I will assume that you are referring to an unamended NEC3 ECC contract and the work was not designed by the Contractor. Firstly clause 10.1 (“mutual trust and cooperation”) does not change the contract in any way – all it means is you all openly and honestly do what the contract says you should.
The Contractor is correct (to an extent). The Contractor is obliged to provide the works in accordance with the WI (20.1), and if he does not do so it will be a Defect (first bullet of 11.2(5)). The only person that can issue a change to the WI is the PM (14.3), or anybody else who the PM delegates that action to under 14.2. Such instructions have to be in a form that can be read copied and recorded (13.1). There is no need for formality in that respect, and email from the PM or somebody who has delegated authority will pass this test. The reasons for this are very simple – it is just good basic project management to control the people who can make such changes and record those changes properly.
There is no such thing as deemed delegation, again because that would merely cause total confusion and be poor management control. How often would it have to happen before the authority was deemed to be delegated? What would happen to all the instructions before that time – would there status somehow change?
The need for these sorts of disciplines can be simply illustrated by what happens when they are not followed. Wearing another hat I am dealing with a project at the moment where lots of instructions changing the WI were issued by lots of people informally. They are now all arguing, months after the job has finished, as to what was said by whom to whom and whether that changed the WI and was a CE. And, for good measure, they are also arguing about what is and is not a Defect, because it was (or was not) carried out in accordance with the original or (allegedly) changed WI. Good for me, because I am earning fees from the mess, but not good for the parties!
However it is important to realise that not all changes to the WI will lead to a CE – they have to effect time or Defined Cost before a CE occurs – see the 3rd bullet of 61.4. Whether or not a particular change to the WI will change cost or time depends upon the circumstances. For example an instruction to move some drill holes 5mm may not affect Defined Cost or time at all if it is issued early enough. But what happens if it was not issued until after the holes had been drilled? At the very least they will need re-drilling, which will cost Defined Cost. But what happens if, for structural reasons, they cannot be re-drilled, and the base plate has to be cut off and scrapped and a new one fabricated and welded on? That will cost more Defined Cost. But what then happens if the fabrication facilities were at full stretch and it could not be re-fabricated for a week, and that particular structural steel member was on the critical path? In those circumstances moving those holes 5mm at the last minute may be a very expensive change!
It is also important to realise that it is the PM’s responsibility to notify CEs that arise from changes to the WI – see 61.1. If he does not do so the time bar in the last sentence of 63.3 will not apply and the Contractor can notify the CE any time up until the defects date (61.7).
Finally in my experience on anything except simple projects the WI is, unfortunately, changed more than 10 times! I say unfortunately because the WI in the contract should be good enough not to need changing, but rarely is. However whether all such changes are CEs is another matter!