The JCT contract for domestic work includes an adjudication clause, but not the adjudication rules. So does this make it an unfair contract clause?
A decision at Bath County Court in February may provide a boost for the JCT homeowner contract. This provides a system for quick and economical dispute resolution system for domestic work by incorporating the rules of the RICS/RIBA adjudication scheme. This procedure requires an adjudicator to issue a written decision within 21 days of the appointment for a maximum fee of £750. Even better, if the adjudicator apportions the fee (as they often do) then each side only has to pay its share without liability for the other’s if it defaults.
So what could possibly go wrong? Well one problem is that the RICS/RIBA adjudication rules are not printed on the contract form. You have to ask for them to be sent to you. And who can be bothered to read to the end of part I of the contract form and then ring, write or email the RICS or RIBA and wait until it posts a copy?
Ms Fay, a lady who wanted work done on her home, certainly could not. Then she fell out with her builder. The builder applied to the RICS, which appointed a Mr Cartwright to decide on a claim for extras. Then the battle began in earnest, with crossclaims for defective works among other things. Mr Cartwright decided that the overall victor was the builder, to which he awarded £4306. He then split his fee equally.
Ms Fay refused to pay the builder or her share of the adjudicator’s fee. She denied that Mr Cartwright had any right to sue her directly or that she was bound by the adjudication rules, which she had not seen before signing the contract. She also contended that the rules were unfair and unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999. Mr Cartwright went to court to recover his fee.
The court held that Ms Fay had agreed to all of the terms of the contract by signing it, including the terms that were referred to but contained elsewhere, such as the adjudication rules. It concluded that these clearly entitled Mr Cartwright to sue. No great surprise there.
The application of the consumer contracts regulations to adjudications is more controversial. The regulations apply where goods or services are provided to someone acting outside their normal business and where the term has not been negotiated individually by the parties, such as when a standard form of contract is used. The Technology and Construction Court so far has referred to these regulations in four adjudication cases where there has been a question about whether the process was unfair to the consumer.
The test of unfairness under the regulations is a subtle one. A term will be unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer. The court has to examine the circumstances under which each contract was made. Fair and open dealing by the supplier is required in order to show good faith. A term can be unfair and unenforceable because the consumer did not have the chance to see it properly before signing the contract. Which brings us back to Ms Fay.
The judge found that requesting the customer to sign a contract that included clear directions as to how the adjudication rules could be obtained did not breach the requirement of good faith. Ms Fay accepted that she had plenty of time to read the contract and that she could have obtained copies of the adjudication rules before she signed the contract. The evidence was that there was an interval of several days, if not weeks, between Ms Fay being sent the contract and being asked to sign it.
It is not difficult to envisage problems in a case where the consumer had only minutes to read the contract before signing it. In those circumstances there would be a risk that the adjudication rules might be found to be unfair and unenforceable.
As the court must in each case examine the circumstances in which the contract was made, there may be no way of ensuring that the JCT homeowner contract is proof against challenges under the regulations. But one precaution might reduce a lot of the risk: to print the rules of the adjudication scheme on the contract form or until this is done, make sure a copy of the rules is included with the customer’s copy of the contract, and that it is acknowledged in some way, when the contract is signed.
Ralph Wynne-Griffiths is a barrister and adjudicator based at Guildhall chambers in Bristol