A “construction contract” may no longer need to be in writing but there still needs to be a contract. Working out whether there was an oral contract may not be easy but does the fact that the works have been carried out help? A subcontractor carried out works at the Dorchester Hotel and the main contractor made a number of payments but, when the subcontractor submitted its final account, the contractor failed to respond with a pay less notice and the subcontractor obtained an adjudication award in its favour. The main contractor claimed, however, that there was no concluded contract and that the adjudicator consequently had no jurisdiction to decide the dispute.
The court said that, where works have in fact been carried out, it may readily find that there was an intention to create legal relations. Even if there was insufficient certainty about the agreement of a price or pricing mechanism, the court will readily infer that the person carrying out the works is entitled to be paid on a quantum meruit basis rather than reaching the more drastic position of denying the existence of a contract altogether.
It seemed clear “beyond argument” to the judge that there was in fact a contract in place. There was substantial “performance” on both sides, with the subcontractor carrying out the works and the main contractor making payments amounting to £654,000. While it is theoretically possible for parties to carry out works and to receive payments without having entered into a legally binding agreement, it was unrealistic to suggest that is what had happened, for a number of reasons, including a clear acknowledgement, by a key employee of the main contractor, that there was an agreed original scope of works with an agreed contract value, to be supplemented by subsequent variations. The adjudicator’s award was therefore enforced.