It is very likely that most people reading this article have already entered into some form of contract in the last 24 hours. If you have got on a train, parked your car or bought a coffee you have already entered into a contractual relationship with somebody today.
In the ideal world every contract would be documented and signed by all the parties. There would never be a dispute about what the contract meant and all employers and contractors would complete the contract work on time and get paid on time. Even lawyers appreciate that we do not operate in the ideal world and that the construction industry is no different than any other. We accept that it is impractical and often un-commercial for every building contract to be documented. We also appreciate that employers or customers are often put off by the very thought of signing standard terms of trade or similar such types of documents. It is for this reason that most building contracts that are entered into every day are either partially documented or purely verbal.
This type of contract is equally as binding and as enforceable as any other. Lawyers recommend that contracts be documented in order to try and prevent there being disputes over their terms. If contracts are written properly and all the parties consider them before signing, it is very rare that a dispute will arise in connection with what was agreed and not agreed at the outset.
When contracts are formed verbally or are partially documented problems can arise over content and interpretation. It is quite possible for two honourable and honest parties to enter into an unwritten contract and still have diametrically opposite views on what the contract requires them to do. Over many years the courts have been asked to reach judgements on this type of dispute. Hundreds of years of case law confirms that the courts will allow parties to insert unwritten terms into contracts.
What is an unwritten term?
It is one that is implied by law. These are, not surprisingly, called ‘implied terms’. One of the most common and widely used implied terms is that which relates to when the contract work will be completed. The courts will recognise, in the absence of a written document evidencing what was agreed between the parties at the outset, that all the parties will perform their contractual duties in a timely and diligent manner. The most common question asked to contract lawyers is what should be done when that contractual duty is not honoured.
Persons who have contracted with a person who has not complied with the duty to perform diligently should not automatically assume that they are entitled to terminate the contract or pursue a claim for damages. The courts have for some time recognised that the party in delay should be put on notice of the intentions of the other party before such steps are taken. It is absolutely essential to get these steps right before doing anything further. Getting them wrong can be costly!
Before an injured party is entitled to terminate the contract or pursue any claim for damages, notices must be served and additional time must be allowed for the person in delay to remedy it. The party in delay must be told of the intentions of the injured party. He must be told what will happen if he does not complete the work and he must be granted further reasonable time to complete the work. The additional time granted must be carefully considered and be reasonable in all circumstances. In some instances a failure to undertake these measures properly will lose you the right to recover any damages no matter what loss you have suffered and no matter what the extent of the delay.
George Davies Solicitors advised one particular client who was successful in a landmark case involving a party not serving the correct notices and therefore losing its entire right to claim any loss. The wording of notices in matters like this is of critical importance. The party making the claim in this particular case alleged there had been a delay in the performance of the contract for over eighteen months and that the damages they had sustained as a result ran to a sum in excess of £1.8m. There were several reasons why, after a nine week trial, the claim failed in its entirety but one of them was in connection with the nature and timing of the notices that were served prior to the termination of the contract.
Notices must contain the right contents and must be served properly and at the right time.
We, and more importantly the client involved, would recommend that our Construction or Litigation Departments be consulted generally in matters such as these before notices are served and before simple and costly mistakes are made.
