Can a contract be varied after it has been signed?

The legal position

Agreement. A variation is an agreement to alter the terms of an existing contract and, like any agreement, requires the consent of both parties. Where the contract prescribes that variations must be made in writing, that requirement should be observed. A contract that the law requires to be evidenced in writing can be varied only in writing.

Consideration. Unless it is made by deed, a variation must be supported by consideration from each party: each must give something of value in return for what the other has promised. Two situations give rise to most of the difficulty:

• Additional payment for the same performance. The traditional rule is that the performance of an existing contractual duty is not good consideration for a promise of additional payment. A more recent approach permits the enforcement of such a promise where the party promising to pay more obtains a practical benefit, such as timely completion, provided that the promise was not extracted by economic duress or fraud. That approach is not yet firmly established in Caribbean appellate courts, and the traditional rule remains the prudent starting point in Trinidad and Tobago.
• Acceptance of a lesser sum. Payment of part of a debt is not, by itself, consideration for a promise to discharge the whole, even where the creditor agreed to accept it. There are exceptions. They include payment at an earlier date or a different place at the creditor's request, the provision of something different in kind, payment by a third party, and composition arrangements with creditors. In equity, under the doctrine of promissory estoppel, a creditor who clearly promised to accept less, and on whose promise the debtor relied, may be held to that promise. That is so provided the debtor did not exert improper pressure on the creditor and paid as agreed. The part-payment rule applies only to a liquidated debt (a fixed sum) that is not in dispute. A genuine compromise of a disputed claim binds both parties.

Waiver. A party may elect not to insist upon a contractual right, and neither writing nor consideration is required for that purpose. A waiver may suspend the right or abandon it entirely. A waiver in respect of future performance may ordinarily be withdrawn on reasonable notice.

Variation clauses. Some contracts confer on one party a power to vary their terms; standard-form contracts for financial, telecommunications and membership services are common examples. Such a power exists only if it is contained in the contract, and it is construed narrowly. Where one party deals as a consumer or on the other's written standard terms, a party that relies on such a clause to render a performance substantially different from that which was reasonably expected must show that the clause satisfies the requirement of reasonableness (Unfair Contract Terms Act, s 6). Whether that provision extends to a clause that merely alters the price is doubtful.

Practical implications

A contractor may, during the course of the works, demand additional payment as a condition of completing them. Where the owner (the "employer" in a building contract) agrees because of a threat to abandon the works, the agreement may be liable to be set aside for economic duress. Where the employer agrees freely, because timely completion is of real value, the promise may be binding. The point has not been settled by the courts of the region, however, and neither party should assume the outcome.

A creditor who accepts a lesser sum "in full and final settlement" of a fixed debt that is not in dispute may or may not be held to that acceptance. The answer depends on the clarity of the agreement, on whether the debtor paid as agreed, and on the parties' subsequent conduct.

A landlord cannot increase the rent during a fixed term unless the tenancy agreement permits it or the tenant agrees to a properly constituted variation.

Recommended steps

Every variation should be recorded in writing, dated and signed by both parties. It should state precisely what is being changed and confirm that the remaining terms are unaffected.

Where a variation benefits only one party, the other should receive some consideration in return, however modest, or the variation should be made by deed.

A party that is being pressed to agree to a variation should record in writing, at the time, that it agrees under protest.

A settlement of a debt for a lesser sum should be recorded in a formal settlement agreement rather than in an informal message.