What are the implications of working on a project for which the contract hasn't been signed? Despite prompting from the QS, the contractor has failed to return the singed contract documents. It turns out he had issues with the liquidated damages amount following a reduction in the scope of works and want to negotiate. As project administrators, we are following correct contract procedure- issuing interim certificates, A.I.s etc. The contractor is also following correct procedure with regards to insurances and applying for an extension of time. It has come to the point where we have issued the practical completion certificate and the contract sill hasn't been signed. I have been told that should the project end up being disputed, it will be viewed as if a contract was in place for the project as we have been acting accordingly. Can someone help me get my head around this. How bad could this get? Cheers, P.S.- CONTRACT: JCT SBC05 w/o quants

Hi Pedro.

Tricky one that - we've got a panel of legal experts who contribute to CJ so I'll forward it to them and see what they think.

Cheers,

Will.

Pedrospedros,the short answer is that it depends...

The current approach adopted by the Courts confirms that where the parties propose that their agreement should be contained in a formal contract (e.g. JCT) to be drawn and signed in the future, this does not preclude the conclusion that they had already informally contractually committed themselves on exactly the same terms.

The Courts will therefore look subjectively at the conduct of the parties in deciding whether or not to enforce an unsigned contract. In terms of a possible dispute about what terms of contract apply therefore, this will very much depend on the circumstances.  When was the scope of works reduced?  Was this at the outset, or during the course of the works?  When did the contractor raise issues with the liquidated damages amount?  If the amount of LAD's is the only term that the contractor is taking issue with, then it would appear on this basis that the likelihood of a dispute will turn on whether any LAD's have been or are likely to be applied.

Furthermore, if this is the only term that is not agreed, it is likely on the basis of current case law that the Courts will seek to enforce the contract, but will look to the conduct of the parties and the facts as to the applicable LAD figure.

Ben Thornycroft, Beachcroft LLP - bthornycroft@beachcroft.com

 Hi Pedro,

In u r context Ben is right further as a Project Administrators u r going thr'o with the correct procedure only fault is u didn't force them to return the sigd cont . agreement  but as a contractor already they got the practical completion cert. also when u go to court judge will see the circumstance evidence and will study the LAD plus other issues  only the legal argument is have any legal/valid agreement so that too will discuss but according to the normal law if they can prove their grievances on reduction of scope of work and correctly EOT then those will be looked at.

so under the any form of contract any reduction on scope of wrk then what ever the loss on productivity HO losses plus loss on profit to be compensate.

 

 

As Ben said it's a matter of timing as I understand it. If the contract was issued for signing without objections from the contractor and he started work, not having objected then I believe that the courts would hold that a contract was in place.

If however the terms were objected to prior to the contract being issued for signing, or after the contract was issued but before work started, I believe the courts may look at the intent and hold that whilst the contract was in place the liquidated damages might not be enforceable.

If the contract was issued for signing after the work started and the contractor was unaware of the likely wording, you may have a problem with the contract as a whole.