Some very bad news

In Bouygues (UK) Ltd vs Dahl-Jensen (UK) Ltd 2000 the Court of Appeal decided that an adjudicator's decision should be enforced in full, even though the court believed that the adjudicator had made a miscalculation and the effect of enforcing the decision was to order payment of a large amount of money that otherwise was not payable (but see John Redmond's "Bouygues reconsidered", 10 November 2000").

The Bouygues case is often regarded as a policy decision of the courts – that they will enforce adjudicators' decisions provided that the right issue has been decided, even if it has been decided wrongly. This outrages our innate sense that justice should be done to the individual in each particular case, and that policy should bow to fairness. The general principle should be that bad challenges to an adjudicator's decision should be dismissed, not good challenges. Otherwise, the court system brings itself into disrepute.

RJT Consulting Engineers Ltd vs DM Engineering (Northern Ireland) Ltd 2002, the second Court of Appeal decision, is hardly more meritorious than the Bouygues ruling. It concerned section 107 of The Construction Act, which says that the act only applies if there is a construction contract is in writing. It also gives a wide definition to the term "in writing". This is important because if a contract is not in writing, then it will not be possible to adjudicate under it. If that is the case, the payment regime of the act, including the provisions about withholding money and about suspension, will not apply.

The Court of Appeal decided that it is not enough to have evidence in writing that supports the existence of an agreement. What has to be proved in writing is the whole of the agreement, not part of it.

However, this could cause serious problems for the industry, as contracts usually consist of express terms and implied terms. Put simply, the law will impute a term into a contract to give it business efficacy – to give effect to what businessmen must have intended.

By way of an example, let's say a client wanted a local builder to reroof his property with a rare local stone. Several firms could supply the stone but it was not immediately available. Nevertheless, the builder promised to do the job and the client promised the builder that he would pay him fairly and properly. It was implied that the price would be a reasonable one, taking into account the current market value of the stone (rates for labour and other materials having been agreed).

The duration of the contract was dependent on the procurement of the stone and it was implied that the work would be carried out reasonably expeditiously. The parties intended to contract with each other, and a contract was concluded, even though most of the terms plugging the gaps were merely implied. This is a typically sieve-like construction contract – only watertight when all terms are taken into account.

What the RJT ruling concludes is that, for adjudication to take place, all the "express" terms of the contract must be evidenced in writing. The Court of Appeal talks about a record "of everything which has been said".

This might sound good in theory, but in practical terms could be very bad news.

Parties to construction contracts are not always the most articulate people and the contracts they deal with are complex. Just as in our reroofing example, it is frequently the case that not all contractual terms are evidenced in writing, nor even agreed verbally.

Yes, there will often be a good answer when an adjudicator's jurisdiction is challenged on the basis that the contract is not fully evidenced in writing; however, if applied rigidly, the Court of Appeal's ruling will mean that many disputes cannot be adjudicated at all, because they are under contracts only partly recorded.