Many forms of contract state that contractors or subcontractors who receive instructions orally rather than in writing will not be paid for the work they do as a result. 

Formal contracts often contain a procedure that says any oral instructions should be confirmed in writing in order for payment to be made.  In real life, however, it is often the case that a person is instructed to do something and they have to do it there and then; it is simply impossible for them to wait for a formal written instruction.  They get on and do the work but unfortunately the written confirmation never arrives.

A recent case in the court of appeal may help parties who seek payment for such oral instructions in the future.  Globe Motors v TRW Lucas Varity Electric Steering is not a construction case but part of the decision deals with whether or not a contract clause stating that variations must be in writing is effective.  This is a common clause in most commercial contracts; the reason behind it is to ensure certainty. 

In the Globe Motors case, the court of appeal decided that notwithstanding such a clause the parties can agree to oral changes to the contract, it said that the parties agree to a new contract including the change.  That agreement includes, in effect, an acceptance of the oral change to the contract.  Therefore, if one party instructs an oral variation in a construction contract and the other party agrees to do it, that could be a new agreement.  That new agreement overrides the written terms of the contract and the oral instruction would be valid.  The proviso is that in the conversation where the oral instruction is given it should be agreed that work carried out as the result of that instruction will be paid for. 

This is a very new case and no doubt the law will develop.  In view of this, our advice is that it would be very risky to rely on such a stance.

Oral instructions also cause problems because it is difficult to prove what was instructed and what was not.  We advise clients always to confirm oral instructions in writing.  If the party doing the instructing does not confirm it in writing then the party that received the instruction should.  This simply needs to be an email confirming what was instructed, that additional costs will be incurred and that extra time will be required to carry out the works.  If possible it should include the value of the works and the amount of time needed.

For advice on this or any other aspect of contract law relating to construction, please contact Peter Allen.

Peter Allen
01245 453813
peter.allen@birkettlong.co.uk