Legal twister

Fred and Joe are negotiating a brickwork subcontract. They have met in the site hut on a Friday afternoon, and have agreed on the work that needs doing, a price and a programme. Everything seems fine and dandy, and they agree that Joe's specialist brickwork company will start work on Monday morning. Fred says that he will write to Joe with confirmation of everything that has been agreed. True to his word, he sends a letter later that afternoon setting out the terms.

This looks like exactly the sort of contract that is affected by the Construction Act. But when things go wrong and Joe thinks he has been paid too little and too late, he goes to his solicitor and finds that things aren't quite as simple as he had thought.

The first thing the solicitor wants to know is whether the contract was subject to the act. Although it is quite obvious that it is a construction contract, there is a problem. The act only applies to contracts that are in writing or evidenced in writing. The contract was verbal. But, Joe says, there is a letter, so surely it is "evidenced in writing"?

It ain't necessarily so. When the act first came into force, almost six years ago, most people thought that evidenced in writing was a simple test. If there was written evidence that there was a contract, it was evidenced in writing. So an invoice sent three weeks later referring to the contract, or a brief note of a phone conversation jotted on last week's Building would be evidence. On that basis there is no doubt Fred and Joe's contract was subject to the statute.

Several judges of the Technology and Construction Court seemed to agree with that approach. Unfortunately, when one of the cases went up to the Court of Appeal, it all went wrong. The case was RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd. A professional retainer had been evidenced in writing on several drawings, as well as the minutes of meetings and letters. Lord Justice Ward was not satisfied with that. He said what has to be evidenced in writing is, literally, the agreement – which means all of it. Without such evidence the contract may still be a contract, but it is not subject to the act, and so the requirement for an adjudication process does not apply.

So, where does that leave Fred and Joe? If they had not thought about the periods for interim payment, for example, and nothing had been agreed, then there is no problem. Fred's letter recorded everything that had been agreed, Lord Justice Ward's test is satisfied and the contract is subject to the act. The act requires the contract to deal with the periods for interim payment. It didn't, so the act automatically introduces a term that interim payments are made monthly. It also introduces the right to go to adjudication.

It is not enough to show with written evidence that the parties entered into a contract. This is absolute nonsense …

But if Fred and Joe did discuss interim payments, and then Fred forgot to mention them in his letter, the written evidence does not cover all the agreed terms. So, it fails Lord Justice Ward's test. That means that the contract is not subject to the act, and although there is a binding term about when payments are to be made, there is no statutory right to go to adjudication.

This judgment was quoted with approval in a more recent Court of Appeal case, Tally Weijl (UK) Ltd vs Pegram Shopfitters Ltd. There is therefore no doubt that, as the law stands at the moment, an incomplete written record is not good enough to provide evidence of the contract sufficient to mean that the act applies. It is not enough to be able to show with written evidence that the parties entered into a contract.

This is all absolute nonsense. It cannot have been parliament's intention to supplement a contract by implying into it essential conditions that the parties did not agreed to, but to decline to become involved in the contract when they did agree essential conditions, but failed to write them down.