Monday 27 September 2010

Contract in Writing?

Introduction

When a dispute arises one of the issues that usually has to be established is whether there is a contract, and if so, what are the terms? Each party will advance a case based upon differing views as to what was agreed during negotiations. The case of Adonis Construction v O’Keefe Soil Remediation is a good example of the problems this creates particularly when adjudication is concerned.

The facts

Following receipt of a tender enquiry O’Keefe submitted a quotation for soil remediation works. Adonis did not respond to the quotation because they intended to award the works to another subcontractor. This never happened and a pre-start meeting was convened at which the following was agreed: (1) commencement date; (2) description of work; (3) form of contract; (4) contract period; and (5) contract price. Adonis later submitted a letter of intent which said:
“We confirm our intention to enter into a sub-contract with you in accordance with your sub-contractors obligations contained in the following documentation…”
Various documents were then specified including the pre-start minutes. O’Keefe was invited to take the letter as an instruction to proceed with the works. The letter further provided:
“In the unlikely event that the sub-contract does not take place…”
Prior to work starting on site Adonis submitted a draft subcontract order with the official order to follow later by post. The draft order was never signed or returned by O’Keefe.
O’Keefe thereafter started work on site and about six weeks after completion Adonis sent O’Keefe an official subcontract order. O’Keefe amended the order and returned it to Adonis, which they did not accept. A dispute arose concerning allegations by Adonis that the remediation works were incomplete, and as a consequence it sought payment for works it had carried out. O’Keefe denied the allegations and sought payment for the works. Adonis referred the dispute to adjudication. O’Keefe contested the jurisdiction of the adjudicator, submitting that there was no contract in writing pursuant to section 107 (1) of the Construction Act. The adjudicator found he had jurisdiction and made his decision in favour of Adonis. O’Keefe contested the decision of the adjudicator, so Adonis made application to enforce the decision.

Court Case

Firstly Adonis argued that the relevant contract was entered into by O’Keefe’s acceptance by starting work after receipt of the draft order. This argument failed because the court considered that the use of the word “draft” indicated that Adonis was not offering then and there to contract, but was indicating the terms on which it would offer to do so in the future. Also, the draft order was incapable of acceptance by O’Keefe starting work because it had to be signed and returned.
Secondly Adonis argued that there was a contract by the letter of intent, pre-start meeting minutes recording the basic terms, and the start of the works. This argument failed too because the letter was followed by the draft order, the starting of work was not an act of acceptance clearly referable to the letter. Further, the order was inconsistent with the provision of the letter and it was clear from the wording of the letter that it was intended to refer to a future contract and did not constitute a contract itself.
Whichever way the matter was put the court found that there was a well arguable case that the adjudicator lacked jurisdiction. In the circumstances the court declined to give summary judgment to enforce the decision.

Comment

The facts of this case are typical of many construction arrangements where there have been a series of written exchanges between the parties that continue after the works have started. If the parties have, for whatever reason, not got round to producing a mutually agreed document, it will not be so easy to identify the point at which the parties reached agreement, if indeed they did at all (and equally difficult to identify the document forming that agreement).