This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
One of the most significant changes to be introduced by the new Construction Act is the repeal of Section 107 of the old Act, which provided that only contracts “in writing or evidenced in writing” came under the ambit of the legislation. Once the new Act comes into force (1 October 2011 in England and Wales), it will also apply to contracts made orally (on the phone, in meetings, on site etc). On the face of it this change will give greater protection to oral contracts than the old law, however Constructive suspects that it may lead to more disputes over whether or not there is actually a ‘construction contract’ in existence.
If there is no written evidence of the terms of the Contract then evidencing agreement may prove difficult and could come down to witnesses’ recollection, contemporaneous notes and records and analysis of previous dealings between the parties. So, the change in the legislation actually means that parties to a construction contract may need to be even more careful about evidencing agreement in writing!
Here are Constructive’s top practical tips to avoid these issues:
- Enter into contracts in writing wherever possible and as soon as possible after any oral agreement is made;
- Carefully record any oral agreement in meeting or fle notes etc; and
- Mark any relevant correspondence ‘subject to contract’ to clarify when written correspondence is not intended to be binding.
It should also be remembered that no written contract means that there will be no right to collateral warranties or liquidated damages. In addition, the adjudication provisions of the contract must continue to be in writing or else the Scheme for Construction Contracts 1998 will apply.
