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The subcontract was ordinary. Carry out and complete an M&E installation. That鈥檚 what the order said 鈥� but it didn鈥檛 state the price. When a dispute arose, the subby took its case to adjudication, whereupon the main contractor told it and the adjudicator to clear off. The reason was the rule that the construction agreement needs to be an 鈥渁greement in writing鈥� in order to be eligible for adjudication. The order was said not to be 鈥渁n agreement in writing鈥�. True enough, it wasn鈥檛.

I will return to that case later. First, what鈥檚 all this about the need for the contract agreement to be in writing? Judges have observed that because 鈥渢he adjudication process is intended to be a swift and summary process, parliament thought it was inappropriate for an adjudicator to have to deal with disputes that often arise as to the terms of an oral contract鈥�.

鈥淒isputes as to the terms, express and implied, of oral construction agreements are surprisingly common and not readily susceptible of resolution by a summary procedure such as adjudication. It is not surprising that parliament should have intended that such disputes should not be determined by adjudicators under the act.鈥�

But the real truth is that the parliamentary draftsmen stole the idea from the Arbitration Act 1996, which says that 鈥渁n arbitration clause shall be in writing鈥�. The draftsmen for the Construction Act nicked that page and changed 鈥渁rbitration clause鈥� to 鈥渃onstruction contract鈥�. So it became statute law that for adjudication and 鈥減ayment rules鈥� under the Construction Act, the electrical subby鈥檚 contract has to be 鈥渋n writing鈥�.

Now, back to the dispute. Murray 黑洞社区 Services was the M&E subcontractor, Spree Developments the main contractor. The M&E chaps liaised directly with the employer鈥檚 consulting engineers, which arranged a project specification.

The spec was still being finalised when the work ought to have begun, so the main contractor sent a letter and order for the M&E work as per the consulting engineer鈥檚 scheme, saying, 鈥渇orward your costs once finalised and agreed with the consulting engineer鈥�. All this was on an official order of the main contractor. Is that an agreement in writing?

The Construction Act says that 鈥渢here is agreement in writing if the agreement is evidenced in writing鈥�. Well, said Murray鈥檚 barrister, my client has been to adjudication and the adjudicator agreed that those words mean that the order from the main contractor evidences their agreement. Then the adjudicator awarded Murray its money in the dispute. Spree wouldn鈥檛 pay, so Murray went to the High Court to ask that the award be enforced.

There is no justification for this rule in the Construction Act about contracts having to be in writing. Come on, parliament, hoof that clause out

The barrister for the main contractor argued that 鈥渨hat has to be evidenced in writing is literally the whole of the agreement, not part of it 鈥� or, alternatively, the terms material to the issue or issues in the dispute should be clearly recorded in writing鈥�. As to the price, the order merely said 鈥渇orward your costs once finalised and agreed鈥�. So, the order form specifically omitted the price.

It was conceded by Murray鈥檚 lawyers that the price is a vital term, and that if this order was to serve as an agreement in writing, the price must be recorded in writing. However, they argued that this did not mean that the price had to be stated: it would have been good enough if the words on the order intended the price to be that which was agreed between the subcontractor and another person such as the consulting engineer. That means it was okay for the method of calculating the price to be agreed, if not the actual sum.

So, the court had to interpret 鈥渇orward your costs once finalised and agreed鈥�. Was that an agreement on price? The judge said no. No matter what was finalised with the engineer, the main contractor could still challenge any computation of costs. The words did not form an agreement about a 鈥渧ital term鈥�, so the court would not enforce.

There really is no justification for this rule about contracts having to be in writing. Adjudicators are quite capable of deciding a dispute about an oral promise, known by the lawyers as an express term. Come on, parliament, hoof that clause out.

Tony Bingham is a barrister and arbitrator