Construction contract – Terms and conditions – Written contract – Claimant contractor engaging defendant to carry out subcontract works – Parties agreeing contract rates orally but excluding rates from terms of contract – Claimant sending fax to defendant referring to agreed rates – Defendant referring dispute as to rates to adjudicator – Claimant seeking declaration that adjudicator having no jurisdiction to proceed — Whether arrangement between parties amounting to written contract – Declaration granted
The claimant was the main contractor was engaged to construct residential units. In February 2006, it engaged the defendant subcontractor to provide a fixed number of joiners on a day-works basis.
Over the ensuing few months, the claimant issued a series of further written instructions and orders, by which the work that the defendant was to be carry out and its obligations to the claimant were enlarged. The defendant subsequently referred to adjudication a dispute concerning the rates to be paid for its works. An issue arose as to whether: (i) the arrangement constituted a written construction contract for the purposes of section 107 of the Housing Grants, Construction and Regeneration Act 1996; and (ii) if so, the scope of any such contract gave the claimant a contractual right to vary the terms and conditions and oblige the defendant to carry out such variations.
The claimant issued proceedings, seeking declarations that the adjudicator did not have jurisdiction to proceed. It contended that a single contract had been created in February 2006, which, irrespective of its scope at that stage, had not been sufficiently evidenced in writing for the purpose of the 1996 Act. The defendant argued that there were two contracts but, regardless of whether there had been one or two contracts, both had been sufficiently in writing for the purposes of the Act. The adjudication was stayed pending the resolution of those issues.
Held: The declaration was granted.
All the terms of a construction contract had to be in or evidenced in writing. It had not been argued that section 107(5) applied, whereby an unchallenged exchange of written submissions concerning the existence of an agreement otherwise than in writing could constitute a written agreement: RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2002] EWCA Civ 270; [2002] 1 WLR 2344 and Stratfield Saye Estate Trustees v AHL Construction Ltd [2004] EWHC 3286 (TCC) applied.
It was not necessary, for there to be a written construction contract, that the price should be recorded in writing. If, however, the price was agreed orally but was not evidenced in writing, an agreed term was not in writing and the contract was not a written construction contract for the purposes of the 1996 Act. Parties could, both in ordinary contractual terms and for the purposes of a written construction contract under the 1996 Act, have an agreement in which the contract price was not expressly stated or agreed. They could also agree a verbal or mathematical formula by which the price could be determined. It might be possible to determine the price in the light of the background facts; such an exercise would not prevent the construction contract from being a written construction contract under the 1996 Act. However, it was necessary to distinguish between the construction or interpretation exercise that established what the agreed price was and a written confirmation that something had been agreed orally since the former could be a written construction contract under the Act while the latter could not: Murray Building Services v Spree Developments unreported 30 July 2004 considered.
Many construction contracts had implied terms and it would be an extraordinary state of affairs if contracts that would otherwise be written construction contracts were taken outside the operation of the 1996 Act because they contained one or more implied terms. It followed that a written construction contract that did not state the price, orally, in writing or otherwise, would still be a construction contract within the 1996 Act if the price or the rates fell to be determined by reference to an implied term as to reasonable rates or prices: Connex South Eastern Ltd v MJ Building Services Group plc [2004] EWHC 1518 (TCC); [2004] BLR 333 and Allen Wilson Joinery Ltd v Privetgrange Construction Ltd [2008] EWHC 2802 (TCC); 123 Con LR 1 considered.
In the instant case, in respect of the contract at least evidenced by the fax of February 2006, there had been no written contract for the purposes of the 1996 Act. Therefore, the adjudicator, who had been appointed to adjudicate only on the disputed claims arising in connection with that contract, had no jurisdiction.
Andrew Kearney (instructed by Osborne Clark, of Bristol) appeared for the claimant; Abdul Jinadu (instructed by Deacon Standen Associates) appeared for the defendant.
Eileen O’Grady, barrister