Problem: Does a new agreement need to be put in place after terms of contract changed?
I am the company secretary for a building contractor based in Rugby, and we are part-way through building a 27-unit housing development on the border of Leicestershire / Northamptonshire.
Both the project and our client have been a nightmare! There have been disagreements over the programme and sequencing or work, what is and is not included in the price, standard and delays. We are however negotiating through it, and have agreed on a way forward on all the big issues. For example, we have agreed to extend the date for completion and that the developer will not seek any delay damages.
However, my worry now is, once we have agreed on the way forward, should the existing agreement be terminated and a new agreement put in place? This has not been discussed, and my fear is that once we have agreed on the way forward, nothing formal will be executed and this could lead to further disputes at some future date.
Response: Options for recording new terms for a construction contract
Although the project does sound nightmarish, you are very sensible in considering that an agreement needs to be clearly and concisely recorded once your company and your client has reached an agreement on the various issues in dispute, and there is no conflict with the initial contract.
You essentially have two options:
- Terminate the initial agreement whereby the contract is discharged by mutual consent, and enter into a new contract that incorporates all of the new terms that have been negotiated. With this option, the initial agreement does not cease to exist, only that the future rights and obligations of the parties fall away.
- The second option is to execute a deed or simple contract to vary the terms of the initial agreement. This is usually the most common method and is referred to either as a deed of variation/agreement to vary or a supplemental agreement. If the initial contract was executed as a deed, then the supplemental agreement must also be executed as a deed. If the supplemental agreement is otherwise a simple agreement, each party must give consideration to make the change binding.
In a supplemental agreement, it is also vital to set out in the terms that unless the supplemental agreement expressly provides otherwise, the initial contract remains unaffected and continues to take full force and effect.
I would, however, recommend that you seek professional assistance from a construction law professional in drafting up an agreement, as this will benefit both parties.
© Michael Gerard 2016
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.