Home Building Contract Variations & Payment Disputes NSW

8 October 2025 in Building and Construction Law | 6 min read | skip to FAQs

This article provides an overview of the concept of variations of a Home Building Contract, the requirements of variations and what constitutes out of scope works.

What is a Variation in a Home Building Contract?

A variation to a home building contract effectively means a change, being either an omission or addition to the scope, nature or manner in which building works are carried out. Or a change in the plans or specifications for the building works, for example, changes to the character or quality of building materials, which will subsequently mean a change in the cost of such materials.

In general, depending on the particular wording of the building contract, variations to the building work may be required by the Builder or requested by the property owner.

The general effect of a variation would be a change to the contract price and the construction period, which will depend on the nature of the variation. For example, where there are omissions or reductions to the building work, this would typically result in a decrease in the contract price. Likewise, where there are additions to the building work, this would result in an increase in the contract price.

Each individual contract will prescribe the manner in which the owner or Builder can request a variation to the building work.

Legal Requirements of Variations in a Home Building Contract

Variations, as explained by clause 1(1) of Part 1 of Schedule 2 of the Home Building Act 1989 (NSW), form part of a contract for residential building work.

In order to be a valid variation, clause 1(2) of Part 1 of Schedule 2 of the Home Building Act 1989 (NSW) states that variations must be in writing and signed by, or on behalf of, each party to the residential building contract.

Where a contract allows for the price to be varied, section 7(5) of the Home Building Act 1989 (NSW) states that the contract must contain a warning regarding this and an explanation of the effect of the particular contract clause which allows for such a variation of the contract price. This warning must be placed next to the contract price, if the price is known.

How is the Price of the Variation Determined?

The contract terms will prescribe either the person responsible, or the method to be used, for determining the price of the variation. The price of the variation, depending on the contract, will generally be either:

1. The amount quoted for the variation; or
2. Where an amount is not quoted prior to the work being carried out, the deduction of the reasonable cost of all deletions from the building works or the addition of the total cost of all extra work plus the Builder’s margin applied to that cost. The Builder’s margin being the percentage outlined in the contract which covers a builder’s profit.

When is the Price Variation Paid?

Depending on the terms of the contract, the price of a variation is generally due and payable at the next progress payment after it is carried out, unless a different time is agreed by the parties to the contract.

When is Work considered Outside of the Contract’s Scope?

Work, materials, goods or services will not be a valid variation and will therefore not form part of the scope of a residential building work contract (additional work) in circumstances where:

1. A related variation is not in writing and signed by the parties;
2. A related variation is not performed in accordance with contractual procedures; or
3. Where there is no enforceable contract or agreement (see in particular sections 10(1), 92 and 94(1) of the Home Building Act 1989 (NSW) and our article on this specific point).

Should any of the above three circumstances occur, then the builder (or contractor, if the person who performed the work or delivered/obtained the relevant goods is someone other than the builder) will not be entitled to make a request for payment or recover money for the additional works performed, or goods obtained, under the contract.

What are the Legal Options when Building Work is outside of the Contract’s Scope?

1. A claim can be made regarding the additional work or goods on a quantum meruit (the latin term for as much as deserved) basis.
2. There is also the possible option of making a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW). Please see our article regarding this for further information.

Quantum Meruit Claim

Quantum meruit arises where there is no contract for the works and under the area of law known as claims for restitution, which aim to restore a party to their original position, or the position they would have been in had a particular wrong not occurred or a benefit not been unjustly conferred. That is, if the money been paid for the works performed or goods obtained.

How can Quantum Meruit be Established?

A claim of restitution on a quantum meruit basis arises in circumstances where it would be unjust for the owner to retain the benefit of the additional work performed or goods obtained without paying the builder the reasonable value of that work or goods;

To establish quantum meruit the builder must establish the Five Elements Test established in Goodacre v Trinder Alpine Constructions Pty Ltd [2013] NSWCCT 124 at paragraphs [69] and [70]that:

1. The additional work involved must be beyond the scope of the work required under the contract;
2. The owner must have knowledge of the variation as it was executed;
3. The owner knew that it was outside the scope of the contract;
4. The owner knew that the contractor expected to be paid; and
5. The builder/contractor has evidence that the amount claimed is a fair value.

How much is Recoverable in Quantum Meruit Claims?

1. The amount is a liquidated (fixed) amount representing reasonable remuneration for the additional work;
2. The onus is on the builder to establish the reasonable value of the additional work performed and accepted by the owner. This is a question of fact (meaning a question of what actually occurred);
3. Relevant evidence will include any invoices and receipts of the contractor; time sheets of the builder; rates under the contract for labour and materials; and qualified expert evidence that analyses the additional work actually performed and the reasonable cost of that work;
4. The amount recoverable in the claim cannot exceed the amount that would have been payable under the contract for that component of that work.

Relevant Case Law of building claims based on quantum meruit 

Durastyle Homes Pty Ltd v Gosling; Gosling v Durastyle Homes Pty Ltd [2022] NSWCATCD 106 at [81] and [85] to [88];

Nayack v Rockwell Constructions Pty Limited [2017] NSWCATAP 18 at [30]

Suecha Pty Ltd v VSD Glass & Timber Pty Ltd [2020] NSWCATAP 170;

Woodward v Warwick Green Building Pty Ltd [2021] NSWCATAP 210;

Rekrut and Scott v Champion Homes Sales Pty Ltd [2017] NSWCATAP 187;

Roude v Helwani [2020] NSWCA 310; Rice v JR and SD Farmer t/as Urban Bespoke Homes [2020] NSWCATAP 208;

Paraiso v CBS Build Pty Ltd [2020] NSWSC 190;

Durastyle Homes Pty Ltd v Gosling; Gosling v Durastyle Homes Pty Ltd [2022] NSWCATCD 106 at [89] to [90];

Mann v Paterson Constructions Pty Ltd [2019] HCA 32 at [100], [101] and [105];

Horton v Jones (1934) 34 SR (NSW) 359 at 367;

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 at 228.

Key Takeaways

1. Variations Must Be in Writing and Signed To be valid, any variation to a building contract must be in writing and signed by both parties to the contract.

2. Variations Change the Contract Price A variation will generally increase or decrease the contract price, depending on the terms of the contract. The contract will set out how this change is calculated. Payment is usually made with the next progress payment, unless the contract states otherwise.

3. Unenforceable Variations May Still be Paid Under Quantum Meruit If the variation is not a valid variation under the contract, a builder/contractor may still be able to claim payment through a “quantum meruit” claim.

How can BSM Sydney Lawyers assist you?

Brander Smith McKnight  Construction Lawyers Sydney are renowned as building contract experts. Our construction lawyers have several decades of experience in building and construction projects at all levels. We provide top tier construction law experience and a highly responsive and personal service. The senior building and construction lawyers at BSM Sydney Lawyers offer a free 20-minute consultation.

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