The Importance of Being Evidenced - RJT Consulting Engineers Ltd. v. DM Engineering (NI) Ltd, Court of Appeal, 8 March 2002

Profession:Herbert Smith

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It is an important part of project administration for employers to ensure that their trade contractors/main contractors execute their Trade, Works or Management Contracts and that their consultants execute their professional appointment documents. It is equally important, for main contractors, to ensure that their sub-contractors and design advisers execute their sub-contracts and professional appointment documents.

Unfortunately, with deadlines to be met and potential purchasers or tenants wishing to take possession of the building or works, it is often easy to overlook the pitfalls of not getting documents executed. It is easy to fall into the trap of getting the trades/ consultants/sub-contractors on site, issuing them a letter of intent, and then paying them under that letter, often considerably above the ceiling amount specified in the letter or (even worse) having a letter with few terms and no ceiling on payment at all.

Then, suddenly, when the works are delayed or drawings have to be re-issued, and the parties look to the terms of the agreement to try to protect their position, the employers or main contractors find that they have little or no protection if the contract has not been signed up. This is because the contractor/consultant/sub-contractor may then be entitled to be paid on a quantum meruit basis. In other words, they may be entitled to be paid a reasonable amount for doing work of a reasonable quantity within a reasonable period of time - hardly the sort of contract that most employers or main contractors would willingly enter into with their contractors/consultants/ sub-contractors (see British Steel Corporation v. Cleveland Bridge & Engineering Co. Ltd. (1981) 24 BLR 94, [1984] 1 All ER 504).

If that weren't reason enoughÖ

There is now, however, a further reason to get those documents executed, and that follows the decision of the Court of Appeal in RJT Consulting Engineers Ltd. v. DM Engineering (NI) Ltd. on 8 March 2002.

In only its third judgement concerning Adjudication, and in particular the meaning of section 107 of the Housing Grants, Construction and Regeneration Act 1996 ("the Act"), the Court of Appeal held that all the terms of a construction contract have to be evidenced in writing if the contract is capable of being referred to adjudication, and that the mere existence of a contract with some of the terms set out therein does not suffice for that purpose.

The facts of the case...

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