Write on the money

Imagine you are an m&e subcontractor and you have entered into contract with a contractor. During the course of the works you carry out additional work, following instructions from the contractor.

You attempt to extract a written order from the contractor, but this is not forthcoming. Lo and behold, the contractor refuses to pay you without a written order and you end up at loggerheads.

The only thing you could point to as evidence that you were instructed was a conversation you had had with the contractor, in which he asked you, and you agreed, to carry out the works.

Your contract is so worded that orders in writing are made a condition of any right to extra payment for the additional works. This situation is illustrated by the recent case of Management Solutions & Professional Consultants v Bennett (Electrical) Services.

Management Solutions entered into contract with Bennett for electrical installation works in connection with electrical upgrading works for family houses at the RAF base in Colchester, Essex. After completion of the works, Management Solutions was left with sums of money that had been applied for but had remained unpaid. A dispute arose between the parties concerning the unpaid sums.

Management Solutions started adjudication proceedings to claim the sums, and an adjudicator was appointed. Although the adjudicator decided that Bennett should pay Management Solutions the unpaid sums, Bennett refused.

Court proceedings

Management Solutions was disgruntled by this and issued court proceedings by way of summary judgment to have the adjudicator’s decision enforced.

During the course of the project Bennett orally instructed Management Solutions to undertake certain additional works. Bennett disputed that the instructions had led to the agreed expansion of the scope of works or that the work was additional to that scope.

Furthermore, the contract between the parties was formed via Management Solutions’ written quotation and Bennett’s written acceptance.

The contract contained a written variations clause allowing Bennett to add or subtract from the scope of work

However, Bennett contended that the effect of these oral instructions meant the whole of the contract was not in writing or evidenced in writing, and thus did not satisfy the requirements of the Construction Act. So the adjudicator lacked jurisdiction, and his decision was not valid or enforceable.

Bennett reasoned that the contract originally formed between the parties was a legally binding contract made in writing which fully satisfied Construction Act requirements. It contained a written variations clause allowing Bennett to add or subtract from the work.

This clause provided that no variation to the work was to be carried out without a written instruction from Bennett, so oral instructions fell outside the scope of this clause. Thus once the oral instructions were given, the contract changed its nature to become one which was partly oral – covering the variations – and partly in writing – covering the originally contracted work.

Management Solutions disagreed and contended that the entire contract was in writing and remained so, notwithstanding the oral instructions. It argued that the variations clause allowed the scope of work to be varied within the limits of the clause. Within those limits, the works could be varied.

Such oral variations were not varying the contract, they were merely instructions issued under the contract and redefined the scope of work.

The judge preferred Management Solutions’ contentions. He said that the variations were carried out under the contract and were within its scope. Even if the variations were oral and not evidenced in writing, the work required by them was carried out, and the instructions were given by Bennett.

The resulting work was therefore carried out by agreement, with the result that the requirement that the variations should be in writing was waived by both parties.

Lesson

Courts have recently become more relaxed in their judgement of cases in which a contractor has sought to recover payment, despite not having secured an order in writing. Courts have sought to protect contractors from injustice.

Notwithstanding this, a subcontractor should always ensure orders are received in writing or evidenced in writing, preferably before committing itself to carry out the work.