In an ideal world, parties to construction contracts would spend time carefully mulling over the form of contract, specification and scope of works.

‍

They would rush off from site to carefully document agreements regarding additional work or extras. However, in the real world many small to mid-size contractors who trade on their hard-earned reputations take much on trust. More contracts than we might imagine are what our clients commonly refer to as “handshake agreements”, by which they mean an oral contract with a party who they trust implicitly to pay them for the work. Whilst this works well for many, unfortunately most small to medium sized contractors will at some stage of their business be faced with a client who for whatever reason can’t or won’t pay.

‍

This can be immensely difficult and stressful for a contractor which prides itself on paying suppliers and sub-contractors on time but which for the first time can’t do so because it is being starved of cash by its customer. The rumour mill at the builder’s merchant invariably goes into overdrive as stories of unpaid accounts and subcontractors suffering personal hardship spread quickly, often exacerbated by the customer’s insistence that it has paid all monies due and owing and that it is the contractor who is withholding payment. What can the contractor do?

‍

When the contractor consults a solicitor, the solicitor’s first question will be about the contract. Standard form contracts such as JCT have familiar dispute resolution clauses which set out a pathway for dispute resolution. Whilst we would not advise a contractor to proceed on the basis of an oral contract, allis not necessarily lost if things have gone wrong, and there are various ways in which we can assist even if the contract is not in writing.

‍

Many contractors are unaware of their ability to refer the matter to adjudication pursuant to section 108 of the Construction Act 1996. Adjudication is a process that was designed to enable parties to construction contracts to get quick decisions to allow money to flow through and is generally quicker than arbitration or litigation.

‍

FMGS has recently secured an award for a contractor arising from a customer’s non-payment of sums due in respect of an oral construction contract dating back to 2018. Whilst this case was unusual due to the parties’ individual circumstances and the delay (the contractor had delayed its final invoice whilst it worked with the customer on payment options and potential security for the debt) the adjudicator accepted our client’s evidence as to the terms of the contract and the value of the works which had been invoiced on a time and materials basis.

‍

Our experience in running this case has underlined the importance of careful record keeping to underpin a claim. Timesheets and invoices along with witness evidence will tell the story if proper records have been kept. Adjudicators respond well to high quality expert evidence which sets out the underlying documents in a way which makes them easily accessible and digestible to the adjudicator.

‍

Adjudication is sometimes referred to as “rough justice” (due to the speed of the process –which can be as little as 28 days from start to finish). Preparation, planning and the ability to respond to both anticipated and unexpected jurisdictional challenges is key.

‍

We are always happy to have an initial discussion – please do get in touch with Isobel Milburn or Nick Marshall whichever side of the dispute you find yourself on.