Practical Law

Construction contracts will normally specify that variation instructions must be in writing. But what exactly does this stipulation mean? Will this cover any form of communication, such as an email, drawing or meeting minute?

This issue is not only important for contractors seeking payment for disputed changes. It is also important for contract administrators who may owe duties to the employer in respect of the nature and extent of variations that they are authorised to instruct.

Form of communication

The term “in writing” will apply to any form of written communication, whether this be letters or emails. It could be said that a drawing on its own is not an “in writing” communication and there is some limited nineteenth century case law which indicates that an unsigned drawing is inadequate (Myers v Sarl (1860) 3 E & E 306).

In practice, variations are often communicated to a contractor via drawings, delivered via various channels, directing that the changes shown on them should be adopted. It will almost always be the case that the drawing is accompanied by a written message, or will contain writing in the body of it, thereby fulfilling this requirement.

An order or acknowledgement?

When considering the question of whether a particular project communication can be treated as a qualifying instruction, the most important factor is whether it is:

• Directing a change to be made.
• Simply acknowledging that a change has been made.

This distinction is often at the heart of the debate about whether a communication is a qualifying instruction, but it is often overlooked.

Take for example, meeting minutes. A possible change to the works may be discussed at a meeting following which the contract administrator subsequently issues meeting minutes recording that the contractor is instructed to undertake the variation discussed. Depending on the precise terms of the contract, this minute could be construed as a variation instruction. On the other hand, the parties may have a discussion at the meeting about a change that the contractor has made, which is then recorded in the minutes. In such circumstances, the minute is an acknowledgement of the change rather than a direction that it should be undertaken.

Therefore, it is not possible to lay down hard and fast rules as to whether a form of communication will constitute an instruction as opposed to an acknowledgement of the change. It depends of the substance of the document.

Lamprell v Billericay Union (1849) 154 ER 850 involved the construction of a workhouse under a contract that required prior written instructions for variations. The architect issued letters referring to certain additional works while they were in progress. The fact that those additional works had been undertaken was also referred to in certain certificates and in the final valuation.

The court found that these documents did not amount to variation instructions as required under the contract:

“…the only documents signed by the architects, namely, the certificates, the letters, and the final valuation, even on the most favourable construction for the plaintiff, were merely writing stating expressly or impliedly their approbation of what had already been done.

…they certainly are not what the [contract] contemplated, which was a previous written authority from the architects. A subsequent written approval, even if the documents in evidence amount to that, is a very different thing from a previous order to the builder.”

In other words, a contractual requirement for a written instruction cannot be fulfilled simply by pointing to any document that refers to those additional works. The communication must instruct the contractor to undertake the work rather than just acknowledge that the work has been undertaken.

Permissions and Concessions

There are various reasons why the employer, or its contract administrator, will need to engage in a discussion with the contractor about changes to the works, even where it has not directed the variation.

For example, if a contractor undertakes work that is different to the specified scope then this will amount to a breach of contract. The contractor will then need the employer’s permission that the non-conforming work remain. The employer’s subsequent permission may be recorded in writing but this will not constitute a variation instruction.

Equally, the contractor may need to deviate from the contract scope because it has encountered difficulties that it is responsible for. For example, the contract may specify a certain material with a long lead time and the contractor may want to instead use a material with a shorter lead time, so as to prevent delay to the project. In such circumstances the employer may allow the contractor to alter the scope on the basis that the contractor has no entitlement to additional money or time. The communication to the contractor allowing this concession will not be a variation instruction even though it also approves the change to the scope.

Retrospective instruction

When analysing whether a communication is a variation instruction, it is of course necessary to consider the contract’s express provisions. Some contracts provide that written communications sent after the additional work is implemented will amount to valid instructions. For example, in the JCT Standard Building Contract, 2011 Edition (SBC 2011):

• Clause 3.14.4 states that the contract administrator:
  

  “…may sanction in writing any Variation made by the Contractor otherwise than pursuant to an instruction.”

• Clause 3.12.3 also provides that where the contractor has undertaken work following an oral instruction then the contract administrator:
  

  “…may at any time prior to the issue of the Final Certificate confirm it with retrospective effect.”

While the intention behind these provisions is clear, there is a risk they may cause mischief. Although variations are normally ordered at the time, it may be the case that the contractor carries out extra work without a formal instruction, which the employer wanted and is happy to acknowledge and pay for. This is presumably what these clauses contemplate but, under certain circumstances, they could be read as turning a retrospective acknowledgement of a change into a qualifying instruction under the contract.

Next time

While this post has considered contracts which stipulate that instructions must be in writing, this will not always the case. A contract can allow variation instructions to be given orally. Indeed, the position can be further complicated where the contract allows oral instructions to be confirmed in writing, commonly referred to as a CVI (confirmation of verbal instruction).

Whether a variation clause can be construed to allow oral instructions and the intricacies of CVI procedures will be considered in the next post in this series.