Drop it!

James Bessey has a big problem with the DTI’s proposal to drop the requirement in section 107 of the Construction Act that adjudication can be held only if a contract is in writing (31 August, page 47). In a nutshell, James’ concern is that this proposal would effectively mean the dispute resolver (that is, the adjudicator) could decide what the contract was or was not and, therefore, the rules by which it should be adjudicated.

That state of affairs should, James suggests, be contrasted with the existing regime, which restricts the adjudicator to implementing and interpreting the terms of a written contract. Now, no doubt some adjudications do deal with a nice written contract that includes all the terms. However, in my experience, adjudication is often a much more complex and untidy process.

It is always good practice for an adjudicator to satisfy themselves that they do have jurisdiction to proceed with the referral, particularly where jurisdictional objections have been raised by the responding party. That exercise frequently requires them to reach a view – albeit not a final and conclusive decision – about what the contract is or is not (to borrow James’ expression) and indeed whether there is one in the first place. They must also decide whether what there is amounts to an agreement in writing for the purposes of section 107.

In many cases it will be relatively easy to establish what the contract is or is not. The really difficult issue tends to be whether the requirements of section 107 have been satisfied. Here it is not uncommon for the adjudicator to call for lengthy submissions from the parties, frequently supported by copious witness statements.

Far from making the adjudicator’s life more difficult, as James suggests, in most cases the DTI’s proposal would simplify matters by taking difficult and time-consuming section 107 issues out of the equation.

Most adjudicators I have come across are well able to apply the rules of offer and acceptance and to identify and interpret the terms of the contract

What may lie behind James’ concern is the belief that adjudicators cannot really be relied on to arrive at a correct decision on whether a contract is in existence, and what its terms are. In my experience, that belief is generally unfounded. Most adjudicators I have come across are well able to apply the rules of offer and acceptance and to identify and interpret the terms of the contract. For the reasons I have explained, they are already experienced in doing just that.

Nor do I subscribe to the view that the proposal to drop section 107 will encourage the industry, lemming like, to enter into more oral and fewer written agreements. Most of the industry will continue to ensure their contracts are formalised in a written form, for a host of good reasons. Indeed I suspect that if anything, the reverse is likely to be the position. The introduction of the proposal is likely to act as an incentive for parties to ensure that their agreements are properly formalised in writing.

Obviously, there will still be exceptions, typically among the smaller and less sophisticated players carrying out work somewhere down the supply chain, who will carry on much as they do now, in an informal manner and without written agreements. There the adjudicators will have to decide whether there is a contract and what its terms are. However, in most cases, the contract (whether oral or by conduct) will be pretty straightforward and many of the relevant terms will be the standard implied terms familiar to most of the industry. I do not anticipate that the evidential issues arising in such cases would be particularly unusual for most adjudicators.

The Construction Act was introduced to protect exactly the smaller, less sophisticated contractors and suppliers that will for the main part not be using formal written agreements. Of course, there is a risk of rough justice where adjudicators have to deal with arguments about what the contract is or is not but, as Mr Justice Dyson, when senior judge in the Technology and Construction Court, recognised in Macob vs Morrison, rough justice is the price the industry has to pay for the protection the legislation offers to those who really need it.