You signed a contract six months ago, and the deal has moved on. The client wants extra deliverables, the supplier has raised its costs, or a supply delay means the completion date no longer works. A signed contract can be changed to match, but the change has to be made properly, or it will cost more in a dispute than it saved in flexibility.
Done properly, a variation leaves you with a signed document that changes only the terms you intend and leaves the rest of the contract standing. Two assumptions usually get in the way. One is that a conversation or an email exchange is enough to change a signed contract. It can be, in narrow circumstances, but it is hard to prove and often defeated by a no oral modification clause in the contract itself. The other is that you have to tear the contract up and start again. You usually do not: a targeted amendment or a deed of variation does the job, and a full restatement is only worth it once a contract has been amended so many times it is hard to follow.
What you need before you start
Gather the essentials before you draft anything, so the change does not stall or come unstuck later:
- The signed original contract and every amendment made since: A variation you cannot see is a variation you will contradict in the next negotiation.
- A clear read of the contract's variation clause, if it has one: Many contracts specify how changes must be made, commonly "in writing and signed by both parties". If yours does, that clause dictates the whole process.
- The substance of the change agreed before anything is drafted: Price, dates, scope and responsibilities: the parties should agree what is changing before a template or a lawyer is involved.
- Confirmation of who can sign for each party: For a company, that is a director, the company secretary, or someone with express or implied authority to act on its behalf.
- A decision on consideration: A variation is itself a contract, and in general each side must give something in exchange, unless the change is made by deed.
- Any third-party consents checked: A financier, insurer, landlord or franchisor may have a right to approve or veto the change.
- Electronic signing method: If you plan to sign electronically, use a method that identifies the signer and records their intention, and confirm the other side agrees to it.
The items that trip people up are authority and consideration. Both are silent killers: the document can look fine, and still fail later because the wrong person signed it or because one side gave nothing in return.
The steps to a binding variation
Read the variation clause first
Start by reading the agreement you want to change. If it contains a variation clause, it will usually say something like "no variation is effective unless in writing and signed by both parties". Follow it exactly. Australian courts treat these clauses seriously. In White v Philips Electronics Australia Ltd [2019] NSWCA 115, a customer argued that a conversation had changed a service contract that required variations to be in writing and signed. The argument failed. The Court of Appeal noted that whether such a clause completely blocks an oral change remains an open question in New South Wales, but that the clause is at minimum important context for whether the parties intended to be bound by the conversation at all.
The variation clause may also name who must sign, require the variation to be made by deed, or require a third party's consent. Read the rest of the contract too. An entire agreement clause, a clause requiring you not to assign or transfer rights, and a clause giving a financier consent rights can all change what a variation needs to contain.
Agree the change and deal with consideration
A variation is itself a contract, so it needs the usual elements: offer, acceptance and consideration. The High Court put it this way in Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93: a variation changes the content of the obligation; it does not replace the contract itself.
Consideration is where variations come unstuck. If both sides give something, there is no problem: an extended deadline in exchange for a higher price, extra scope in exchange for more money. The trouble is one-sided changes, like agreeing to reduce a price without getting anything in return. Australian courts have accepted in some cases that a practical benefit to the party making the concession can supply consideration, as in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723, where reduced rent that kept a tenant in the premises was supported by consideration. But the outcome is not always predictable, and the reliable route for a one-sided change is a deed, which is binding without consideration.
How the agreement is reached also matters:
- Written: Best practice is a short signed amendment. It leaves no room for argument about what was agreed, and it is the only route that survives a no oral modification clause.
- Oral: A verbal change can be binding where the contract does not require writing, but it is hard to prove and routinely contested.
- By conduct: If both parties perform as though the change is in place, a court may infer a variation. This is the riskiest route and generates the most disputes about what was actually agreed.
Choose the document that fits the change
Match the document to the size and nature of the change:
- Amendment or addendum: The right choice for routine, targeted changes: adjust a price, move a date, add a clause. A short document that identifies the original contract and states the changes.
- Deed of variation: The right choice for significant changes, and the standard answer whenever one side gives something without receiving anything in return, because a deed is binding without consideration. A company executes a deed by expressing that intention and signing under s 127 of the Corporations Act 2001 (Cth); under s 127(3B) no sealing or delivery is needed.
- Full restatement: Once a contract has been amended several times, or is becoming hard to follow, it can be cleaner to restate the whole agreement with the updated terms and a new effective date.
- Land contracts: A contract for the sale or other disposition of an interest in land must be in writing and signed by the party to be charged: see s 54A of the Conveyancing Act 1919 (NSW), with equivalent provisions in every state and territory. A variation to such a contract should therefore also be in writing to be safe.
Draft the variation by reference to the original
Make the variation a set of precise instructions, not a description. Identify the original contract by date and parties, then state each change by reference to the clause being altered: "clause 5.2 is deleted and replaced with the following" or "the schedule is replaced with the attached schedule". State the effective date, and whether the change applies to existing orders, renewals or only new work. Confirm that everything else stands: "all other terms and conditions remain in full force and effect".
Vague wording is a real risk. In Hill v Forteng Pty Ltd [2019] FCAFC 105, agreements said to vary an employment contract were attacked as void for uncertainty, and in White v Philips the alleged variation failed in part because it was no more than an agreement to agree on a "lower price solution" that was never specified. If you are updating a scope of work, service levels or pricing, replace the whole schedule rather than editing it in line: it is cleaner and less likely to create inconsistencies with the rest of the contract.
Sign it with the right authority
Get the signature to the right person, in the right form:
- Who can bind the company: Under s 126 of the Corporations Act 2001 (Cth), an individual acting with the company's express or implied authority can make, vary, ratify or discharge a contract on its behalf.
- Formal execution: Under s 127, a company executes a document without a common seal if it is signed by two directors, or a director and the company secretary, or, for a proprietary company with a sole director, by that director alone in the circumstances set out in s 127(1)(c).
- Why it matters: A variation signed by someone without authority can be challenged. In White v Philips, part of the reason the alleged variation failed was that the manager who supposedly agreed to it had only limited authority to waive invoices.
- Electronic signatures: Under s 10 of the Electronic Transactions Act 1999 (Cth), a signature requirement is met electronically if a method is used that identifies the person and indicates their intention, the method is as reliable as appropriate for the purpose (or is proven in fact to have done the job), and the recipient consents. The state and territory laws are substantially the same. For documents required under the Corporations Act, s 110A applies the same test, and companies can execute deeds electronically under s 127(3A). Electronic signing is generally valid and convenient, but check the contract's execution clause first: if it insists on a particular method, follow it.
File the variation and tell everyone who needs to know
Store the signed variation with the original contract and update your version control, so you can produce the current terms quickly if a dispute arises. Update the operational documents that the contract feeds into: pricing sheets, project plans, invoice schedules and staff handbooks. Then notify the third parties with consent or notice rights, such as financiers, insurers, landlords and franchisors. A variation that breaches a consent requirement can itself be a default under a facility agreement or a lease.
If the contract is a franchise agreement, remember that the Franchising Code of Conduct, now in the Competition and Consumer (Industry Codes — Franchising) Regulations 2024 (in force since 1 April 2025), treats an extension of the term or scope of a franchise agreement as a new agreement for disclosure purposes, with a 14-day consideration period before signing. The Code also provides that a franchisor must not vary a franchise agreement retrospectively without the franchisee's written consent, and breaches carry civil penalties.
Where variations come unstuck
These are the points where variations most often fail in practice:
- Skipping consideration: A one-sided variation with no return benefit is unenforceable without a deed. Decide the deed question before you draft, not after a dispute starts.
- Signing without authority: Check who can sign for each party before you send the document. A variation signed by the wrong person binds no one.
- Relying on a verbal deal: Even where an oral change is arguable, a no oral modification clause and conflicting memories make it expensive to enforce. Write it down.
- Ignoring the variation clause: Some contracts impose formalities on variations themselves. Follow the clause to the letter, or the change will not take effect.
- Relying on a unilateral variation clause in a standard form contract: A term that lets one party change the contract on its own is on the statutory list of terms that may be unfair under the Australian Consumer Law (ACL s 25(d)). In ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224, a price variation clause that let the supplier raise prices on 30 days' notice was declared unfair and void. The small business protections apply to standard form contracts where at least one party employs fewer than 100 people or has turnover under $10 million (ACL s 23(4)), and since November 2023 proposing or relying on an unfair term can attract penalties: for a company, up to the greater of $100 million, three times the benefit obtained, or 30% of adjusted turnover (ACL ss 23(2A), (2C) and 224). If your contract carries such a clause, have it reviewed before you rely on it.
When you need a lawyer for a contract variation
Most routine variations can be handled in-house, but a legal practitioner adds value at specific points. Before you commit, a lawyer will review the variation clause and the wider contract for consent rights, entire agreement clauses, deed requirements and unfair contract terms exposure. They will advise on the amendment versus deed question, and on how to structure consideration where a change favours only one side. They will draft the variation itself: clause-by-clause wording, schedules, effective dates, and a clean restatement where amendments have accumulated. They will confirm the authority analysis, choosing between s 126 authority and s 127 execution and checking that electronic signing complies with the contract and the Electronic Transactions Act. For regulated contracts they will map the extra steps: the Franchising Code's disclosure and waiting period requirements, and mandatory writing for land transactions. And if a variation has already been made informally, a lawyer can assess whether it binds either party, whether estoppel arguments are available, and how to document it retrospectively.
Authority: the step that decides whether the variation holds
The step that most often determines whether a variation holds up is the signature. A variation that follows the contract's own process, is supported by consideration or made by deed, and is signed by someone with authority will bind the company. A variation that misses any of those, especially one signed by the wrong person, is the variation that gets challenged when the commercial relationship sours. Get the authority question right before anything else.
A variation changes the terms of a live contract; it does not replace it. Read the variation clause and follow it, agree the substance of the change, deal with consideration or use a deed, draft by reference to clause numbers, sign with proper authority, and file and communicate the change. Watch the special rules for standard form contracts and franchise agreements. Do that, and the changed contract will stand up when it needs to.