If you’ve read our guide to terminating a contract, you’ll know what’s involved in ending a contract that’s no longer working for you and/or the other party involved.
But what if you want to keep the contract in place, and just change a part of it?
Unless the change you’re looking for is a change of party, that is, a substitution of one contracting party for an entirely new one, (called ‘novation’), then this is where ‘variation’ comes in.
These days, a well-drafted contract will typically include a variation clause within its standard wording. Often, you’ll find this clause towards the end of the document. Our templates contain it.
What exactly is a variation clause?
While English law allows changes to be made to a contract if all parties agree (either verbally or in writing), a variation clause can be added to a contract’s terms to insist that any changes must be made in writing and signed by all parties.
This way, all parties involved are better protected from the contract changing inadvertently, and/or without their express agreement and, crucially, without written proof of their express agreement.
The wording usually looks something like this: “No variation of this agreement shall be effective unless it is in writing and signed by the parties.” This makes clear that there is only one agreement, these are its terms and it cannot be varied by accident.
Variation clauses go hand in hand with ‘waiver’ and ‘entire agreement’ clauses – which are also standard clauses in English contracts. (Waiver clauses make clear that a deliberate, or inadvertent, omission by a contracting party, on one occasion, to enforce a contractual right under a contract, does not mean that the terms of the contract have changed to permanently remove that right from the party having that contractual right. Entire agreement clauses confirm that no other documents or terms form part of the contract, i.e. what you read in the document, is what you get and nothing more.)
How is a variation clause implemented?
When a variation clause is included in a contract, and a change to the original terms are required, there are two ways this can be done: by variation contract or variation deed.
The variation contract (which sets out what is to be changed) must not only be signed by both parties, but it must also show ‘consideration’. Consideration is, essentially, a quid pro quo; i.e. something is given in exchange for something else.
For example, let’s say a project manager’s client needs their project completing earlier than stated in the contract. In this scenario, the variation agreement may state that the completion date is now 1 month earlier, and in exchange (a.k.a. the consideration), the project manager’s fee will increase.
If consideration isn’t relevant in your situation; i.e, if the variation to the contract is one-sided and only favours one party to the contract, then you’ll need to use a deed of variation instead of a variation contract.
An example of this would be if a customer is having trouble in paying their invoice in one payment as agreed in the original contract, the seller may allow them to instead pay in instalments, without the addition of any interest or other benefit to them.
A deed works just like a contract in the way that it sets out the rules of the agreement, and in most cases, the terms look identical. The difference between the two is that with a deed, you don’t need to include something in exchange for the rule you’re changing, and you’ll also need witnesses to sign, in addition to the parties involved.
The point of including the witnesses is to make clear, unequivocally, that each of the signing parties fully understood what they were signing and that they intended to agree to the terms set out in the deed. So the witnesses are the safeguard and cross-check for this.
Deeds also include certain wording that usually appears in the signature section of the document. You’ll see something like this: “This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it.”
The ‘delivery’ reference doesn’t mean that the document needs to be hand-delivered or couriered. It’s slightly old-fashioned wording that is designed to make very clear the date on and from which the parties intend to be bound by the agreed terms (which might be a different date from the date that the deed is in fact signed by the parties).
Our templates include this wording too.
Our experts recommend that you use a deed of variation whenever you make changes to your contracts.
What if you don’t have a variation clause in your contract?
If you don’t have a variation clause in your contract, that doesn’t mean you can’t change anything. Of course you can. But you should make whatever changes you want very clear. You might even want to include a variation clause for the original contract in your deed of variation!
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