Imagine that you have put resources in place to commence work on a project, then at the last minute receive an email from the other party saying that the work should not go ahead and will probably be deferred until the next year.
Your first question would probably be “are they allowed to do that”?
That sequence of events happened in the recent judgment in Grain Communications Ltd v Shepherd Groundworks Ltd. Because of the wording in the contract, the court decided that the work could be postponed in that way.
Grain Communications Ltd v Shepherd Groundworks Ltd
The parties entered into a framework agreement for Shepherd, a company which carries out specialised construction activities, to carry out work for GCL, which carries out wireless telecommunication activities.
GCL had issued 68 work orders instructing Shepherd to carry out work under the framework agreement.
GCL issued work order no. 11500 to Shepherd on 7 September 2023. On 23 October 2023 there were emails instructing a pre-start meeting that day and attaching streetwork permits in respect of that work order.
Shortly after midnight on 24 October 2023, so in the very early hours of the next day, GCL emailed explaining that they intended to continue with all works orders, but that work order no. 11500 would be unlikely to be commenced before the end of 2023. It also said that it would keep in touch regarding the programme for the works.
Adjudication
Shepherd obtained an adjudication decision entitling it to damages for breach of contract, including loss of profit and/or mobilisation and demobilisation costs arising from work order no. 11500.
The work order defined a variation as “any addition to, omission from or other change in the Works or the period or order in which they are to be carried out.”
The adjudicator decided that:
- GCL’s email cancelled work order no. 11500.
- The wording of the variations clause allowed the omission of work, but that did not mean that it allowed GCL to omit all the work under a works order and effectively cancel it. Clear words would be needed to allow cancellation.
- GCL had therefore wrongly cancelled the work order which entitled Shepherd to damages for breach of contract.
Court proceedings
GCL started proceedings in the Technology and Construction Court to overturn the adjudicator’s decision.
The court decided that the adjudicator was mistaken, because the variation clause allowed omissions but also allowed GCL to vary the period in which works were to be performed. As GCL had stated that it still intended to carry out the work, this suspension was within its right to postpone it under the variation clause.
Conclusion and implications
So, what can we learn from this case?
This case makes it clear that whether a party is entitled to take a particular course of action is likely to depend on the precise wording used in the relevant contract.
The court gave a very broad meaning to the part of the variation clause regarding timing. The court could have interpreted this more narrowly, for example deciding that the “period … in which [the works] are to be carried out” only referred to the duration of the works and not their commencement date.
There is therefore a risk in including broad language in variation clauses and other clauses which affect the timing and sequence of work. This means that you should give careful consideration to the wording of clauses which:
- Allow re-sequencing or re-programming of work
- Require co-ordination or integration with others and their work
- Allow acceleration of work
- Permit instructions requiring recovery of delays to work
How CCC can help
At CCC, we bring decades of expertise to help contractors, subcontractors, and employers navigate the complexities of construction and commercial disputes.
Our team has extensive experience in advising and assisting parties involved in all manner of issues including adjudications, arbitrations, contractual disputes and payment disputes.
We understand the pressures of the construction industry and work to deliver tailored, practical solutions to safeguard your business and its interests.
