Construction contracts commonly include variation mechanisms that permit limited unilateral changes to the scope of works. While such provisions are necessary to accommodate evolving project requirements, the extent of the contractor’s obligation to comply with an instruction varies depending on the legal and contractual framework. Upon receiving an instruction involving a significant change, or for work outside the original scope, the contractor may be heard to respond: “But I did not come into this agreement for these things!”^[1] This article examines whether a contractor may lawfully refuse to comply with an instruction to perform additional work, focusing on the common law position and the specific provisions within the NEC4 Engineering and Construction Contract (ECC).

 Common law

At common law, there is no inherent right for the client to unilaterally vary the terms of a construction contract. The contractor is entitled to construct the project as originally specified, and any variation, whether an addition or an omission, requires mutual agreement. This reflects the principle that a variation constitutes a new agreement supported by consideration. Without a contractual clause expressly permitting variation, the client must negotiate every change with the contractor. For this reason, construction contracts typically incorporate variation clauses, enabling necessary changes to be made without undermining the contractual framework or requiring a new agreement for each modification.

Variation clauses in NEC4 contracts

Variations to the scope may be instructed by the project manager and may include alterations to the work’s content, specifications, or the imposition of additional constraints.^[2] The project manager’s authority to change the scope is reinforced by the contractor’s obligation to obey such instructions, provided they are given “in accordance with the contract.”^[3] Each instruction must be in a form that can be “read, copied and recorded” and in the “language of the contract.”^[4]

Many NEC4 contracts are administered using cloud-based software applications. The contract recognises this through reference to a “communications system,” which must be specified in the scope and used by the parties for their communications to be effective. In the absence of a communication system specified in the scope, communications are deemed effective when received at the address stated in the contract data or the last address notified by the recipient.^[5]

A valid instruction issued by the project manager that changes the scope is, with limited exceptions, a compensation event. This entitles the contractor to claim for the cost and time impacts of the change, unless an exception applies. Exceptions include cases where the change is required to correct a defect or results from a change initiated by the contractor for its own design.^[6]

The contractor’s primary obligation under the NEC4 ECC is to provide the works in accordance with the scope.^[7] Once a change to the scope has been instructed in accordance with the contract, the contractor is required to incorporate that change into its performance. Failure to comply amounts to a breach of contract, unless the instruction falls outside the project manager’s authority. The obligation to comply with the instructed change and proceed with the revised works takes effect immediately, and the resulting compensation event is assessed on the premise that the contractor reacts “competently and promptly to the event.”^[8]

Is there a limit on what changes can be instructed?

A change that is so significant as to alter the fundamental nature of the original works could fall outside the scope of a variation clause and result in the formation of a new contract, requiring new terms and an agreement between the parties.^[9]

In Blue Circle v Holland Dredging,^[10] The work involved dredging in Larne Lough, Ireland, to enable larger vessels to dock. The tender stated that the dredged material would be deposited in areas approved by the public authorities, with the intention of discharging the material excavated in suitable areas of the Lough. An alternative plan was agreed to use the excavated material to form an artificial bird island. The employer accepted the contractor’s quotation for this work by letter, which stated that an official works order would follow in due course. The execution of the works to construct the island was unsuccessful, and the employer brought proceedings against the contractor. The contractor argued that the work to build the artificial bird island was not a variation to the works within the scope of the contract but a separate contract in its own right. The court agreed, finding that the island works were radically different in character and intent from the original scope and therefore constituted a new contract.

In Cobalt Data Centre,^[11] the Supreme Court addressed the issue of whether a variation was within the contractual framework. The employer attempted to categorise significant alterations to the location and nature of the works as variations. The court found that the varied works were substantially different in size, building type, and price, thus exceeding the scope of the original contract. Although a case about capital allowances in the context of tax, the ruling provides further guidance on how variations to a contract may not extend to situations where there have been fundamental alterations that recharacterise the nature of the original project.

Omission of works

Under the ECC, the project manager’s instruction to omit work from the scope is a compensation event which may result in a reduction in the prices,^[12] but not an earlier completion date.^[13] Such instructions may be described colloquially as “negative compensation events”.  However, if the client subsequently allocates the omitted work to others, this is likely to constitute a breach of contract. In Van Oord,^[14] work was omitted from the scope of an NEC3 Engineering and Construction Subcontract and re-assigned to a third party.  When assessing the compensation event, the main contractor argued for a reduction in the bill rate for the remaining works. Van Oord argued that the instruction and re-assignment were in breach of the obligation to act in a spirit of mutual trust and cooperation.^[15] The Inner House of the Scottish Court of Session agreed, declaring that the instruction was unlawful and that: “the NEC3 should not be a charter for contract breaking.”

Proposed instructions

The project manager may instruct the contractor to submit a quotation for a proposed instruction to change the scope.^[16]  Significantly, the contractor’s obligation is limited to submitting the quotation, and they should not proceed with the work unless and until the project manager accepts the quotation and issues the instruction which changes the scope.  This distinction protects the client and the contractor from work being undertaken that may never be formally instructed whilst allowing the cost and time effects to be explored by the client before contractual commitments are made.

Conclusion

The contractor is generally required to comply with a valid instruction issued by the project manager to change the scope under the NEC4 Engineering and Construction Contract. Failure to comply constitutes a breach unless the instruction is outside the project manager’s authority and the general right of variation. However, if the instructed change is so significant that it alters the fundamental nature of the contract, it may be deemed to be outside the variation mechanism and require a new agreement. The validity, form, and effect of the instruction, including whether it creates a compensation event for reduced prices, must be carefully assessed in each case.

David Hunter
Daniel Contract Management Services Ltd

July 2025 

^[1] Roughly translated from the Latin phrase, “non haec in foedera veni” in Virgil’s Aeneid (Book IV), where Aeneas is rejecting Dido’s claims that they were bound together in a marriage-like agreement.

^[2] clause 14.3

^[3] clause 27.3

^[4] clause 13.1

^[5] clause 13.2

^[6] clause 60.1(1)

^[7] clause 20.1

^[8] clause 63.9

^[9] Thorn v The Mayor and Commonalty of London (1876); Parkinson v Commissioners of Works [1949] 2 KB 632

^[10] Blue Circle Industries plc v Holland Dredging Co Ltd (1987)

^[11] R (on the application of Cobalt Data Centre 2 LLP and another) (Appellants) v Commissioners for His Majesty’s Revenue and Customs (Respondent) [2024] UKSC 40

^[12] clause 63.3, 63.4, A63.12

^[13]  clause 63.5

^[14] Van Oord v Dragados [2021] CSIH 50

^[15] clause 10.1

^[16] clause 65.1