agrees with a contractor to extend the project deadline by two weeks due to unforeseen delays. Both parties sign a written agreement outlining the new deadline and any additional compensation. This written variation is clear, precise, and enforceable.

Example 2 - Oral Variation

Scenario:

A landlord and tenant orally agree to reduce the rent for three months due to economic hardship. The tenant starts paying the reduced rent, and the landlord accepts it without objection. The conduct of both parties may imply a valid variation of the rent terms, although proving the details of this agreement might be challenging if the original contract required variations to be in writing.

Conclusion

Variations in contract terms are a common occurrence and necessary for addressing changes in circumstances or needs of the parties. For variations to be enforceable, they must be agreed upon by all parties, supported by consideration, and comply with any formalities required by the original contract. Understanding the principles governing contract variations helps parties manage their agreements effectively and ensures that modifications are legally recognized and enforceable.

The interpretation of contract terms (conditions, warranties, and innominate terms) Vitiating factors
27

53

SQE2

Specification

Explore