Andrew Milner looks at what powers employers have to omit work for bad performance
A contract for the execution of work bestows on the contractor not only the duty to carry out the work but the corresponding right to be able to complete the work it was contracted to carry out. To take away or vary the work intrudes into and infringes that right and is a breach of contract.
For this reason contracts usually contain provisions to enable the work to be varied. Such clauses enable an employer or contractor to remove work or carry out additional work or make alterations in the work to meet the contract’s requirements.
Other such clauses may provide that work can be taken away and carried out by another contractor and whether that is the situation will depend on the interpretation of the clause. This issue came before the court in the case of Abbey Development v PP Brickwork.
PP Brickwork was engaged by Abbey as a labour-only subcontractor for brickwork and blockwork for the development of residential property. A written agreement contained the following provision:
“Abbey… reserves the right to vary the number of units and the… programme… and to renegotiate rates or suspend the contract and retender the works without vitiating the contract.”
The contract also contained a standard variation clause that allowed for both additions and omissions.
During the course of the project, Abbey wrote to PP Brickwork complaining of matters that it required to be put right.
PP Brickwork disagreed with the matters raised. Abbey therefore wrote to explain that it was limiting PP Brickwork’s works to that currently under construction, but that the remainder of its works would be given to another contractor for completion.
PP Brickwork referred the matter to adjudication, claiming Abbey’s letter amounted to a repudiatory breach of contract. The decision went in its favour. Abbey disagreed with the decision and issued legal proceedings to overturn it.
If an employer or contractor finds that it has entered into a bad contract, it is not allowed to escape from it by the use of the omissions clause so as to enable it to try and get a better deal by having the work done by another contractor at a lower cost
Abbey argued that the provision permitted it to reduce the quantity of works and to employ others to carry it out.
PP Brickwork argued that it was no more than a standard variation provision and did not confer a right to deprive it of the opportunity to carry out the remaining works simply because Abbey was unhappy with its performance.
It is established law that the basic bargain struck between contracting parties has to be honoured. Therefore, if an employer or contractor finds that it has entered into a bad contract, it is not allowed to escape from it by the use of the omissions clause so as to enable it to try and get a better deal by having the work done by another contractor at a lower cost.
But can work be omitted simply because the employer or contractor was dissatisfied with the performance of the contractor? That was the issue in this case.
The judge considered that the purpose of a variations clause is to enable the employer or contractor to alter the scope of the works to meet its requirements. As the project proceeds it may become clear that some change of mind is needed to attain the desired result.
He said the test to be applied is whether the variations clause permits the change that was made, so that if the change does not fall under the definition of what constitutes a variation under the clause, it will be a breach of contract. The motive or reason for the variation is irrelevant.
Although Abbey may well have had good reason to be dissatisfied with PP Brickwork’s performance, the contract did not provide the purposes which entitled Abbey to omit work with the intention to hire another contractor to carry it out. The variation provision was, according to the judge, a standard clause, as in most contracts, to omit work that Abbey considered was no longer required for the project.
Employers or contractors may wish to omit work from a contract that it does not require to be done and there is no principle in law that states in no circumstances may work be omitted and given to others, but clear wording is needed.
Originally published as "Leave it out" in EMC Jul/Aug 2009
Electrical and Mechanical Contractor
Andrew Milner is with Integritam Construction Consultancy Email: email@example.com