Renegotiating a signed Construction Contract starts with reviewing the original Contract and any existing claims, rights and notices. You then need to assess your contractual and commercial leverage, decide exactly what you want changed, work out what the other party needs, negotiate the proposed changes while continuing to protect your existing rights, and properly document any agreement reached.
This article is for Contractors and construction business owners considering changes to a signed Construction Contract, including where claims have become part of a wider commercial negotiation. It explains how to assess the original Construction Contract, preserve existing rights, work out your leverage, negotiate the proposed deal and document any agreement reached.
Why Do Construction Contracts Need to Be Renegotiated After Signing?
The need to renegotiate can arise at any stage after the original Construction Contract has been signed. A substantial claim may be disputed or remain unpaid, a risk accepted at signing may become a serious problem during delivery, or the price or time arrangements may no longer be commercially workable as the Project develops.
Renegotiation can also arise when several Project issues have accumulated. The parties may have outstanding claims, disputed scope, delay issues and disagreements about how the remaining Works will be completed. Rather than continue dealing with each issue separately, they may decide to negotiate a broader commercial arrangement covering some or all of those issues.
In other cases, the problem sits squarely with the original bargain. The Contractor may have underpriced the Works, accepted an unrealistic Program or agreed to carry a risk whose financial consequences were not properly understood before signing. Those circumstances do not necessarily give the Contractor an entitlement to relief under the original Construction Contract, but they can create a reason to explore whether the parties are prepared to agree different arrangements for the remaining Project.
When Is Renegotiating the Original Construction Contract Worth Considering?
Renegotiation is worth considering where continuing under the existing arrangements is creating a Project or commercial problem that the parties have a reason to resolve together.
A Project may have developed in a way the parties did not expect, a risk accepted at signing may have become much more serious, unresolved claims may be accumulating, or the parties may need different commercial arrangements to complete the Works.
Changed circumstances do not automatically create a right to rewrite the original Construction Contract. The Contractor first needs to determine whether it already has an entitlement under the Contract or at law. If it does not, the Contractor is asking the Principal to agree voluntarily to a different bargain.
The distinction affects the negotiation from the outset. Existing rights have their own contractual and legal value. A request for relief from an unfavourable bargain depends much more heavily on the Project consequences and the commercial value of reaching agreement.
What Is Your Starting Point for the Renegotiation?
Before deciding what to ask the Principal to change, work out whether you are negotiating from an existing contractual entitlement, asking the Principal to change the original bargain, or dealing with a combination of both.
A Contractor with a well-supported $500,000 claim has an existing contractual entitlement to bring to the negotiation. If the Principal disputes the claim, the parties might negotiate the amount, timing of payment or a broader settlement. The strength and value of the underlying claim remain relevant when deciding what the Contractor is prepared to accept.
The starting point is different where the Contractor underpriced the Works or accepted a risk that later proved substantially more expensive than expected. There may be no contractual entitlement to additional money or a different risk allocation. Any negotiated change will then depend much more heavily on the Project circumstances, the Principal’s alternatives and whether changing the original bargain produces a commercially acceptable result for the Principal.
The two situations can exist on the same Project. A Contractor might have substantial unpaid claims while also seeking changes to the Program, risk allocation or commercial arrangements for the remaining Works. Those issues may eventually be negotiated as one package, but they should first be identified separately so the Contractor knows which rights it already has and which changes require the Principal’s agreement.
Start by Reviewing the Original Construction Contract
The original Construction Contract determines the legal starting point for the negotiation. Before offering concessions or asking the Principal to change a contractual term, work out what the Contract already gives you.
The review should be directed at the Project problem. Depending on the issue, relevant provisions may include payment, Extension of Time, delay, latent conditions, suspension, escalation or adjustment mechanisms, changes in law, security, insurance, indemnities, liability, termination, notices and dispute resolution.
Special Conditions, Annexures, scope documents, pricing schedules, specifications and tender qualifications also need to be read with the general conditions. On construction projects, the commercial effect of a clause can change substantially once those documents are read together and the order of precedence is applied.
The review should also establish what has already happened under the original Construction Contract. A strong entitlement supported by notices and Project records gives the Contractor a different negotiating base from a request to change a risk that was clearly accepted when the Contract was signed.
For a broader assessment of the contractual risk allocation, see our Construction Contract Review and Advice service.
What Leverage Do You Have Under the Original Construction Contract and on the Project?
Leverage after signing comes from rights created by the original Construction Contract and the commercial circumstances of the Project. They need to be assessed separately because they do not carry the same legal weight.
Existing contractual rights can include payment claims, Extension of Time entitlements, rights arising from Principal-caused delay, latent conditions, suspension or other Contract-specific remedies. Their usefulness in negotiation depends on the strength of the entitlement, compliance with notice requirements and the supporting Project records.
Commercial leverage comes from what happens if agreement is not reached. Replacing a Contractor partway through a Project may involve delay, procurement costs, remobilisation, new interfaces, loss of Project knowledge and further management effort. A Contractor with specialist personnel, difficult-to-replace suppliers or responsibility for critical-path Works may therefore have considerable commercial importance to the Project.
That leverage should not be overstated. A Principal may have viable replacement Contractors, time available in the Program, strong contractual remedies or a well-documented Contractor default. A Contractor that assumes it is indispensable can misjudge the negotiation badly.
The useful comparison is between each party’s realistic alternatives if agreement cannot be reached. That assessment usually tells you more than the positions being stated across the negotiating table.
Why Would the Principal Agree to Change the Original Construction Contract?
After signing, the Principal already has the benefit of the bargain recorded in the original Construction Contract. A Contractor asking for more money, more time or a different risk allocation therefore needs to understand what would give the Principal a commercial reason to agree.
That reason may come partly from the original Construction Contract. The Contractor may have substantial outstanding claims, rights arising from Principal-caused delay or another entitlement that the Principal needs to deal with. Project circumstances can also affect the negotiation where completion is under pressure, additional work is required, specialist resources are difficult to replace or changing Contractors would create substantial delay and cost.
A request based only on the Contractor having underpriced the Works is much harder. If the Principal can insist on the original bargain without creating a larger problem for itself, there may be little incentive to agree to a price increase. The negotiation becomes more credible when the Contractor can explain the Project consequences of continuing under the existing arrangements and put forward a proposal that addresses something the Principal needs as well.
Contractors usually understand why they want the original Construction Contract changed. Before approaching the Principal, they also need to work out why the Principal should agree.
What Does the Principal Need From the Negotiation?
Contractors preparing for renegotiation tend to focus heavily on their own problems. The Principal’s Project pressures need equal attention because they can determine whether there is a deal available.
The Principal may need completion by a particular date, greater cost certainty, resolution of outstanding claims, additional resources, a clearer approach to remaining scope or certainty about how particular Project risks will be handled.
Those requirements can shape the proposal. A request for additional payment may have a better commercial basis where it forms part of a defined agreement dealing with completion, identified claims and future Project administration.
Understanding what the Principal needs does not mean conceding valuable rights to make the proposal attractive. It helps identify what the Contractor can offer that has value to the Principal and compare that with what the Contractor expects to receive.
Decide Exactly What You Want Changed
A request to “renegotiate the Contract” is too broad to negotiate effectively. The Contractor should identify the provisions, rights or commercial arrangements it wants changed and the result it wants to achieve.
The proposed changes could concern the Contract Price, payment arrangements, Date for Practical Completion, liquidated damages, delay costs, escalation, security, retention, liability, indemnities, insurance, design responsibility, risk allocation, existing claims or contractual procedures for the remaining Works.
Existing claims should be separated from future contractual changes before they are combined into an overall proposal. If a Contractor has substantial unpaid claims and also wants a different delay regime for the rest of the Project, the value of each issue should be worked out independently.
Consequential effects also need to be considered. An amendment to time, price, security or risk can alter cash flow, margin, insurance exposure and other contractual provisions.
What Are You Giving Up to Obtain the Change?
A negotiated amendment or settlement usually involves concessions. The Contractor should know the value of those concessions before agreeing to them.
A Principal may seek settlement of identified claims, a release, revised completion commitments, additional resources or acceptance of a different Project risk in exchange for money, time or another contractual change.
The figures can be misleading when the deal is viewed only as an immediate payment. A $300,000 settlement is commercially poor if obtaining it requires the Contractor to release a strong $500,000 claim plus other unresolved entitlements worth materially more.
Future obligations also need to be priced. Accepting a new liability, tighter Program obligation or broader risk allocation can cost substantially more than the immediate amount obtained in the negotiation.
What if the Principal Refuses to Pay a Construction Claim?
A Contractor can have a contractual claim and still need to negotiate. Principals regularly dispute claims over entitlement, notice compliance, causation, valuation, delay analysis, supporting records or the interpretation of the original Construction Contract.
The claim should first be assessed on its own merits. A $500,000 claim supported by timely notices, contemporaneous records and a clear contractual entitlement should not be treated in the same way as a claim with substantial evidentiary or contractual weaknesses.
Once the claim has been assessed, the Contractor can decide whether a negotiated outcome is commercially sensible. The negotiation might address the amount paid, timing of payment, several outstanding claims at once, future treatment of related Project events or amendments needed for the balance of the Works.
Negotiating payment does not require the Contractor to abandon the underlying entitlement. The claim should continue to be preserved while the Contractor decides whether a commercial settlement is preferable to pursuing the full amount through the contractual or statutory processes available.
Where several claims have accumulated, it can also make sense to negotiate them together. Before negotiating an overall figure, however, the Contractor should understand the strength and value of the individual claims and exactly what rights will be released if a settlement is reached.
Can You Renegotiate the Contract Price After Signing?
A Contractor can ask to renegotiate the Contract Price after signing, but the reason for the additional cost determines how the issue should be approached.
If the additional cost arises from an event for which the original Construction Contract gives the Contractor an entitlement, the claim should be identified and pursued as a contractual entitlement. Where the Contractor simply underpriced the Works, accepted an inadequate allowance or made an incorrect tender assumption for which it carries the risk, the Principal may have no contractual obligation to increase the price.
A Principal may nevertheless agree to revised commercial arrangements where continuing with the original price creates a serious delivery problem, threatens completion or produces greater cost and disruption for the Principal. Whether that opportunity exists depends on the Project, the Principal’s alternatives and what the Contractor can offer as part of the revised deal.
Before approaching the Principal, separate losses caused by the Contractor’s original pricing from amounts arising from contractual entitlements. Mixing the two together can weaken otherwise supportable claims and make it harder to explain what the Contractor is actually asking the Principal to pay.
What if the Contractor Has Accepted a Risk It Can No Longer Carry?
Post-signing problems can expose contractual risks that looked manageable during tender but become serious during delivery. Design responsibility, insurance requirements, security, an aggressive Program, interface risk or an uncapped liability can become much more significant once the Project is underway.
The original Construction Contract still governs the allocation of that risk. If the Contractor agreed to carry it, the fact that the exposure has become commercially severe does not of itself transfer the risk back to the Principal.
Any proposed change should therefore be based on what the risk now means for the Project as well as for the Contractor. An insurance problem might affect the Contractor’s ability to perform particular work. An unrealistic Program could increase delay and cost exposure for both parties. The practical consequences will often determine whether the Principal has a commercial reason to consider a different arrangement.
There can be a substantial difference between the legal answer and the commercially preferable outcome. A Contractor may have no contractual entitlement to relief but still be able to put forward a proposal that produces a better Project result for both parties.
What Happens When Claims and Project Problems Keep Accumulating?
Some projects reach a point where both sides are administering several disputed issues at once. Notices, claims, assessments, delay arguments and scope disagreements begin interacting with each other while the Project still has to be completed.
Dealing with every issue separately may remain appropriate. On other projects, the parties may decide that a broader negotiated settlement gives them a clearer basis for completing the remaining Works.
A broader settlement can address existing claims, payment arrangements, time, remaining Project risks and how identified issues will be handled from that point forward. Packaging several issues together can, however, make it harder to see what the Contractor is conceding.
Before negotiating an overall settlement figure, each material claim and concession should be understood separately. Otherwise, a settlement that solves the immediate cash or Project problem can dispose of considerably more value than the Contractor intended.
Client Experience
“We got Rachelle involved after we’d already signed the contract and things had gone pretty sideways on the job. There were a heap of claims the client wasn’t agreeing to and we needed to sort out how we were going to get through the rest of the project without losing a fortune.
She went right through the contract, our claims and what had actually happened on the job, then helped us work out what we had a strong position on and where we were better off negotiating. She knows construction so we didn’t have to spend hours explaining how the job worked or why certain things were a problem. Very commercial, straight talking and practical. Would definitely use her again.”
Keep Administering the Original Construction Contract While You Negotiate
The original Construction Contract continues to apply unless the parties validly agree to change it.
A recurring problem on construction projects is that senior people begin discussing a commercial settlement and the Project team assumes notices and claims can be dealt with later. The negotiations then take several weeks, no agreement is reached, and contractual deadlines have passed in the meantime.
Contract Administration should continue while commercial discussions are underway unless the parties have made an appropriate interim agreement changing what is required. Notices, claims, Project records, responses to directions and other contractual requirements should still be dealt with in accordance with the original Construction Contract.
The negotiating team also needs to know what is happening on the Project during the discussions. New delay events, claims or scope issues can change the value of a proposed settlement while it is still being negotiated.
See our Construction Contract Administration services for help managing contractual rights during delivery.
Is a Variation the Same as an Amendment to the Construction Contract?
A Variation changes the scope of the Works. An amendment changes the terms of the original Construction Contract.
An amendment may deal with the Contract Price, Date for Practical Completion, liquidated damages, liability, insurance, security or another contractual term without changing the scope of the Works.
A post-signing negotiation can involve both. The Principal might require additional Works while the parties also agree to change time, price or risk provisions dealing with how those Works will be carried out.
The documents should identify each type of change correctly. For information about changes to the scope of the Works, see our Construction Contract Variations page.
How Should the Renegotiated Deal Be Documented?
The final document needs to record the commercial deal and explain how it changes the original Construction Contract.
Depending on what has been agreed, the parties may use a written Contract amendment, deed of amendment, settlement deed or another appropriate document. Existing schedules, scope documents or other Contract documents may also need consequential changes.
Where claims are being settled, the document should identify which claims are resolved, what will be paid, when payment is due and what rights are being released. Claims that are intended to remain alive should not be left to assumption.
The effective date also needs to be clear. An amendment agreed halfway through a Project may apply only to future performance, or the parties may intend it to deal with rights and liabilities that arose earlier.
Changes should then be checked against the rest of the original Construction Contract. Moving the Date for Practical Completion, for example, can affect liquidated damages, Program obligations, milestone dates, security and other time-related provisions.
How Broad Should a Release Be?
Release wording can change the value of a settlement considerably.
The commercial discussion may concern one delay claim, but the settlement document may contain a release covering every claim arising before the settlement date. If other claims are unresolved, still being quantified or continue to develop, the release can dispose of rights that were never priced into the deal.
Before agreeing to a release, identify the claims and rights it captures and decide which need to remain outside it. Known events that are still producing delay or cost also need particular attention because their financial consequences may not yet be fully developed.
Where several claims are being settled together, the document should reflect the scope of the bargain actually negotiated. Broad release wording should not be accepted merely because the parties have reached agreement on the settlement amount.
What Can You Do if the Principal Refuses to Renegotiate?
The next step depends on why the Contractor wanted the original Construction Contract changed.
Existing contractual claims can continue to be pursued under the Contract and through any applicable statutory process. Disputed claims may also proceed through the dispute resolution mechanisms in the original Construction Contract.
Where the Contractor has no contractual entitlement and the Principal will not agree to an amendment, the Contractor may have to continue performing under the original bargain. That possibility should be assessed before adopting a negotiating approach that assumes the Principal will eventually compromise.
Suspension, termination and other contractual remedies require separate legal analysis. They should only be considered where the relevant contractual and legal requirements are satisfied.
If negotiations have stalled, reassess the claims, remaining Project economics and each party’s realistic alternatives before deciding whether another proposal is commercially worthwhile.
Do You Need a Construction Lawyer, Commercial Manager or Both?
The work required depends on what is being negotiated.
A Construction Lawyer can review the original Construction Contract, assess legal rights and claims, advise on contractual risk, analyse proposed amendments and releases, assist with negotiations and prepare or review the final documents.
A Commercial Manager can assess the financial and Project consequences of the available options, including claim value, remaining cost exposure, Project leverage, concessions, margin and cash flow.
Rachelle Hare has worked extensively in both roles. Her Construction Law experience includes private practice and senior in-house roles with major Contractors, while her six years of Commercial Management experience involved working directly inside construction businesses and Projects. That combination is particularly useful where the legal entitlement and the commercially preferable outcome are different.
Legal Services and Commercial Advisory Services are scoped separately. A Commercial Review or Commercial Advisory Service is not automatically included with a Legal Review.
Client Experience
“Rachelle is different to other lawyers we’ve used because she looks at the whole commercial picture, not just what the contract says. We had a pretty difficult situation with a contract we’d already signed and there wasn’t an obvious answer.
She worked through what our actual rights were, what the other side was likely to push back on and what different options were going to cost us if we couldn’t reach a deal. There were a couple of things we thought we should fight hard on and she actually told us not to, and explained why. That’s the sort of advice we needed. No legal waffle, just really good construction and commercial advice.”
Our Construction Contract Renegotiation Services
Blaze Business & Legal can assist before you approach the Principal, during an existing negotiation or when earlier discussions have stalled.
Rachelle’s role can be limited to reviewing the original Construction Contract and advising your team, or extended to assessing claims, developing the negotiation approach, preparing correspondence, participating in negotiations and documenting an agreed amendment or settlement.
Your Director, Commercial Manager or Project team can continue to conduct the negotiation with Rachelle advising in the background. Where direct involvement is useful, Rachelle can participate in the negotiations in the role agreed for the engagement.
The scope will state whether Rachelle is providing Legal Services, Commercial Advisory Services or both. Where the work can be scoped in advance, Blaze Business & Legal provides a fixed-price quote before the engagement proceeds.
FAQs about Construction Contract Renegotiation
1. Can you change a Construction Contract after it has been signed?
A Construction Contract can be changed after signing if the parties agree and the change is documented in accordance with the legal and contractual requirements that apply. Before agreeing to an amendment, review the original Construction Contract, identify existing rights and claims, and assess how the proposed change affects the rest of the contractual arrangements.
2. Can a Contractor renegotiate the Contract Price after signing?
A Contractor can ask to renegotiate the Contract Price after signing. Where the Contractor already has an entitlement to additional payment, that entitlement should be identified and preserved. Where the Contractor simply underpriced the Works, the Principal may have no contractual obligation to increase the price, so the proposed change needs to be supported by a commercial reason for the Principal to agree.
3. Can I negotiate a Construction Claim if the Principal refuses to pay it?
A Construction Claim can be negotiated where the Principal disputes or refuses to pay it. The Contractor should assess the strength and value of the underlying entitlement before deciding what compromise is commercially acceptable and should continue preserving its contractual rights while negotiations are underway.
4. Does the Principal have to renegotiate the original Construction Contract?
The Principal does not generally have to agree to change the original bargain simply because the Contractor requests different terms. Where the Contractor already has a contractual or legal entitlement, that right does not depend on the Principal voluntarily agreeing to amend the Contract, although the parties may still negotiate how a disputed entitlement is resolved.
5. What leverage does a Contractor have after signing a Construction Contract?
A Contractor’s leverage can come from rights and claims under the original Construction Contract and from the commercial circumstances of the Project. Completion pressure, replacement cost, critical resources, specialist suppliers, unresolved claims and the consequences of changing Contractors can affect the negotiation, but they should be assessed against the Principal’s realistic alternatives.
6. Is changing a Construction Contract the same as a Variation?
A Variation changes the scope of the Works. An amendment changes the contractual terms agreed between the parties, such as price, time, liability, security or another provision of the original Construction Contract.
7. Should I keep issuing Contract notices while negotiating?
The notice and claim requirements of the original Construction Contract should continue to be followed unless the parties have validly agreed to a different arrangement. Allowing contractual deadlines to expire while commercial discussions continue can damage claims and other rights if the negotiation does not result in agreement.
8. How are changes to a signed Construction Contract documented?
Changes can be recorded in a written Contract amendment, deed, settlement document or another appropriate instrument, depending on what has been agreed. The document should identify the terms being changed, when the changes take effect, the treatment of existing claims and releases, and how the amendment interacts with the original Construction Contract.
9. Can Blaze Business & Legal negotiate directly with the Principal?
Blaze Business & Legal can negotiate directly with the Principal where that work forms part of the agreed engagement. Rachelle can also advise your internal team while your Director, Commercial Manager or Project Manager continues to lead the discussions.
Related Construction Contract Services
For broader negotiation support before or after signing, see our Construction Contract Negotiation service.
If you need the original Construction Contract assessed before negotiations begin, see Construction Contract Review and Advice.
For issues arising during Project delivery, see Construction Contract Administration, Construction Contract Variations and Construction Contract Claims.
For broader Construction Law advice, see Construction Lawyer Brisbane.
What Happens When You Engage Blaze Business & Legal?
Start by sending the original Construction Contract, relevant amendments and Project documents, together with a short summary of the problem and what you want to achieve.
Rachelle will review enough information to identify the work required and confirm the proposed scope. If the work can be defined in advance, you will receive a fixed-price quote before deciding whether to proceed.
The next stage depends on the engagement. Rachelle may review the contractual rights and claims, assess the Project and commercial issues, help work out the proposed settlement or amendment and identify the rights that need to be preserved while negotiations continue.
If negotiation support is included, Rachelle can advise your team between meetings, participate directly or lead the discussions where appropriate. If agreement is reached, the engagement can also include preparation or review of the documents needed to record the revised arrangements.
Ready to Discuss Your Original Construction Contract and How It Should Be Amended?
Send Rachelle the Contract and a short summary of the problem. We will confirm the proposed scope and, where the work can be scoped in advance, provide a fixed-price quote.
Request a Fixed-Price Quote
Call Rachelle on (07) 3063 3373
