PETER BLAKE


Peter’s legal advice forum


BB&D’s resident lawyer, Peter Blake, is here every issue offering the best legal advice. Thismonth, it’s the danger of not creatingwritten construction contracts


Hello readers! A very happy new year to you all - I hope you had a good Christmas and that you’ve returned to work looking forward to the year ahead.


and what happens when they are not recorded in writing. While construction contracts


T


do not have to be carved in stone, many firms are exposing themselves to unnecessary and costly legal disputes which could easily be avoided by taking time to set out basic terms in writing. Whether you are a large


contractor or SME, do not be misled into thinking that the disadvantages of having to agree and draw-up a contract outweigh the advantages of having a written and signed agreement in place if the project runs into problems. Actually, what many firms do


not realise is that in the absence of a formal contract, the court will consider all exchanges between parties in order to determine what has been agreed, which may leave you with a contract anyway - just an ‘accidental’ one which you never signed and may not have intended to agree. Admittedly, in the real world,


construction works often begin before a contract is signed, with the urgent need to start work for a variety of commercial reasons being the most common reason. This usually results in a ‘letter of intent’ being used to plug the gap left by the absence of a contract and protects both parties without delaying the project. Such situations, however, are not ideal, due to the


o kick off my advice for 2012, I’m going to look at construction contracts


legal uncertainty created. What you need to be aware of


is that a letter of intent can have different effects depending on how it is worded. No matter how well written, the letter of intent can still give rise to great uncertainty - RTS vMuller being one case in point. Three courts reached different conclusions as to the effect of the same letter; the Supreme Court ultimately deciding that a contract had arisen, despite the parties agreeing that no contract would arise until one was signed. TheMuller case perfectly


demonstrates how a contract may arise ‘by accident’. If there is a dispute as to what was agreed, the courts will apply an ‘offer and acceptance’ analysis to communications in order to understand what the parties have agreed. This can result in some surprises for parties that have not monitored their negotiations closely. In theMuller case, the letter of


intent referred to a form of contract but, crucially, the letter had been allowed to expire and was not replaced with anything. The courts then had to analyse all the exchanges between the parties, following the expiry of the letter of intent, in order to decide what had been agreed. So my advice would be put a


signed contract in place as soon as possible. This will help avoid unnecessary disputes as to what has been agreed and, more importantly, not expose you to the consequences of an ‘accidental’ contract as interpreted by the courts.


See you next month! 


For more information visit www.prettys.co.uk


Itmay seeman inconvenience which could slow down the productivity of a


project, but getting a contract written can savemany legal problems down the line


“If there is a dispute as towhatwas agreed, the courtswill apply an ‘offer and acceptance’ analysis to communications in order to understandwhat the parties have agreed”


Peter Blake is head of construction and a Partner at law firm Prettys. As a lawyer with over 20 years’ experience of construction law, Peter regularly advises clients on a range of contractual and other legal issues. As well as being instrumental in Prettys’ operation of the National Federation of Builders’ helpline, Peter regularly presents to the construction industry on legal topics.


16 | British Builder & Developer | BritishBuilder.co.uk


© Robin Jeffries 2011


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