Writing requirements for variation claims under the JCT

A TCC decision earlier this year appears to be the first case to consider whether the need for a written instruction or CVI is a condition precedent to a claim for additional payment in relation to varied work under the JCT form of contract. The Court’s finding in favour of a condition precedent is likely to result in an increase in disputed variation claims, particularly in light of the support given to contractual variation requirements by the Supreme Court in the Rock Advertising case. Contractors operating under such terms should ensure that all requests for varied work are properly documented under the applicable clauses of their contract.

Writing requirements for variations: do they matter?

Construction contracts commonly require that variation claims be supported by a written instruction from the employer or its agent. These requirements are designed to prevent unauthorised claims for additional payment and to avoid arguments over whether, and to what extent, additional work has been requested orally. Construction contracts often also include provisions requiring variations to be costed by a contractor before an instruction to proceed with a variation is confirmed.

Compliance with such requirements may, subject to the terms of the contract, amount to a condition precedent to a claim for the costs of varied or additional work. Such conditions precedent are usually enforceable, meaning that a variation claim made without compliance is likely to fail. In the past, an exception might apply if the condition precedent could be said to have been waived. For example, if the employer had verbally instructed work and had received the benefit of that work. 

The ability of parties to waive such conditions is now, however, uncertain in light of the Supreme Court’s decision in Rock Advertising v MWB Business Exchange. In that case, the Supreme Court held that a “no oral modification or variation” clause (“NOM clause”) was effective to prevent parties agreeing to a subsequent variation unless the formalities required by the NOM clause were followed. Although the Court left open the possibility of parties waiving the requirements of the NOM clause, it noted that something more would be required than the mere agreement of an oral variation; there would need to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality.

The Rock Advertising decision has been applied in the context of a change control procedure in an IT procurement contract (in Agilisys Ltd v CGI IT UK Ltd) and may apply to any formal requirements for the making of variation claims under construction contracts.

Vainker v Marbank Construction Ltd

Mr and Mrs Vainker (the “Vainkers”) engaged Marbank to design and build a residential home. The parties entered into a JCT Standard Building Contract Without Quantities 2011, with amendments and with Contractor’s Design Portion.

The Vainkers brought proceedings before the Technology and Construction Court in relation to various defects in the house. Marbank counterclaimed in respect of disputed sums included in its final account.

Among the various issues raised by the final account dispute was whether Marbank could claim for variations without a written instruction. The Vainker’s claimed that the JCT terms made a written instruction from the Architect or Contract Administrator a condition precedent to the recovery of additional payment in relation to variations.

Writing requirements for variations under the JCT

In considering this issue, the Court reviewed the provisions of the JCT Standard Building Contract in relation to the instruction of variations and additions to the Contract Price. Materially the same provisions appear in the JCT Design and Build Contract.

Clauses 3.10 to 3.22 all appear under the heading “Architect/Contract Administrator’s Instructions”. Clause 3.14.1 states that “The Architect/Contract Administrator may issue instructions requiring a Variation”. These provisions required Marbank to comply with variation instructions issued to it which the Architect or the Contract Administrator were expressly empowered to give.

Under clause 3.12, if any instructions were given not in writing, these were to have no immediate effect until confirmed in writing by the Architect / Contractor Administrator or by the Contractor itself (provided the Architect/Contractor Administrator did not reject the Contractor’s confirmation). Such confirmations are commonly referred to as “Confirmations of Verbal Instructions” or “CVIs”.

Clause 4.2 provides that “The Contract Sum shall not be adjusted or altered in any way other than in accordance with the express provisions of these Conditions…”.

Clause 4.3.2 states that there shall be added to the Contract Sum the amount of the “Valuation of any Variation”. The “Valuation of a Variation” is the subject of clause 5.2.1 which provides that the value of “all Variations required by the Architect/Contract Administrator’s Instructions or subsequently sanctioned by him in writing” shall be such amount as is agreed by the Employer and Contractor or, where not agreed, valued by the Quantity Surveyor.

In the Court’s judgment these provisions, when read together, meant that: “only Variations instructed in writing or confirmed in accordance with clause 3.12 fall to be valued under clause 5.2.1 and the value added to the Contract Sum. There are no other provisions in the Contract which would permit adjustment of the Contract Sum.” However, the Court also concluded that where there were no other formal requirements set by the contract, “an e-mail or the issue of a drawing may be sufficient writing,” depending on the circumstances.

Finally, consistent with the decision in Rock Advertising, the Court acknowledged that questions of waiver may arise in certain circumstances.

Conclusions and implication

This appears to be first decision in which the writing requirements for the making of variations under the JCT form have been considered in relation to their impact on a claim for additional payment. The Court’s finding that these requirements were a condition precedent to the recovery of additional payment are of particular significance in light of the robust interpretation given to similar clauses after the Supreme Court’s decision in the Rock Advertising case.

It remains to be seen how previous cases in relation to the waiver of such requirements will be applied in the wake of Rock Advertising. In the meantime, contractors operating under the JCT form should take special care to ensure that requests for varied work are properly instructed and documented under the applicable clauses or that an express acknowledgement is obtained that the writing requirements under the contract need not apply. Failure to do so may mean that a contractor is unable to recover additional payment for work carried out at the request of an employer.  

References:

Rock Advertising Limited v MWB Business Exchange Centres Limited [2018] UKSC 24

Agilisys Ltd v CGI IT UK Ltd [2018] CSOH 112

Vainker v Marbank Construction Ltd [2024] EWHC 667 (TCC)