Jacob Austin 00:00:00 Hi there all, it's Jacob Austin here and welcome to episode 162 of the Subcontractors Blueprint, the show where subcontractors learn how to ensure profitability, improve cash flow and grow their business. Today's episode is all about verbal instructions, what to do when you're told to do something on site and nothing ever arrives in writing, and how a letter nobody answers can turn into an instruction that has to be paid. So let's dig in. So why does this matter? Well, let's picture a scenario. The site manager comes and finds you at half seven on a Tuesday morning. This service runs in the wrong place, and he needs you to take it round the back of another footing. And you need to crack on now, because there's a follow on trade coming in in a matter of a couple of days. So you crack on two men, three days a bit, plant a bit of material in an extra length of dig. A couple of months later, you're trying to get your final account agreed, and the chassis is looking at a line called Service diversion.
Jacob Austin 00:01:24 It's £11,400. And he says the thing that a contractor shows always says there's no instruction for that. And so you explain the site manager was standing right there. He asked for it. His follow on trade was coming in in a few days. We needed to crack on there and then. And the QTS says quite reasonably, from where he's sitting, he wasn't there that the site manager has moved on now and that he can only value what he's got paperwork for. And that's the problem. It wasn't that the instruction didn't happen because it did verbally. It's now that nobody can prove what that instruction was. And this is a regular occurrence. There is a process to counteract that. And this is the entire reason that this episode exists under a lot of standard forms. You don't need them to confirm anything. You can confirm it yourself. And if they say nothing within a stated period, their silence turns your correspondence into an effective instruction. And that does mean that once in this industry, something is designed so that the contractors failure to reply costs him money instead of you, but almost nobody uses it.
Jacob Austin 00:02:43 So today, how instructions are supposed to work, the confirmation route and the deemed instruction, the three positions you can find yourself in, and a quick process that takes about four minutes, and it turns a site conversation into something that you can measure value and get paid for. That's what we're going to cover in detail. And we'll start at the beginning with the basics under the JCT. Family instructions are required to be in writing. That's the default. And it's there for good reason. And that reason is because really nobody's memory is any good nine months later, including yours. But the people drafting the contract know that construction doesn't always run that way. So they provide a route for an instruction that gets given verbally. It works in three steps, and the principle is the same across all of the JCT forms, even though the wording and the clause numbering differ slightly between them. Step one the instruction is given other than in writing. That means somebody with authority to instruct you tells you to get on with it.
Jacob Austin 00:03:52 Step two. You confirm it in writing to the person who gave it to you within the period the contract states. Step three if they don't dissent from your confirmation within the stated period after receiving it, then the instruction takes effect at the end of that period. Then it becomes an effective instruction as if it had been given in writing, and it has to be valued like any other. Now, the period is something that the contractor is likely to tinker with in his amendment. So I'm not going to quote an exact period for you. Usually something like two weeks, but check it yourself in your specific contract. And the basic steps are instruction given by the contractor. You confirm it back to them in writing, and silence for a stated period makes that instruction stick. So you need to find that in your subcontract. Look for the section dealing with directions and instructions from the contractor and find the paragraph that deals with directions given other than in writing. Write the periods somewhere where you're going to be able to find them.
Jacob Austin 00:05:00 If you have a one sheet, like a fact sheet for each job, that's the place to put it. If you don't, then maybe your valuation document or your payment schedule somewhere you're going to be able to find it when you need it. This will take you 3 to 5 minutes, and it's one of the most useful chunks of information you'll have on any contract. Two more things that the standard forms give you first. Most forms also let the contractor confirm his own verbal direction in writing at any time, and then it takes effect from when it was given. So if you do the work and he later writes it up himself, you're fine. But don't rely on that happening and follow your own process. If he does sort it, then all the better. The second thing that's worth knowing for the awkward conversations in most forms, if you actually carry out the work and nobody's confirmed anything either way, the contractor can still confirm it at any time up to the final account or final certificate. And that instruction still then has effect.
Jacob Austin 00:06:05 Now you don't want your money depending on somebody's choosing to be helpful to you nine months after the fact, but it highlights that the standard form of contract has thought about it and that it's a possibility. So when the contract is, QTS is sat there saying, I can't pay you that. There's no instruction. You can say, well, give me an instruction then. A definite thing to note here if you're working on any C4, is it. That contract works differently. There is no deemed instruction by silence. The contractor gives instructions to you as the subcontractor, and the route to money is the compensation event process, with its own notification periods and its own consequences for missing them. Now, you can't assume if you're on an NEC for subcontract that what I said about confirmation applies. It does have its very own unique regimes. It's worth covering that in a separate episode, so I think I'll do that at a later time. Moving on with the verbal instruction process, two practical questions that decide whether any of this works.
Jacob Austin 00:07:09 Firstly, what counts as writing? Most modern forms deal with this clearly, and they will allow electronic communication, often subject to whatever the parties are filled in at the front. Specifying whether a particular person or a particular email address has to be used to notify the other party. In practice, email is almost always fine. What is less safe is anything that lives only on a phone. So a text message, a message inside a site app, a photo of a whiteboard, a WhatsApp voice note, whatever. It might well be a communication that you can reproduce. It might be in writing, but if your subcontract specifies how writing is shared between the two parties and how communications are served, if you ignore that you're giving the contractor ammunition, you're giving them a technical loophole that I'm sure he'll be happy to jump through. So the rule is simple. Send it by the method that the subcontract says. The second question is the authority. Not everybody who speaks to you on site can commit to the main contractor when it comes to instructing work.
Jacob Austin 00:08:19 As a general rule, the contractor's own site management team can. But the further you get from that, the shakier it becomes. Sometimes the contractor employs a clerk of works or a quality man. Him, along with the employer's clerk of works, generally can't instruct you. Anyone from the employer's team, even they don't have a contract with you, so they can't issue an instruction under your contract under the subcontractor certainly can't. A consultant engineer who you've been liaising with directly about some awkward detailing and has been really helpful in working out an issue. He might have practically instigated the change, but he can't instruct you. He's not a party to your contract either. The thing is, though, that's not a reason to ignore what they've told you because on site you're probably going to act on their instruction regardless from that. But this is straying into a grey area, and this is why it's always best to follow your own contracts. Communication methods, to let the contractor liaise with his own engineers, to let them receive the change of detail, and then tell you what to do with it.
Jacob Austin 00:09:29 Sadly, sometimes you do these things to be helpful or I'll pick up the phone to the engineer, no worries. But him then instructing you to do something differently. Causing a change puts you in this grey area. What you could do is then email confirming to the contractor that the engineer attended site and direct to the change to this detail, and you've proceeded on the basis that this is a direction issued on the contractor's behalf, and that you consider that variation. Now, the authority question is one that the contractor can think on himself, but what he has to do is if he wants you to stop and say, nobody had the authority to tell you that he has to respond to your confirmation this week or within the period set out in your contract, that gives you the time to stop. What he can't do is stay quiet for nine months and trot out that argument at the final account stage. But as I said, if you use the contractor as your direct liaison point, keep them as your line of communication and let them coordinate with the engineers, the architect, or whoever else it might be.
Jacob Austin 00:10:36 You don't muddy those communication lines and you don't end up in that same dangerous place of doing something for somebody who's got no authority to instruct you. Now, every bit of work that you've done off the back of a conversation will sit in one of these three places. First, a properly instructed change issued in writing. That means an email, a drawing revision, a site instruction, a marked up sketch. It doesn't really matter what it's called, if it's in writing, and it came from somebody with the right authority. You're in good shape, so value that and move on to a verbal instruction that you've confirmed in writing. And it's not been dissented from. This is the position that we've created in the example we spoke about earlier. This is nearly as good as position one. You have a written document. You have a date, you have a lack of response, which in the GT form forms the instruction position. Three a verbal instruction that's never been confirmed by anybody. A lot of subcontractors sit in this position on charges of all different kinds of values, and it's a bad place to be.
Jacob Austin 00:11:48 There are some legal positions that you might be able to take up with some proper advice. You might be able to argue that the work was instructed as a matter of fact, and that the contractor is stopped from denying the instruction, particularly if he's watched you do the work and taken the benefit of that piece of work. And then you might be able to argue that you're entitled to be paid on a restitution basis for work that you were asked to do, and that he's now got. These are arguments that exist, and sometimes they succeed. But this is something that you do after the event at a court, and it will be decided on whose recollection the tribunal prefers, and it's going to cost you money to run. You don't want to use these when you can avoid them altogether. Get out of position three and get into position to confirm instructions yourself in writing at the right time. Now there are ways to get caught out doing this. I've come up with six ways that I've seen before. Firstly, confirming to the wrong person.
Jacob Austin 00:12:50 The best thing you can do is confirm to the person who gave the direction, and if that is not the same person that your subcontract says, notices are served to, then issue a copy to that person as well. A text message to the site manager's personal mobile and email to the person who is not the named person in your subcontract. Those things are not going to work. These bits of information are set out so that you can get the process right and protect yourself. It's just a matter of reading them and then following the directions. Number two missing the period. The confirmation route only works if you confirm within the stated period that it's likely to be seven days. If you leave it three weeks, then you're outside of the proper mechanism and you're basically back to arguing about who said what. Three. Confirming something that isn't a variation. This one catches people out and it can be painful if you start banking on it, but it catches you later. If a piece of work was always in your scope, then confirming it in writing doesn't do anything to turn it into an extra.
Jacob Austin 00:13:59 A deemed instruction is only worth money if what instructed is an actual change to the subcontract works. That might be additional scope, a change of scope, or an imposed way of delivering the scope that wasn't part of the original job. So you do need to ask yourself, is this a change? Or is this something I should have priced for writing it out? Vaguely confirming that you're asked to sort out the drainage issue. Is close to useless. What drainage issue? What does that mean when you come back to visit it three months later to start valuing the piece of work. What does that mean to the contractor if it doesn't identify the work? It gives you nothing to value and you might as well not have sent it. You need to be specific, almost to the point of being boring about it. Number five authority. We touched on that already. Not everyone on site can instruct you. If the instruction comes from the main contractor site manager, that's usually fine. If it comes from the employer's clerk of works or a gateman, another subcontractor, a consultant, someone with no contractual relationship to you, then it's generally not an instruction under your subcontract.
Jacob Austin 00:15:13 Six. This is the big cultural one. Not wanting to be difficult. I know what this can feel like because you get a decent relationship going with your site manager. He's under pressure. That's why he's walking around the site giving verbal instructions rather than following with proper paperwork in the first place and now firing off an email confirming something he's asked you to do. Feels like you're making a thing of it. So here's how to think about it. That letter isn't aimed at him. It's aimed at the SHS. Who's going to value this change in nine months time, and who would have no problem sitting in his chair saying, that's not instructed. You're not building a case against a site manager that you like. You're building evidence to get yourself paid and the tone can reflect it. A confirmation doesn't have to read like it's a big contractual argument or a warning shot. It can be chilled out as you like, and it can just sound like somebody keeping their records organised. Now, what does the contractor say when he gets your confirmation of instruction? The most common thing is nothing at all.
Jacob Austin 00:16:21 That's probably the result you want. Silence for the stated period makes the mechanism work. You've got evidence, especially if you've emailed it, of the date and the tone that you sent it. If they say nothing. Two weeks later, that counts as an official instruction. Sometimes they say that's not a variation, it's in your scope. That is a proper dissent, and it stops the deemed instruction from taking effect. But notice now what's happened. You've got a specific dated disagreement about scope months earlier than your final account. Far, far earlier than you otherwise would have found out. Whilst the work is fresh and the drawings are real and her hand. That's a lot better position than discovering it. Later it starts a discussion so that you can answer that. You can say why you think it's a change and ultimately, if it's a big money item, you've now got a dispute that you can take to adjudication rather than after you've not been paid for months. It also gives you a choice, hopefully, before you've committed too much money About how you deal with that change and how much cost you commit to it.
Jacob Austin 00:17:33 You might also get a response that says, I never said that. This rarely happens because if you sent the confirmation pretty quickly after the fact. Your memory of that conversation can't have changed that much. And if you're saying it how it was, then it's a hard position for the site manager to hold. But honestly, this happens more. If your confirmation has been sent late, you've forgotten or missed the detail, or it's just too vague to properly confirm anything. Now let's go back to our hypothetical scenario from the beginning of the episode. It's that Tuesday morning, and the site manager has asked to reroute your trench around the foundation. It's going to take two men, three days with a mini digger and a bit of material. In four minutes, you're going to protect yourself. That afternoon, before you go home, you send one email to the contractors named contact. That's noted in your subcontract and a copy to the site manager. The body of that email says something like. Further to our conversation this morning, we confirm that you directed us to divert the drainage run or the service run.
Jacob Austin 00:18:42 Whatever I said earlier from the position shown on the drawing, preferably reference the drawing here and the revision so that the contractor can pick it out and follow your description. We understand this is required to avoid a service clash, and we propose to proceed with this on Wednesday when the plant becomes available. We consider that this constitutes a variation to the subcontract works, and will submit our evaluation of it in due course. Please confirm if you disagree. And that's it. Pretty simple. 4 or 5 sentences what you were told. Who told you when? What the drawing says. What are you going to do now? And that you say it's a change. Next, as it's going to be a change. You take some extra records, photographs of the work as it goes, recording the labor and plant time. And when you've finished photos of the completed work with something in shot in the background so that you can sort of reference the location if you need to look at it later. Nobody replies, big surprise, but that's the normal outcome because the site managers are busy and the shows don't read everything.
Jacob Austin 00:19:53 Nine months later, the conversation happens. There's no instruction for that. Except now your answer is completely different. There's a confirmation of it dated the 14th, sent to the contractor at the named address in the subcontract. It's not been dissented from within the period stated in the clause. So in line with your subcontract terms that took effect as instruction, here are the records, the photos that measure and my valuation. That's £11,400. It's no longer an argument over somebody's memory. It's a pure valuation exercise. You've established your right to be paid, and it's now about how much it's worth. You might have a look at the rates challenge a bit of the plank time. That's a normal commercial conversation. But what he can't do is tell you one, that the work didn't happen, and two, that there was no instruction because you can now demonstrate that there was. And what does that email cost you? It's four minutes on a Tuesday afternoon. Just think about what that means for your business. If you're dealing with, I don't know, between 3 and 10 of those on a decent sized job, they're ranging between 5 and £10,000 at the top end.
Jacob Austin 00:21:10 That's £100,000 worth of work that you're just not going to get paid for because you didn't send an email. Maybe you recover some of that, maybe a third in the negotiation process, but that means that you're kissing goodbye to £70,000 for the sake of not following up with a few emails. The cost is next to nothing, and that means that that simple process is worth more to your business than almost any efficiency you could find on a site. So some key points. JCT. Forms require instructions in writing, but they do provide a route for instructions given verbally. You just have to confirm them in writing. And if the contractor either agrees or doesn't respond, that instruction takes effect. To do this, find the confirmation provision in your own subcontract. Make notes of the periods and the contacts, and then all you're doing is sending an email confirming the person who gave the direction. The nature of the change and that you believe it's a variation. Send that the same day every time. Make it a habit.
Jacob Austin 00:22:16 Be specific about what you right. I was told by this person on this date at this time what you were told, what drawing and revision. The work is different from what you're going to do. Maybe. When are you going to do it? And definitely that you consider it a variation. Remember, confirming something already in your scope isn't going to turn it into extra work. And remember, if the contractor dissents, it's not actually a failure. It gets you clarity on the position months earlier when the evidence is fresh and you can still do something about it if, of course, you feel like that's possible. Remember also to check the authority. Accepting instruction of the contractor's laborer isn't going to get you anywhere. It needs to be somebody from the main contractor in a position of responsibility on the site. And finally, confirmation proves the entitlement. But you need to follow that with your records and your evaluation and now I hope that helps. My mission with this podcast is to help the million SME contractors working out there in our industry.
Jacob Austin 00:23:25 If you've taken some value away from today's episode, then I really need your help to share the show and pass that value on to somebody else who would benefit from hearing it, so that I can help as many people as possible. And thanks for tuning in. If you like what you've heard and you want to learn more, then please do find us at www.SubcontractorsBlueprint.UK. We're also on all your favourite socials again at @SubcontractorsBlueprint and remember miss the contract detail and the commercial risk falls on you. Thanks all. I've been Jacob Austin and you've been awesome.
