REUTERS | Kim Hong-Ji

Contracts not in writing

Following the repeal of the in writing or evidenced in writing rule in section 107 of the Construction Act 1996, the scope of the disputes referred to adjudication is changing. Adjudicators are now being faced with disputes where the parties:

  • Have a written contract, but disagree over whether a particular term was subsequently agreed orally (like a variation).
  • Disagree over whether they have a binding contract at all.

One of the issues is whether adjudicators are up to this challenge.

What are the contract terms?

The first point is nothing new. We’ve been dealing with alleged subsequent variations to a written contract since the Construction Act 1996 came into force. There is a body of case law demonstrating that, on the whole, we’ve managed quite well in this regard.

In dealing with the second of these issues (and some may argue the second point isn’t new either), adjudicators are required to consider the basics of contract formation. Many have doubted whether adjudicators, particularly those without legal training, should be dealing with such complex legal issues as offer, acceptance and consideration.

I can only speak for myself on this one when I say that such matters can be properly dealt with, sometimes through a meeting with the parties and questioning of the relevant individuals. Once an adjudicator has tested the evidence, he can decide whether the parties agreed something so important as the price or the completion date and have a binding contract. Then he can move on to consider the substantive issue, the claim that is being made in the adjudication.

Less of a jurisdictional issue

Now the parties may agree there is a contract, but can’t agree on its terms. Before they may have just denied the existence of a contract in writing. From an adjudicator’s perspective, unless the parties disagree over whether there is a binding contract at all, the repeal of section 107 means the parties and the adjudicator can focus on the claim, rather than being distracted by a jurisdictional challenge (in the adjudication at least).

I haven’t come across a situation yet where I’ve been asked to consider whether there is a binding contract. I can only hope that if and when I am asked that question, I will come to the right decision. If that means the answer is no, and I have no jurisdiction, then I assume I will resign. The only doubt that I have on that issue is whether, given I cannot make a binding decision on my own jurisdiction, I would need to resign, or whether I would ask the parties what they wanted me to do next. I’ll let you know what happens, when that day comes!

Is it making a difference?

As I’ve said before, adjudicators (including me) are already dealing with contracts that are not in writing. It is still early days, and we haven’t seen any challenges on enforcement arising on these points yet, but I’m sure the day will come. Until then, I’m keeping my contract law books close to hand.

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