7th July 2017
In this case, the Technology & Construction Court (TCC) was tasked with deciding whether there was one oral contract or three separate oral contracts for works at three separate sites.
Mr Conway was engaged as a contractor to carry out works at three different sites in: Notting Hill, Pewsey and Sutton.
Mr Conway engaged RCS Contractors (RCS) as a groundwork sub-contractor for the three sites. No written contract was put in place for RCS’ works. The parties simply relied upon an oral agreement.
RCS referred a dispute to adjudication after Mr Conway failed to pay RCS’ final account. The Adjudicator awarded RCS £60,000.
Mr Conway refused to pay and RCS commenced enforcement proceedings.
Mr Conway disputed the Adjudicator’s decision on jurisdictional grounds: stating that the Adjudicator only had jurisdiction to deal with one single contract, and that the dispute here related to three separate oral contracts.
Section 108(1) of the Construction Act provides that:
“A party to a construction contract has the right to refer a dispute arising out of a contract for adjudication.”
The courts have interpreted this provision to mean that adjudicators can only deal with one dispute, arising out of one single contract at a time, not multiple contracts.
Accordingly, here the court had to decide whether there was one contract and therefore one dispute or three separate contracts and three separate disputes.
The court found that on the balance of probabilities, there was one single contract concerning the three different sites.
The Judge considered that Mr Conway’s witness evidence was unsatisfactory. The contemporaneous evidence suggested that the parties understood there to be only one contract. In particular:
The Judge found that the fact that there had been different documentation for the three different sites did not necessarily mean that there were three separate contracts. It was necessary to consider what the parties had agreed.
The evidence here indicated that the parties had agreed that there was to be one single contract.
This case confirms that the courts will not permit a party to resist enforcement of an adjudicator’s decision by seeking to depart from the terms which have been agreed, even if there is no written record of such terms.
However, parties should ensure that contracts are recorded in writing wherever possible, to avoid expensive disputes over the agreed terms.
Oral contracts often lead to uncertainty and divergence in understanding between the parties as this case demonstrates.
Without a written contract in place, a dispute concerning an oral contract becomes a dispute of facts as opposed to a dispute of contractual interpretation, which causes great difficulty for the parties and the courts to resolve.