Omission Impossible: When your work can be taken away and what you can do about it
Having work omitted from your scope can be more than just a contractual hiccup. It can be a significant disruption that ripples through your operations, finances, and future prospects.
Resources, timelines, and investments are all planned around the assumption that the entirety of the contracted scope will be completed, so omission of work from a party’s scope can leave it in a difficult position. In a business where margins can be tight and timelines crucial, any deviation from the original plan can have a big impact.
In this newsletter, we look at what works can be omitted, when they can be omitted, and what you can do to protect yourself from this all-too-common occurrence.
General principles
Whether the contract is bespoke, based on JCT or NEC forms, or even if there are no written terms at all, the fundamental position is the same:
- One party agrees to do some work.
- The other party agrees to pay for it.
There is nothing surprising about this, but what is less well known is that the opposite of this is also true: if a party is contractually required to do work, the other party is contractually required to allow them to do that work. There is therefore a two-way obligation.
This means that unless there is a clause in the contract allowing for work to be removed from the scope, the employing party is not entitled to remove any work at all.
So, when can work be omitted from the scope?
Unsurprisingly, Employers and Contractors recognise that the scope of the works required can change, so are highly motivated to include clauses allowing them to omit work and the standard forms (such as the JCT Design & Build 2016) generally contain basic provisions allowing for some omission of work.
Even so, these clauses have been interpreted very strictly by the courts and two important points have emerged over the years:
- If work is being omitted so that it can be done by the Employer or the Contractor or by someone else, then the contract needs to say so explicitly.
- A clause allowing any work to be omitted does not permit all work to be omitted. To omit all work (effectively terminating the contract) then there must be clear wording permitting this.
The common principle is that where work is to be omitted, the clause allowing the omission must be scrutinised to see whether it allows that work to be omitted for the reason for which it has been omitted.
How can I protect myself?
- The best time to act is to act before the problem occurs. This means reviewing the clauses carefully before you enter into the contract. If the contract contains a harsh omissions clause, try to negotiate it out, or to have it amended.
- If work has been omitted then the first step is to check your contract. Does it contain an omissions clause that is broad enough to cover what the other party has done? If not, then they may well be in breach of contract and you may be entitled to payment of your losses, including your overheads and profit on the omitted work.
Even if there is an omissions clause which is broad in its scope, omitting a large chunk of work is unlikely to be something that happens in a vacuum. You should consider the wider circumstances:
- Was the work omitted so that others could do it instead?
- If so, was that because the job is in delay generally?
- If it is in delay, whose fault is that and do you have any other claims arising from it such as additional preliminaries or other loss and expense?
How CCC can help
CCC has decades of experience in reviewing contract terms and identifying risky provisions such as omission clauses. This arms parties with the knowledge they need to negotiate out these clauses, or at the very least be aware of all of the risks early on in the process.
We also assist parties in dispute resolution relating to all manner of construction disputes including:
- Unlawful omission of work
- Unlawful termination
- Disputes over account valuations
