Verbal remedies

Final account discussions between the contractor’s quantity surveyor and his opposite number frequently grind to a halt on the issue of whether variations have been the subject of any formal instruction. The word “discussions” can be a polite description of what happens next, particularly if the parties have spent most of the day struggling to dispose of a 200-item schedule and are only at item 27.

The contractor refers to verbal instructions given by “someone on site”. The employer’s representative triumphantly brandishes the contract and points to the clause requiring all instructions to be in writing, or, at the very least for there to be confirmation of verbal instructions (CVIs) given by the supervising officer. The contractor is temporarily nonplussed. Is there a way out of this?

Conditions precedent

Arguments in such situations may be limited if the contract provides that a written order is a “condition precedent” to a valid variation instruction – in other words, if it is essential that there is a written order for the instruction to occur. This is not the case in most standard forms, but sometimes appears in amendments. Nevertheless, even here, the contractor need not give up hope.

First, unless the clause specifies that the instruction must be in a particular form, it may be able to rely on a drawing, sketch or part of a letter sanctioning the varied work. Some of the standard forms expressly or otherwise envisage that instructions will be given in this form.

Second, if the oral instruction comes from the employer itself, rather than the supervising officer, or if the contractor proves that whoever gave it did so with the employer’s consent, a court might well find that there was a separate contract with the employer. In these circumstances, the employer cannot hide behind the formalities of the variation clause.

Interestingly, the contractor will not necessarily be bound to the contract rates here. It will be paid a reasonable price under the new contract – this need not be the same as the bill rates, although they might be used as a guide, depending on the circumstances.

If there is no “condition precedent” clause, the contractor may still have all of the above arguments – and some more besides.

Further arguments

First, a contractor should thoroughly scour all correspondence to see if the CVI procedure can be used. Note that clause 4.3.2 of JCT98 contains a pitfall here. If the contractor obeys an oral instruction immediately, then dispatches a CVI, the instruction is not automatically validated back to the date of the verbal request. This can be awkward, although the problem is not insurmountable. Other contracts (ICE 7th, GC Works 1) are drafted more clearly.

If the oral instruction comes from the employer itself, a court might well find that there was a separate contract with the employer

Next, the employer may be held to have instructed extra work by implication if, in effect, it stands by and encourages the contractor to carry it out (see Hudson on Building Contracts, 11th edition, par 7-072). The degree of employer involvement is a factor. The employer that merely takes a detached interest in what is going on will not be bound.

Third, standard arbitration clauses give the arbitrator power to open up, review and revise any “requirement” (or similar) of the supervising officer. This should allow the arbitrator, in appropriate circumstances (and specifically where he decides that the supervising officer should have issued an instruction), to revise the verbal requirement so as to make it a written instruction complying with the contract.

Estoppel and waiver

Finally, the contractor could consider arguments based on estoppel or waiver, which are similar concepts. Here, one party is saying that the other led it to believe that the strict terms of the contract would not be enforced, and that it relied on this before doing the work.

The recent case of Ministry of Defence vs Scott Wilson Kirkpatrick & Partners and Another (BLR 2000, page 20) illustrates the difficulties of raising estoppel or waiver arguments. In this case, the contractor, carrying out the refurbishment of a roof, was contractually obliged to ensure that the roof was as well fixed as the original. The rafters of the original roof had been fixed to the purlins with 9 inch nails. The contractor decided to use 4 inch nails. The roof blew off in high winds and landed in a nearby field.

Here, the contractor’s argument failed for two related reasons. The contractor had to show that there was a clear indication by the employer that the strict requirements of the contract would not be enforced. But there was simply no evidence of this. The events had happened eight years previously and witnesses’ memories were hazy.

Also, the contractor was trying to sidestep fundamental obligations as to work and materials. It was naturally difficult to show that the employer had waived these.

However, it often happens that the supervising officer agrees and adopts an informal approach to variation instructions throughout the contract period. Here, estoppel or waiver arguments are more likely to succeed. In these circumstances, and assuming that the supervising officer did not give any indication that he would revert to the strict legal position, the contractor has every prospect of getting paid for the varied work.

No instructions at all

Finally, what if the contractor varies the work without any instructions at all? Leaving aside situations such as emergency compliance with statutory requirements (JCT98 clause 6, for example), there is no reason why it should be paid extra. The supervising officer might sanction work retrospectively but that cannot be seized on by the contractor as entailing a right to payment. The purpose of sanctioning the work might simply be to confirm that the employer is willing to allow the non-compliant work to stand.