Many of our contractor and employer clients are involved in construction projects involving some form of standard form contract, usually a JCT.
They also know that once the construction phase is underway, it is inevitable that variations to the contract will arise. The dilemma the contractor has is whether to act on an oral instruction from the Contract Administrator (CA) to vary the contract. The dilemma the employer has is whether an oral instruction from its CA is valid immediately. This becomes particularly problematic where the contract incorporates a confirmation of variation instruction (CVI).
The reason why this is worthy of some discussion is that the contractor may be entitled to hang fire until the variation has been confirmed in writing or the employer could refuse to pay the contractor for works done on an oral variation alone.
“Profit margin ….. cash flow ….. or even worse – adjudication!” we hear contractors say
So how do you know what to do if an oral instruction is given on site?
Check the terms of your contract: whilst having a term that stipulates that all variations must be instructed in writing would legally be the clearest indication that an oral instruction is in valid, it hardly assists both the contractor or the employer in the timely delivery of the project; if a CVI is in place then this surely could provide a more workable solution. Sadly not always. A typical CVI contract term could state that the contractor then writes to the CA following a verbal site instruction stating it is a formal instruction. The CA has the option of setting out any objections but must do within a certain time frame.
But what happens when there is no follow up in writing? It undoubtedly creates a practical problem as the CA could struggle to direct the undertaking of works on site by way of a verbal communication there and then which is probably the norm on a busy construction project. Further the JCT position generally is that the contractor is not in fact obliged to comply with that oral instruction on site until the CVI procedure has been instigated. Again this is practically cumbersome because if no oral variation is binding until it is confirmed in writing then the contractor could technically pick and choose those with which he should comply and those with which he should not.
“Delay …. damages ….. and possibly more adjudication!” we hear employers say.
So the moral of the story is what lawyers always advise, check your particular contract terms and follow the position on variations to the letter as it is very likely that the written actions do speak louder than the oral words spoken by the CA.