Contract formed? Does a Contract Exist Just Because Works Have Been Carried Out?

Are the pre requisites for a proper and enforceable contact in place? Is the contract formed?

Not all contracts exist in the written form, and the formation of oral contracts has always been notoriously difficult to identify, on what terms if any is the contract formed.

It is often considered that the fact that works have been carried out implies that a contract has been formed simply because work has been undertaken. This principle was considered in Purton (t/a Richwood Interiors) v Kilker Projects Ltd [2015] EWHC 2624.

In Purton, a sub-contractor carried out works at the Dorchester Hotel and the main contractor made a number of payments for the works, however when the subcontractor submitting its final account, the main contractor failed to respond with either a payment or the requisite Pay Less notice and the subcontractor duly commenced an adjudication and was awarded payment.

The main contractor claimed that due to the lack of a formal contract, the adjudicator had no jurisdiction to decide the dispute.

When the case proceeded to court, the court confirmed that where works have been carried out, it may readily find an intention to create legal relations even if there is a lack of certainty around the consideration (price) or the pricing mechanism. If this is found to be the case, the sub-contractor is entitled to be paid on a quantum meruit basis as opposed to the main contractor adopting position of denial of the existence of a contract altogether.

In this particular case it was deemed to be clear ‘beyond argument’ that there was a contract in place as there was substantial ‘performance’ on both sides in the form of the sub-contractor carrying out the works and the main contractor making a series of payments amounting to £654,000.

Whilst it is possible for parties to carry out works and to receive payments without entering into a contract, it was viewed extremely unlikely to have happened in this case judging by the evidence, which included an acknowledgement by a key member of the main contractor’s staff that there was an agreed scope of works and an agreed rate.

The court enforced the adjudicators decision.

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