Being fairly compensated for variations that involve an extension of time to the construction programme can be an uphill battle for contractors. Rob Clarke (above left) and Kieran Blockley of Auckland law firm Greenwood Roche highlight some key factors for contractors to consider when making variation claims involving extensions of time and time-related costs.
Frequently we encounter situations where contractors are uncertain whether or not an instruction from the engineer to the contract or the principal amounts to a variation to the scope of the contract works. Our advice is always to provide a notice of any potential variation as soon as possible.
There are obligations under the NZS 3910:2023 and NZS 3916:2025 construction contracts to provide early warning notifications for variations, and to notify of any instruction or event a contractor considers should be a variation within 20 working days of that instruction (or as soon as practicable thereafter).
These variation terms are often amended to include shorter durations for the submission of claims.
The short time frames are commonly described as being a time bar or a “condition precedent” to having an entitlement to pursue a variation claim, even if a contractor has valid grounds to make the claim.
‘Queen of Hearts’ clauses
These time bars may be onerous (and have been described by some in the industry as penal or “Queen of Hearts” clauses). However, if the clause itself contains clear and unambiguous contractual language which has been agreed between the parties, the courts (or an adjudicator) will likely give effect to the provision according to its terms.
Often these types of variations contain an element of cost to undertake additional work, but also may impact the due date for completion of the contract works. It is not uncommon to see circumstances where a contractor has fulfilled its notification obligations in relation to a variation, but has only notified of a potential extension of time within their variation claim (or not at all).
However, an application for an extension of time is a separate contractual obligation which may have different requirements (and time frames) from a variation claim.
For example, under NZS 3910:2013 (a version still frequently used in the industry), a contractor has one month to issue a variation but a slightly different time frame (20 working days) to issue an extension of time claim.
While the time frames are now consistent in the 2023 version, there are still additional requirements under NZS 3910:2023 and NZS 3916:2025 for the extension of time claim (as opposed to a variation claim) to provide details of the estimated delay, and further obligations to submit repeat notifications for ongoing delays.
These differences may be further exacerbated by special conditions to NZS 3910:2023 and NZS 3916:2025 construction contracts which may require detailed programming updates to be provided within very short time frames. The obligations are often drafted as a condition precedent to the extension of time entitlement.
While this does not necessarily mean that a contractor must submit two entirely separate notices for the variation and the extension of time claims, they must ensure all the contractual requirements for both claims are satisfied within a combined notice (although, as always, this will depend on the terms of the contract in question).
Potential fishhook
Another potential fishhook is time-related costs. NZS 3910:2023 and NZS 3916:2025 construction contracts preclude a contractor claiming for time-related costs where an extension of time is granted on grounds other than for variations or an act of default by the principal or their agents.
Even where time-related costs are recoverable under the NZS templates (which may include a pre-agreed working day rate), these are not simply claimed in addition to the variation costs.
Rather, these costs can only be claimed to the extent that they have not already been incorporated into the cost of the variation, to prevent “double-dipping”.
The takeaway point is that claims for extensions of time, time-related costs, and variation claims have distinct contractual notification obligations. Failing to meet these notification requirements may result in losing the entitlement to make a claim, which can have a significant financial impact on a contractor.
