Newsletter – Don’t start work without your (construction) contract!

Certainty is a great thing yet construction projects, large and small, are often performed without a formal contract in place. If a dispute ends up in legal proceedings, the courts may have to analyse what the parties have said, in the best way they can, no matter how vague or uncertain the exchanges were.

In the recent case of Goldsworthy (t/a Goldsworthy Builders) v Harrison [2016] EWHC 1589, which concerned a project for work on a residential, occupied property, Goldsworthy carried out works for the Harrisons. The Harrisons envisaged using a commonly adopted, standard form of contract; the Joint Contracts Tribunal (JCT) minor works contract form. Works began and it was more than a year before a copy of the contract was sent out for signing. Goldsworthy would not sign but subsequently took a dispute to adjudication, and obtained a favourable award. Goldsworthy then asked the court to enforce the award, but the Harrisons claimed that the minor works form did not apply.

In England and Wales adjudication is a statutory process applying, with limited exceptions, to all construction contracts. One such exception is in the case of residential occupiers – a category which would have covered the Harrisons and adjudication would not have applied but for the use of the JCT form.

The court noted that whether there is a binding contract, and what the terms of that contract are, depends on what the parties have agreed.

To achieve this a court will consider all communications between the two parties, whether in writing or oral, and their conduct to determine if, on an objective conclusion, all the terms which are considered essential in law to create a contract were agreed and there was an intention to create ‘legal relations’. A binding contractual relationship can be made even though the parties defer to a later date the agreement of other, important matters. Contracts can come into existence also asa result of conduct.

In the circumstances found in Goldsworthy v Harrison, without more complete evidence from the Parties, the judge found it impossible to say that there was no triable issue as to whether the parties had agreed to the application of the JCT minor works terms (with appropriate gaps). The result of this was that Goldsworthy’s application to enforce the adjudicator’s award by summary judgment failed.

The advice which must be drawn from this case, which is a situation all too commonly found, is that it is better to have the formal contract executed before any work is commenced.