We, a sub-contractor entered into a contract in 2006 with a main contractor for 2 phases of a project. In addition to our sub-contract works, we agreed to carry out a number of variations during Phase 1. It was agreed that one of these variations would be an additional cost for Phase 1 but free of charge for the Phase 2.

After Phase 1, the contractor returned to us, in May 2009 and said that we must re-tender for the remainder of the contract, as a result of the economic downturn. We agreed to do so, as the contractor had grounds to terminate the contract based on delays, which we were deemed to be responsible for on Phase 1.

We re-tendered successfully for the same works which formed part of our original contract in 2006. The revised price was much lower than the contract rates. The Contractor is now expecting us to also complete the variations that we did in Phase 1 free of charge.

Our argument is that any previous agreements made for Phase 1, are now null and void as we have re-tendered for the project at a lower rate. In our revised tender document of May 2009, we did not price the variations, just the items that were part of our original package. If the original rates were in place, we would complete these works free of charge for Phase 2. We think this new price amounts to a counter-offer of the original agreed contract.

The Contractor is refusing to pay for any of the additional variations, yet is expecting us to carry these out, which we are doing.

Are we entitled to charge for these variations, or are we bound to do these free of charge?