A variation clause in a construction contract permitting omission of works does not equate to a termination clause and cannot be invoked to eliminate all obligations without grounds.

[7] Learned counsel for the appellantfurther submitted that the appellant and the respondent had entered into the sub-contractas a commercial transaction. Therefore if the respondent had intended to limit therights or scope of the appellant to omit works from the sub-contract it would haverequested that this be expressly worded into the sub-contract. However, this wasnot done. As such, there is nothing limiting the appellants contractual right underthe said cl 19 to omit the remaining works under the sub-contract.

[8] It is also the contention ofthe appellant that both the High Court and the Court of Appeal in the present casewere wrong in seeking to limit the bargain freely entered into by the appellantand in not finding that cl 19 in effect allowed for termination without defaultnotwithstanding there is the existence of other clauses in the sub-contract whichprovided for termination in the event of default. To the appellant the parties canin one and in the same contract have some provisions which allow for terminationfor convenience and other clauses which allow for termination upon default.

[9] With respect we could not agreewith the above points of contention of the appellant. The principal issue to bedecided in this appeal is whether the appellant can lawfully invoke cl 19 to omitthe whole of the sub-contract works that effectively resulted in the terminationof the sub-contract. We agree with the findings of the courts below that cl 19 isa variation clause and so could not be invoked to omit the entire sub-contract works.

[10] It is to be noted that a variationclause gives power to make adjustments to the sub-contract works but not a powerto cancel the sub-contract works. On this point in the English case of Trustees of the Stratfield Save Estate v. AHL Construction Limited [2004] EWHC 3286 (TCC),Justice Jackson, inter alia, had this to say:

"46.Provisions entitling an ownerto vary the work have therefore to be construed carefully so as not to deprivethe contractor of its contractual right to the opportunity to complete the worksand realise such profit as may then be made .They are not in the same category as exemption clauses. They have been commonfor centuries and do not need to be construed narrowly. In developed forms theynow offer contractors opportunities to participate actively in the success ofthe project and to enhance their returns (for example, by way of value engineeringor the application of concepts such as partnering).

47. However, the cases do show that reasonably clear wordsare needed in order to remove work from the contractor simply to have it doneby somebody else, whether because the prospect of having it completed by the contractorwill be more expensive for the employer than having it done by somebody else,although there can well be other reasons such as timing and confidence in theoriginal contractor.The basic bargain struck betweenthe employer and the contractor has to be honoured and an employer who finds thatit has entered into what he might regard as a bad bargain is not allowed to escapefrom it by the use of the omissions clause so as to enable it then to try andget a better bargain by having the work done by somebody else at a lower costonce the contractor is out of the way (or at the same time if the contract permitsothers to work alongside the contractor) ."

[emphasis added]

[11] A variation clause is distinctand different from termination for convenience clause. It is a question of constructionof the contract as to the extent and scope of the permissible exercise of powerof a particular clause. The particular clause must be examined in itself as wellas in conjunction with the other clauses in the contract. In any case whether itis a variation clause or termination for convenience clause, they cannot be exercisedunreasonably in the ab