Extending the Construction Act to embrace oral as well as written agreements is to be applauded. Expanding the definition of ‘agreement’, on the other hand, is definitely not
In view of the government’s proposals for amending the Construction Act, Tony Bingham was, in my opinion, quite right to touch on the implications of dropping the requirement in Section 107 for an agreement in writing (6 July, page 57).
This is by far the most significant of the proposals and a welcome surprise because it represents a complete change of mind on behalf of the government. Extending the ambit of the legislation to contracts that are purely oral or partly oral and partly in writing would clearly further the laudable objectives behind the legislation.
However, I was left puzzled and somewhat concerned by Tony’s statement that the government should now extend the legislation to embrace “all ‘agreements’ irrespective of whether they are ‘contracts’”. First, I share the view expressed by Graham Watts (3 August, page 31) that any further attempt to move the goalposts at this stage is likely to be fatal to the whole package.
What puzzled me was Tony’s interpretation of Judge Wilcox’s decision in Bennett vs Inviron, which he employed in aid of his suggestion. In that case, so Tony suggests, the judge held that there was in existence an “agreement in writing”, although not a “contract in writing”, which he (the judge) described as an “equitable agreement” to do building construction works. It should be remembered that Section 104 defines “construction contract” as an “agreement” to perform construction operations.
This startling proposition forced me to dig out the judgment in that case and I am not sure that I agree with Tony on this one. First, a little context might help. In that case Bennett was seeking to enforce an adjudicator’s decision requiring Inviron to pay it money pursuant to a letter of intent issued by Inviron. Inviron challenged the adjudicator’s jurisdiction to make that decision arguing that, whatever relationship did exist between the parties, it did not amount to an “agreement in writing” for the purposes of Section 107.
It seems clear from the decision that the judge correctly viewed the existence of an actual contract as essential for the legislation to apply
Bennett’s claim had been presented in the adjudication on two alternative footings. Its primary argument was that the letter of intent upon which it relied did fall within the ambit of Section 107. Alternatively, it claimed the money on a quantum meruit basis, which is a reference to a restitutionary, rather than a contractual, remedy. The law of restitution is based on the principle of unjust enrichment and not the existence of an agreement between the parties.
Inviron successfully argued before the judge that because the letter of intent was expressly headed “subject to contract”, it could not amount to a contract of any sort.
So far as the claim for quantum meruit was concerned, the judge commented that “in default of the contract being concluded, [the parties had] agreed a request and restitutionary basis of remuneration”. This, however, did not amount to an agreement in writing for the purposes of Section 107. It seems clear from the decision that notwithstanding the definition in Section 104 referred to above, the judge correctly viewed the existence of an actual contract as essential for the legislation to apply.
In essence Tony is urging the government to extend the scope of the legislation beyond “contracts” of all hue, as in the existing proposals, to “agreements” of all hue, irrespective of whether they amount to “contracts”. However, to treat the Bennett case as supporting such an extension is misleading since it is incorrect to characterise the relationship that existed in that case as an agreement of any sort.
Quite apart from the practical risks of seeking any change to the amendments, extending the legislation in the way that Tony suggests would simply be unworkable. Whereas the average adjudicator should be perfectly able to satisfy himself about the existence of a contract between the parties underpinning his jurisdiction, to found his jurisdiction simply upon the existence of an “agreement”, whether binding or not, would be a bridge too far. To base it upon the application of restitutionary principles would surely be unthinkable.
Dominic Helps is a partner in specialist construction law firm Shadbolt & Co