Written records are of primary importance in construction projects. Not only do they obviate disputes as to alleged happenings, but they also help focus the parties’ attention on any potential adjustment of the contract sum. In Vim Engineering Pte Ltd. v. Deluge Fire Protection (SEA) Pte Ltd.  SGHC 63, the General Division of the Singapore High Court (SGHC) held that a contractor is not entitled to claim for variation works that were carried out pursuant to verbal instructions when the contract specifically provides that any variation work may only be carried out upon the employer’s written instructions. The SGHC also emphasized the importance of complying with contractual conditions when making variation claims.
Deluge Fire Protection (SEA) Pte Ltd. (“Deluge“) was the subcontractor for a building and construction project. Deluge in turn subcontracted certain plumbing and sanitary works for part of the project to Vim Engineering Pte Ltd. (“Vim“) for a subcontract sum of SGD 1,750,000 (excluding payment for any variations).
Among other claims and counterclaims, a central issue in the dispute was Vim’s entitlement to a sum of SGD 697,130.58 for alleged variation works that were carried out pursuant to Deluge’s verbal instructions (“Variation Claim“). As with most modern construction contracts, the subcontract specified that any variation work shall only be carried out upon written instructions by Deluge’s project manager.
Vim first argued that “a gentleman’s word is his bond” and that Deluge should be liable for the Variation Claim. However, this argument was rejected by the SGHC. It held that Vim had first agreed by entering into the contract with Deluge that it would carry out variation works only upon Deluge’s written instructions.
Vim then argued that certain shop drawings provided by the main contractor constituted the necessary written instructions. However, this argument was also rejected by the SGHC. It held that the agreement clearly provided that the written instructions had to come from Deluge’s project manager and not the main contractor. Accordingly, the SGHC found that the contractual conditions for a successful variation claim were not satisfied.
The issue then turned to whether Deluge had waived or was estopped from relying on the absence of written instructions for the variation works. More specifically, Vim put forward the following arguments:
- The signature of Deluge’s project manager and his subordinate on various purported variation work invoices indicate that Deluge had accepted Vim’s variation works, and would pay for them; (“Signature Argument“).
- One of Deluge’s directors had, on various occasions, promised that Deluge would settle all outstanding amounts claimed by Vim (“Promise Argument“).
However, both of these arguments were rejected by the SGHC. Besides making the general observation that the giving of verbal instructions cannot, in and of itself, amount to a waiver or estoppel in the circumstances, the SGHC put forward the following opinions:
Regarding the Signature Argument
- The signature of Deluge’s project manager and his subordinate on various purported variation work invoices were only an acknowledgement that the works had been carried out, and did not indicate that such works were variation works or that Vim would be paid for them.
- In any event, Deluge’s project manager and his subordinate did not have the authority to waive the requirement of written instructions.
Regarding the Promise Argument
- Vim’s particulars of the purported promise on various occasions were internally inconsistent.
- It made no commercial sense for Deluge to make such a promise to Vim, and such a promise was even more unlikely in light of Deluge’s history of not certifying the variation claim invoices, and deducting back-charges instead.
- There were no written records to support the alleged promise.
The key points and best practices which parties should be apprised of are as follows:
- Complying with contractual requirements
- Adherence to contractual procedural requirements is essential. A party will likely not succeed in its claim for variation works if contractual procedural conditions had not been complied with, and contractors who carry out variation works in such circumstances do so at their own risk.
- Contractors should ensure that contractual conditions have been complied with, and that they have the necessary documentation to support their claim before commencing on any variation works.
- A verbal instruction cannot, in and of itself, amount to a waiver or estoppel in relation to a contractual clause mandating the requirement of written instructions.
- The SGHC also made the following observations:
- The person designated to provide the written instructions does not have the authority to waive the need to comply with contractual conditions.
- The court would expect any promise to effect payment notwithstanding the failure to comply with contractual procedural conditions to be recorded in writing. In this regard, concrete evidence is required to prove that parties had waived such contractual procedural requirements.