Applying for a variation to the contract is a simple matter of downloading and completing a Variation to Contract form and submitting it through our office for formal approval. Legal costs associated with a variation are discussed in detail below.
|What is a variation to the contract?|
|Why make such a big thing of simple changes?|
|Download The “Variation To Contract” Form|
What is a variation to the contract?
A variation is a change to the contract.
On the day of sale the parties agreed on the terms and conditions of the sale. Each party knows their respective rights and responsibilities because these are all set out in the written contract.
Of course, it would not be fair if one party to vary the contract without the other party agreeing to the variation. The formal written variation is the means by which a change in the contract is agreed to by both parties, and is given legal effect.
Any change in the contract must be made by way of a formal, written and legally binding variation. Common examples of variations to the contract include:
- Changing the settlement date to allow for early settlement.
- Changing the settlement date to allow for later settlement.
- Adding new terms or conditions.
- Deleting existing terms or conditions.
- Any other change in the contract that requires the parties’ written authority or signatures.
Why make such a big thing of simple changes?
We often hear of consumers being told by estate agents that changing the contract is simple, and that it is not necessary to make a big deal of a small procedure. But the reality is that nothing in property law is as simple as it may first appear to be.
Simple changes can have huge consequences
Here is a straight-forward example, involving a very common problem in real estate contracts.
The problem arises where the estate agent records the settlement date as being a number of days from the day of sale, perhaps 30, 60 or 90 days, and the settlement day falls on a weekend or public holiday:
Settlement is due to take place on Friday 26 January, 2007. But this is a public holiday, and settlement must take place on the next available business day (this is because the standard contract used in the real estate industry says so).
The purchaser wanted to settle on a Friday in order to have the weekend to move in. When she complains to the estate agent she is told, “That’s OK, your solicitor will change it for you.” So the purchaser asks her solicitor to bring the settlement date forward to Thursday 25 January, 2007.
The solicitor writes to the vendor’s solicitor to request the variation to the contract, and the vendor’s solicitor eventually replies by fax, confirming that settlement is to take place on Thursday 25 January, 2007. The vendor is pleased that settlement has been brought forward, and arranges for the settlement of his own purchase to be changed to 25 January.
As settlement approaches, the purchaser discovers that her bank will not be ready in time, and that settlement will have to be postponed until Monday 29 January, 2007 (which would have been the settlement date if the variation had not taken place). But this creates a major problem for the purchaser, because if this settlement is postponed the vendor will not have the funds needed to settle his purchase, and could be sued for thousands of dollars. The vendor will then expect the purchaser to compensate him for this loss, and will also require the purchaser to pay his legal costs, plus penalty interest.
Faced with this terrible problem, the purchaser looks for a way out. The purchaser’s solicitor tells her that the variation cannot be enforced by the vendor, because the variation does not comply with Section 126 of the Instruments Act 1958. The purchaser
then instructs her solicitor to inform the vendor that settlement will take place on Monday 29 January, 2007.
The vendor is now faced with losses of thousands of dollars because of the likely failure of his purchase settlement on the Thursday. He complains about his solicitor’s handling of the matter in not having the variation dealt with properly. The vendor’s solicitor suggests that the purchaser’s reliance on Section 126 of the Instruments Act 1958 should be disputed in court. It is hoped that the purchaser, fearing the escalation in the dispute and the legal costs and stress associated with a court action, will comply with the vendor’s demand for settlement to take place on the Thursday, or will bear the costs of a postponement until the Monday.
The purchaser, stressed and upset about the looming legal dispute, asks her solicitor how the matter could get so out of hand.
No matter how the court decides the matter, BOTH parties will end up losing.
How would a formal variation change the situation?
First, the purchaser would be advised that such a change is no simple matter and that a formal variation is necessary. She may well ask questions about the need for such formality, and would receive the advice she needs.
Similarly, the vendor would not want to sign a formal variation without knowing exactly what he is signing, and why.
Second, the formal variation, signed by both parties, would eliminate any dispute regarding legal compliance.
Third, having two parties who know exactly what they are getting themselves into, and knowing their precise legal position, greatly lessens the likelihood of a legal dispute.
Who’s responsible if things go wrong?
The real estate industry in Victoria is seriously hampered by corruption and incompetence. Estate agents tend to deal with important legal matters on the basis of a handshake or a supposed “gentleman’s agreement”. Consumers often find that they have been victims of the “wink and nudge” or “crossed fingers”. And when things begin to fall apart the only assistance offered is, “I think you’d better talk to a lawyer about it.”
Even conveyancers and lawyers, whose role it is to protect consumers, can fall into the trap of using informal methods and arrangements in the hope that somehow everything will turn out OK. The huge number of complaints and claims generated by the taking of informal short-cuts confirms the fact that when things go wrong they go very wrong.
Fairness for all
We take the view that everyone, on either side of the transaction, should be in a position to rely on the contract, and any variations or amendments made to it, without having to launch or defend an expensive legal dispute. Each party should have the benefits of knowing:
- That the other party has signed off on the change
- Exactly what the change or variation is
- The consequences of making the variation
- The costs associated with the making of the change
- What will happen if the change is not observed by one or other of the parties
Having to “sign off” on the variation means that the person signing the variation must be aware of what is taking place, and has the opportunity to ask questions and to obtain legal advice if he or she would like to do so. This lessens the likelihood of a dispute arising because a party did not sufficiently understand the variation or its consequences.
Keeping things legal and safe
By ensuring that all variations are dealt with properly, and in accordance with the law, we are able to prevent misunderstandings while giving effect to the intentions of the parties who matter most – the purchaser and the vendor.
To be legally effective, a change or “variation” to the contract must be in writing, signed by both parties to the contract.
The party from whom we receive our Variation to Contract Form will be liable to the payment of our legal costs, regardless of the success of the application:
- Where our client requests the variation, our client must pay our costs.
- Where the other party requests the variation, the other party may pay our costs.
- Where the variation is mutually agreed, the party that submits the Variation to Contract Form must pay our costs.
If you have any questions about our costs at any time, please feel free to contact us.
How are costs determined?
Our set cost for dealing with a Variation to Contract is $220. This figure is based on the tasks involved in receiving, checking, submitting and responding to the variation request, and is based on the Legal Practice Act Practitioner Remuneration Order [Click here to download PDF 80k].
Costs are not result based. They are based mainly on the time involved in arranging a variation and the work performed in seeking a response from the parties. Thus, our costs are payable whether or not the variation actually eventuates.
If you have any questions about our costs at any time, please feel free to contact us.
How is payment made?
The method of payment depends on whether our client or the other party is liable for our costs as discussed under “Who pays?” above.
Payment by our client:
Where our client is to pay the costs associated with the Variation to Contract, an invoice will be forwarded direct to the client.
Payment by the other party:
Where the other party is to pay the costs associated with the Variation to Contract, an invoice will be forwarded to their representative. In the event that payment is not received at least 5 days prior to settlement, the payment must be accounted for in the Statement of Adjustments by way of an adjustment in favour of our client.
Download The “Variation To Contract” Form
You may download our Variation To Contract Form here.
NOTE: We will regard the downloading and submitting our Variation To Contract Form as a confirmation that the party making the submission will pay our legal costs as described under “Costs” above.
- click on the following link to download our Variation to Contract Form.
- Complete the Variation to Contract and send it to us by any of the following methods:
Fax: (03) 9725 3316
Suite 6, 3-5 Hewish Road,
When we have received the Variation to Contract form we will immediately seek the variation requested, and we will advise in writing as to whether or not the application has been successful.
Adobe Acrobat Reader
To access our Variation To Contract Form you will need a copy of Adobe Acrobat Reader, available free from the Adobe site.