In Nichols v Earth Spirit Home Pty Ltd, the Queensland Court of Appeal held that a wholly oral contract was enforceable despite being illegal under the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act).

The case in brief

Mr Nichols (Applicant) and Earth Spirit Home Pty Ltd (Respondent) entered into a wholly oral agreement at the request of the Applicant, under which it was agreed that the Applicant would pay the Respondent a weekly management fee to complete the construction of 10 houses in Brisbane.  A dispute arose between the parties regarding the payment of the management fee.  The dispute was heard by the Queensland Civil and Administrative Tribunal (QCAT) and again in the Appeals Tribunal, where the Tribunal upheld that the Applicant was liable to pay the management fee to the Respondent.

On appeal to the Queensland Court of Appeal, the Applicant argued that the wholly oral building contract was unenforceable by virtue of section 67G of the QBCC Act, which provides that a builder who enters into a building contract which is not in writing commits an offence.

The Court of Appeal held that section 67G of the QBCC Act did not impliedly render the contract unenforceable.  The Court’s conclusion was supported by a consideration of the terms of section 67E(1) of the QBCC Act, which expressly provides that while entering into a building contract a party to that contract commits an offence under the QBCC Act, this does not have the effect of making the contract void or voidable.

Further, the Court distinguished section 67G to other sections of the QBCC Act which specifically make particular contractual provisions void.  The Court held that the absence in the Act of any other consequences for a failure to reduce the contract to writing contradicts the Applicant’s contention that the QBCC Act impliedly prohibits enforcement of a wholly oral building contract.

The Court also dismissed the Applicant’s contention that it was contrary to public policy to allow the Respondent to enforce the building contract, stating that there was nothing in the Respondent’s conduct to suggest that it had deliberately attempted to circumvent the Act and that there were otherwise no good reasons of public policy to find that the contract was unenforceable.

What next for your business?

This case provides a simple yet effective reminder for principals and building contractors to ensure that their contracts are put into writing.  While the Court of Appeal in this case upheld the enforceability of a wholly oral building contract, best practice is to ensure you capture the terms by reducing them to writing.  This also avoids the issue of builders committing an offence.