Under many standard contract conditions, there is a provision permitting the contract administrator to initiate any variation to the works. It may be in the form of an addition, modification, or omission. This provision may permit the omission of works to an unlimited degree. If so, it allows the client or his agent to omit most of the works, agreed upon originally. Then the question arises whether it is possible legally, or law places any limit on what may be omitted.
Another important matter is, although the contract provisions empower the employer or the contract administrator to omit part of the work agreed originally, it does not give the right to omit with the object of giving omitted works to another contractor. For example, the employer cannot employ another contractor to do the omitted work at a lesser rate than in the original contract.
The correct practice would be to omit only when the employer does not expect to have the omitted work done at all.
Abbey Development v PP Brickwork (2003)
The claimant, Abbey Developments Limited engaged the defendant PP Brickwork Ltd as a labour-only subcontractor for brickwork and blockwork for the development of an estate of 69 houses.
The case was initiated to clarify whether the claimant was entitled to take away the remainder of the work which the defendant had agreed to carry out.
The claimant was invited to submit a tender by a letter of invitation dated 25th September 2000. Part of the invitation letter was as follows.
“For your information and guidance, we wish to advise the Site comprises of a total of 69 No. units and their respective Garages, and at present, it is envisaged that the construction program will last approximately 18 months.
“However, Abbey Developments Limited reserves the right to vary the number of units and the construction program without vitiating the Contract or giving rise to a claim from the sub-contractor.”
The letter of invitation further said;
“Abbey Developments Limited reserves the right to renegotiate rates or suspend the Contract and retender the works without vitiating the Contract or giving rise to any claim from the subcontractor.”
The tender was duly submitted on 6th November. It was for a sum of £484,000. It was accompanied by a tender summary, which the tenderer had been required by the claimant to complete. The prices for each of the house types and the numbers of the prospective house types were all set out, together with those for the various types of garage.
On 21 December 2000, the claimant sent its subcontract order to the defendant, which was accepted forming the contract.
The contract contained the usual standard provision for variations, including omissions, which would not vitiate the contract.
Some months later, after starting construction in 2001, the claimant had to write to the defendant complaining of various matters which is required to be put right.
And then, in October, the claimant wrote to the defendant saying that it was considering determining the defendant’s contract according to clauses 6 to 13 of the General Conditions because of failure to supply sufficient labour. That drew a reply from the defendant saying there had been labour. There was an answer to that saying they were merely considering it and not going to take the matter, at that stage, any further. And these continued, further complaining about health and safety matters. Ultimately, on 12th December, the claimant wrote complaining about insufficient supervision. It was also critical of the workmanship.
Due to the above reasons, finally, the claimant terminated the contract. Part of the termination letter was as follows.
“… I am informed by our Construction Department that still you are failing to provide labour in sufficient numbers and quality to maintain our build programme.
“Therefore, we must now inform you that we are limiting your works to those plots that you currently have under construction. Following the satisfactory completion of these plots, your contract will be determined in accordance with our standard terms and conditions.
“An alternative contractor will be employed to complete the development and any additional costs to this company which result will be charged to your account.”
The additional charges of the claimant have been quantified as £8,000.
This was followed by an adjudication procedure. On 12 February 2003 the adjudicator, decided that the claimant was in repudiatory breach of contract in deciding to limit the scope of the work and that the defendant was entitled to damages of £59,727.71 plus interest and 50% of the adjudicator’s fees and expenses. He concluded that the termination letter constituted a repudiatory breach of contract by the claimant, entitling the defendant to damages.
The claimant went to the courts seeking a declaration as to whether Abbey was entitled to take away the remainder of the work which PP Brickwork had agreed to carry out. There was also an application by the defendant for the enforcement of the decision of the adjudicator which was in his favor.
The claimant’s declarations, if granted, would mean the dispute that led to the adjudication would be resolved in favor of the claimant and the adjudicator’s decision would then be unenforceable. If the claimant were to fail in its entirety on the application, then the adjudicator’s decision would be enforceable.
The Court refused Abbey’s application, holding that under the proper construction of the subcontract, Abbey was not entitled to reduce the quantity of the works by removing all plots upon which PP Brickwork had not yet started work. The Judge determined that a convenience or omissions clause required reasonably clear words to allow an employer to transfer work from one contractor to another. The subcontract provisions allowing the variation of the quantity of work lacked clarity to allow Abbey to behave as it did.
Accordingly, Abbey was in breach of the subcontract by engaging an alternative contractor to carry out the work which had been removed from the scope of the subcontract.
Conclusion
If a Client wants the ability to reallocate work, then the contract must be clear and specific in this regard.
In Abbey Developments, the contract permitted the omission of work where that work was no longer required for the project. The Client sought to omit work from the contractor because he was dissatisfied with the contractor’s performance, and give this work to another contractor. The court said that reallocation was a breach of contract because the wording only provided for the omission of work in certain circumstances (where the work was no longer required).