Can indefinite postponement of works constitute a variation?

In his latest article our Iain Thom highlighted the many ways in which the Contract Sum under a fixed price, lump sum contract may change. The obvious reason for price adjustments being as a result of variations instructed by the employer which either change the scope, or manner in which the works are completed.

However, in the recent case of Grain Communications Ltd v Shepherd Groundworks Ltd [2024] EWHC 3067 (TCC) HHJ Kelly, sitting as a High Court judge in the Technology and Construction Court (“TCC”), provided significant clarity on the scope of variations under construction contracts. The case revolved around whether an employer’s decision to postpone work indefinitely constituted a permitted variation or amounted to a breach of contract instead.

Grain Communications Ltd (“Grain Communications”) a telecommunications company, and Shepherd Groundworks Ltd (“Shepherd”), a construction contractor, were parties to a framework agreement for the provision of wireless telecommunications construction works. Specific work orders were issued as needed under the agreement, although the terms of the framework agreement made clear that the employer was not obliged to issue any such orders.

The dispute arose when Grain Communications, the employer, delayed commencement of a work order issued in September 2023. The day before work was due to commence, the employer instructed the contractor via email to postpone the start date, citing an inability to commence the works before the end of 2023.  Shepherd claimed that this postponement amounted to a termination of the works order and sought damages for loss of profit and mobilisation costs.

The matter was initially referred to adjudication.  The adjudicator concluded that whilst the work order allowed Grain Communications to make omissions from the works, careful wording would have been required to make clear that the email instruction was intended to take effect as a variation.  As such, the adjudicator ruled in favour of the contractor.

However, Grain Communications sought declarations from the High Court that the email instruction amounted to a variation to postpone the works, not a breach of contract.

In considering the application HHJ Kelly held that, whilst the email instruction to postpone the works did not highlight that it was a variation:

1. the terms of the framework agreement nevertheless permitted the employer to make omissions from the works to be performed under any work order, and also to adjust the period within which works were to be completed; and
2. the email was issued ‘in writing’ following a telephone conversation between the parties, confirming that whilst the employer still intended to procure the works; there was a delay to the commencement date.

As such, HHJ Kelly held that the email satisfied the requirements for variations under the contact and was therefore a valid variation. 

The fact that the terms of the work order permitted variations of time meant that there could be no implied term preventing Grain Communications from postponing the works.  To do so would create a conflict with the express terms of the contract.  This was particularly pertinent, since the framework agreement made clear that notwithstanding work orders may be signed, works could not commence until such time as all necessary work permits had been issued by the local authority.  The parties therefore already anticipated that there may be delays in starting works on site. 

The Birketts View

Once again, this case provides a useful reminder of the importance of precise contract drafting, particularly regarding variation and postponement clauses.

Whilst it highlights the TCC’s willingness to permit wide-ranging variations, provided they are clearly articulated within the contract; it simultaneously highlights an unwillingness by the courts to imply terms either (i) where to do so would cause conflict with the express terms, or (ii) to give business efficacy to the terms of the agreement in circumstances where the parties were capable of including express terms themselves. 

Ultimately, the fact that the contract did not explicitly prevent the employer from postponing commencement of works in circumstances where, if that is what they intended, they could have done so; meant that the court would not come to Shepherd’s rescue.