Contracts in Writing

Do you have the right to refer a dispute to an adjudicator?

Currently, if you want to benefit from having the right to refer a dispute to an adjudicator then, in the absence of a written adjudication clause, you need to make sure that all your negotiated terms are evidenced in writing, otherwise you will not have a construction contract within the meaning of the Housing Grants, Construction and Regeneration Act 1996 (the "Construction Act").

In the recent case of Rok Building Limited ("Rok") v Bestwood Carpentry Limited ("Bestwood"), the Technology and Construction Court (the "TCC") was asked to consider whether there was a construction contract within the meaning of Section 107 of the Construction Act.

Rok was the main contractor on a job to construct residential units in London. Initially Bestwood was approached by Rok to undertake particular works on a labour-only basis in support of the existing sub-contractor already onsite. Eventually Rok invited Bestwood to provide rates and prices on a measured works basis. Bestwood carried out the works as instructed and submitted applications for payments, which were duly made. In and around June 2006 issues began to emerge regarding the basis of payments. For three years the parties attempted to reach agreement on Bestwood's final accounts. Eventually, Bestwood issued adjudication proceedings seeking the recovery of unpaid sums. Rok objected to the adjudication on the basis that there was no contract in writing as required by section 107 of the Construction Act. The parties agreed that the TCC should make a ruling with regard to the jurisdiction of the adjudicator.

The TCC held that although there was undoubtedly a contract between the parties, there were terms which were agreed orally only, which were not contained in or evidenced by writing, and the TCC came to the view that what was negotiated was a relatively simple and limited contract, which related only to the provision of joiners on a day works basis. Specifically, the TCC highlighted that a faxed message confirmed that there were "agreed rates" (with regard to payment) but that it did not evidence in writing what the agreement about the rates was.

As a result, the TCC held that as not all of the contract was evidenced in writing the adjudicator had no jurisdiction to proceed as an adjudicator in this matter.

What this means for you

If any of your contracts contain terms that are not evidenced in writing then there is no construction contract within the meaning of the Construction Act 1996. It you want to benefit from the right to seek adjudication, make sure when negotiating your contracts that all agreed contractual terms are evidenced in writing. This is due to change when the Local Democracy, Economic Development and Construction Act 2009 becomes operative, doing away with the need for all contract terms to be evidenced in writing.

Also be aware that if you have doubts as to the adjudicator's jurisdiction, it may be more sensible to seek clarification from the TCC before embarking on the adjudication. Ultimately this could save money rather than, after an adjudication, one of the parties disputing the adjudicator's power to act.

If you have any queries or need further information please do not hesitate to contact me at s.homer@ashfords.co.uk

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