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Oral agreements and trivial terms: what does it all mean?

Mr Justice Akenhead has recently refused an application for summary judgment to enforce an adjudicator’s decision, partly on the basis that the contract was not “in writing”.

At first blush the case appears unremarkable, but the judgment is worth reading as it provides important guidance on what “in writing” actually means.

One of the trickiest types of jurisdictional issues is a challenge to the adjudicator’s jurisdiction on the grounds that there are oral terms not evidenced “in writing”. As will be clear from this case, Akenhead J considered it inappropriate to grant summary judgment as there was a triable issue in relation to the existence of an oral term. As an adjudicator, you have to form a conclusion, often on limited documentary evidence, without the benefit of an oral hearing and in a short period of time. The costs of dealing with such a challenge can be significant.

While, in my view, differentiating between implied and oral terms is relatively straightforward, having to determine whether an oral term is “trivial” is more difficult – especially if the answer, which Akenhead J suggests, depends on the facts. There is more scope for argument here.

Some commentators have suggested that the repeal of section 107 will take away arguments about oral terms. My view is that they will still be there, but an adjudicator will have less of a time constraint in dealing with them; they will simply form part of the decision.

Further, an adjudicator will be able to reach a temporarily binding decision as to whether an alleged oral term exists or not, as opposed to the current situation when faced with a jurisdictional challenge. This may lead to greater certainty when a party adjudicates. Only time will tell whether it leads to fewer jurisdictional challenges.

One thought on “Oral agreements and trivial terms: what does it all mean?

  1. Matt’s post highlights one of the difficulties for an adjudicator when his jurisdiction is challenged. While the adjudicator is free to decide matters as he sees fit (subject to the rules of natural justice), he will have to decide questions of fact on the limited evidence before him, on the balance of probabilities. This may mean that, when faced with an allegation that the contract includes oral terms, the adjudicator will stand down only if he thinks that allegation is true on the balance of probabilities.

    This differs from the standard that is applied in court on a summary judgment application, when a defendant resists enforcement of an adjudicator’s decision. In that situation the court does not look at who is likely to succeed in the proceedings, but asks whether the defendant has a real prospect of success at trial. Only at trial will the court be concerned with probability.

    This gives rise to one of the paradoxes of adjudication: even if an adjudicator reaches a fair decision on the balance of probabilities, and continues with the adjudication, there may still be scope for challenging his jurisdiction at the enforcement stage.

    This is not the fault of adjudicators or judges. If anything, it arises from the legislation itself. The Construction Act 1996 and the Scheme for Construction Contracts 1998 are silent on how to enforce an adjudicator’s decision, which left the Technology and Construction Court to develop its own procedure in a legislative vacuum.

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