Contract or No Contract? That Is the Question

Does not having a written contract with my builder affect my rights?

It is surprisingly common for building contractors, home improvement firms and tradespeople to carry out work without a formal written contract with the homeowner.

Unsurprisingly, however, it’s pretty common for disputes to arise surrounding specifications, time, payment schedules and completion in domestic construction, extension and home improvement projects.

Is There a Legally Enforceable Contract or Not?

The first thing people want to know is whether, despite work being carried out, there is a legally enforceable contract or not.

Firstly, It is a well-known principle that the fact that one party has not formally signed a contract does not automatically mean there no enforceable contract. This was at the centre of the seminal case of Brogden v Metropolitan Railway, which established the principle of ‘contract by conduct’ through a course of dealing. However, Brogden was a commercial contract and had a history of prior dealings.

In a further case, Lord Denning, in Gibson v Manchester City Council 1977, suggested that not all contracts are formed strictly on the basis of offer and acceptance, but one should look at the intentions, correspondence and conduct of the parties. This was reiterated by Steyn LJ in Trentham v Luxter 1993.

Case law has developed to establish whether or not there is a binding contract in existence, based upon what was communicated between the parties in both words and/or conduct. This may lead to the conclusion that they had agreed to the essential terms and had the intention to be bound into a legal agreement.

Is the Contract Finalised?

The courts have made it clear that even if there are some terms or issues that have not been finalised this does not preclude a contract from being in existence. Equally, however, one party signing the contract document is not proof positive that a contract has been incepted.

Of course, one may naturally conclude that if works have started and are progressing and payment has been made without objection the homeowner must have consented and given access to the property. However, while this is an important factor, it is not determinative of an agreement on all the terms.

While it would be unjust for the homeowner to receive the benefit of the work without paying for it, giving rise to a claim in restitution, this may not compensate the innocent party in the same way as damages for repudiatory breach of contract for example. This exposes the contractor and homeowner to risks that would otherwise are mitigated by terms and conditions. There is little that focuses the mind better than the promise of payment or the threat of compensation.

So, Should I Have a Contract?

What is clear is that builders and contractors and homeowners will be better placed with properly negotiated and drafted agreements which have been signed by both parties.

It one party starts work or pays for works without a formal agreement, you should proceed with care and commit the key points to writing, such as;

1. The price
2. The scope of works
3. The payment schedule
4. Time for completion

The lack of a formally signed contract does not necessarily mean a legally binding contract does not exist, but it can cause problems going forward.

For advice and assistance on legal business documents, contact the construction law experts today.