What is a downstream sub-contractor’s recourse if the upstream main contractor gives only oral instructions for variation works although the subcontract requires written instructions?
What are the implications to a downstream sub-contractor if it decides to carry out variation works based only on the main contractor’s oral instructions? Will it have a right to claim for additional payment?
These are frequently encountered issues in the construction arena, and they arose for the High Court’s consideration in this case.
Vim Engineering Pte Ltd (“P”) was Deluge Fire Protection (SEA) Pte Ltd (“D”)’s domestic subcontractor for plumbing and sanitary works in a construction project in Singapore. D was in turn the sub-contractor of the main contractors of the project, Samsung C & T Corporation (“SCT”).
Disputes arose and P commenced an action in the High Court to claim against D for, amongst others, a sum of $697,130.58 for variation works.
Clause 16 of the subcontract stated that variation works shall be carried out only with the written instructions of D’s project manager. It reads as follows:
“[a]ny variation work such as [additions] or [omissions] or [modifications], shall be on a back-to-back basis with the Main Contract. Such variation shall be carried out only with written [instructions] from [D’s] Project Manager … [P] shall be entitled to ninety percent (90%) … or shall allow a discount of 10% (Profit & Attendance) for [D], on any approved variation claim for additional work orders”
P however did not base its claim on written instructions as none had been issued by D. Instead, P asserted that D had waived the requirement under clause 16 and/or was estopped from Clause 16. P relied on three main factors - (1) D had verbally instructed P to carry out the works; (2) D had verbally assured P that it would pay for the variation works; and (3) D had accepted P’s invoices for the variation works by signing on them
D disagreed with P’s position and maintained that P was not entitled to any of its claims for variation works as D had not given to P any written instructions for the works.
The Court was of the view that Clause 16 of the subcontract which required written instructions for variation works must be complied with. Since P did not receive any written instructions for the variation works, it was not entitled to any of its claims for variation works.
The Court further determined that P had failed to establish waiver or estoppel on the part of D. All three factors relied upon by P were rejected.
Firstly, verbal instructions from P could not amount to P’s waiver of the contractual requirement under clause 16. The issuing of verbal instructions simply meant that P had failed to comply with Clause 16.
Secondly, on the evidence before it, the Court could not find that there was an oral agreement whereby D had promised to pay P for the variation works.
Finally, P’s reliance on D’s project manager’s signatures P’s invoices for the variation works were not found to lend any support to P’s position. The invoices had been signed to acknowledge the completion of the works but not that the works were variation works.
P’s claim based on quantum meruit was also rejected by the Court as there was no evidence that D had received any additional payments from SCT for the variation works claimed by P.
In the haste and heat of a construction project, subcontractors typically focus on getting the job done and ignore the written terms of their subcontract. While this may bring about the timely completion of the works and commendations from the main contractor, if may also result in losses as claims for additional works may be rejected for non-compliance with contractual requirements.
Subcontractors should therefore always keep an eye on the terms of the subcontract to ensure their conduct does not comprise their own contractual rights.
Tan Joo Seng