Early perceptions of allowing adjudication of oral contracts

AuthorJennifer Charlson
PositionDepartment of Built Environment, University of Wolverhampton, Wolverhampton, UK
Pages233-249
Early perceptions of allowing
adjudication of oral contracts
Jennifer Charlson, Robert Baldwin and Jamie Harrison
Department of Built Environment, University of Wolverhampton,
Wolverhampton, UK
Abstract
Purpose – The purpose of this paper is to consider the implications of the admission of oral contracts
to statutory adjudication proceedings. A major criticism of the Housing Grants, Construction and
Regeneration Act 1996 (“HGCRA 1996”) was that Section 107 required contracts to be “in writing” for
the parties to be able to use statutory adjudication. In response, the Local Democracy, Economic
Development and Construction Act 2009 repealed Section 107 of the HGCRA 1996. This paper considers
the implications of the admission of oral contracts to statutory adjudication proceedings, whereby
adjudicators’ may now have to determine the exact nature of oral agreements. The critical literature
review has highlighted that there is a perceived risk that, by allowing oral contracts to be decided
through adjudication, there could be an increased risk of injustice (as the adjudicator may have to decide
oral testimony about contract formation). Adjudicators may now have to determine the exact nature of
oral agreements. The critical literature review has highlighted that there is a perceived risk that by
allowing oral contracts to be decided through adjudication there could be an increased risk of injustice
(as the adjudicator may have to decide oral testimony about contract formation).
Design/methodology/approach The questionnaire responses of 38 construction industry
professionals were analysed by identifying facts and salient themes. The research aims to identify to
what extent the changes have widened the scope for entering into adjudication proceedings and
whether there is an increased risk of injustice due to the short timescales involved.
Findings – There was signicant agreement that parties to an oral agreement have an increased risk
of injustice through wrong interpretation of the terms and signicant disagreement that allowing oral
contracts to be referred to adjudication will encourage the use of oral agreements. In addition,
construction industry professionals were interviewed in the Midlands, UK, to obtain their opinions,
views and perceptions of the admission of oral contracts to statutory adjudication.
Originality/value – The research is anticipated to be of particular benet to parties considering
referring an oral contract to adjudication.
Keywords Adjudication, Dispute resolution, Local democracy, Oral contracts,
Economic Development and Construction Act 2009, Housing grants,
Construction and regeneration act 1996
Paper type Research paper
1. Introduction
Part VIII of the Local Democracy, Economic Development and Construction Act 2009
(“the LDEDCA 2009”) came into force in England and Wales on 1 October, 2011. The
provisions included in Part VIII of the LDEDCA 2009 deal with construction contracts
and contain various amendments to Part II of the Housing Grants, Construction and
Regeneration Act 1996 (“the HGCRA 1996”). A controversial amendment was the repeal
of Section 107 of the HGCRA 1996 which provided that only contracts made in writing
could be adjudicated.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1756-1450.htm
Allowing
adjudication of
oral contracts
233
International Journal of Law in the
Built Environment
Vol. 6 No. 3, 2014
pp. 233-249
© Emerald Group Publishing Limited
1756-1450
DOI 10.1108/IJLBE-02-2013-0004
Entwistle and Gemmell (2010) suggest that the repeal of Section 107 is the most far
reaching of the changes made by the LDEDCA 2009, and that the changes made in this
area have the potential to increase both the number of cases and the time taken to reach
an adjudicator’s decision. Furthermore, Atherton (2010) contends that by allowing oral
contracts to be decided through adjudication, there could be an increased risk of
injustice, and there could be an increase in challenges to the adjudicator’s jurisdiction.
2. Judicial interpretation of “oral contracts”
The leading authority on the matter of “oral contracts” comes from the case of RJT
Consulting Engineers Ltd v. DM Engineering (Northern Ireland) Ltd [2002] wherein a
dispute arose, which the claimant sought to refer to adjudication. The claimant’s right to
seek adjudication was disputed by the defendant on the basis that their agreement was
not in writing, as required by Section 107 of the HGCRA 1996. The defendant applied to
the court for a declaration to that effect. HHJ Mackay refused to grant the declaration
holding that the contract was, in fact, in writing by virtue of the case falling into
category Section 107(2)(c) of the HGCRA 1996. However, HHJ Mackay did grant leave to
appeal the decision. The decision to refuse the declaration was overturned by the Court
of Appeal where the leading judgement (provided by Lord Justice Ward) set a
cornerstone for how Section 107 of HGCRA 1996 was subsequently interpreted. Lord
Justice Ward stated that:
On the point of construction of Section 107, what has to be evidenced in writing is, literally, the
agreement, which means all of it, not part of it. A record of the agreement also suggests a
complete agreement, not a partial one (RJT Consulting Engineers Ltd vDM Engineering
(Northern Ireland) Ltd [2002] EWCA Civ 270, 19).
Although agreeing with his fellow Court of Appeal Judges’ decision, Lord Justice Auld’s
reason was subtly different. His Lordship states:
I do so, not because the whole agreement was not in writing in any of the forms for which s 107
of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996) makes
provision, but because the material terms of the agreement were insufciently recorded in
writing in any of those forms (RJT Consulting Engineers Ltd v. DM Engineering (Northern
Ireland) Ltd [2002] EWCA Civ 270, 21).
Atkinson (2002) states that the interpretation of Section 107 was considered very
carefully in this case, as such it has been followed by the lower courts and adjudicators
faced with jurisdictional challenges. This resulted in a large number of cases, including
Mott MacDonald Ltd v. London and Regional Properties Ltd [2007] and BSF Consulting
Engineers Ltd v. MacDonald Crosbie [2008], where the jurisdiction of the adjudicator
was challenged on the basis that not all terms of the contract were in writing.
When considering where there is a written contract in place that would satisfy
Section 107, but it has subsequent variations in RJT v. DM, Lord Justice Ward said:
Once jurisdiction to refer the matter to adjudication was established the judge held, and in my
judgment rightly held, that it was proper within that adjudication to decide whether or not a
particular term had been incorporated into the contract. The scheme would be emasculated if
a party were able to deprive the adjudicator his power to decide simply by putting up an
argument that some term was or was not incorporated into an agreement otherwise accepted
to be in writing (RJT Consulting Engineers Ltd v. DM Engineering (Northern Ireland) Ltd
[2002] EWCA Civ 270, 11).
IJLBE
6,3
234

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT