Contract agreement commences when construction work begins

As those within the industry are well aware – and may have experienced – it is not unusual for construction work to commence prior to a formal contract being entered into. There would, however, be an expectation of all major and minor points relevant to the scope of work are agreed on by that stage. In practical terms what this expectation means is that there is a valid assumption that agreements are in place and, in essence, a contractual agreement exists when work goes ahead.

The above has not prevented parties from trying to contest their position in a JCT contract dispute with the claim that no contract is in place. Time and again we have seen this approach taken and, in terms of the Construction Act 1996, such defences being dismissed.

A contract is a compulsory requirement in respect of all construction work. It is assumed to both exist and be agreed to in cases where projects have commenced, irrespective of whether the technicalities and formalities of the contract have been met.

One of the most recent cases to highlight this is Goldsworthy & Others v Harrison & Anr [2016] EWHC 1589 (TCC). The case saw Harrison present an argument that the terms of adjudication under JCT Minor Works 2011 were applied without jurisdiction as no final agreement had been reached. No signed contract was cited in support of this.

In hearing the case, the Judge gave consideration to the findings of similar instances. A recurring theme was the upheld view that the performance of a service can be sufficient to bring a contract into being, albeit noting that this differs from it being offered and accepted. Essentially, the prevailing view is that when work starts, it is taken as being that a contract, statutory for all construction work, has been agreed to be adhered to.

The dynamics of the construction industry mean that the commencement of work cannot always wait until all formalities of a contract have been completed. Whilst not quite an industry norm, it is a factor understood – in particular from a cost management perspective.

As a number of cases have illustrated, it most certainly is vital to ensure that all major and minor aspects of a contract are agreed upon, and to be aware of the fact that once work commences then a contract is assumed to exist. This understanding can reduce the risk of disputes and the requirement for JCT amendments and resolutions.

At Amison Dispute Resolutions we have a lot of experience with various types of contract, including JCT. We understand the issues that can arise with them and the disputes that can be caused. As a result we can offer an array of services including JCT amendments, dispute avoidance, and resolutions that avoid the need for litigation.