The Court of Appeal has issued a reminder of the fact that simply because two parties had proposed that their agreement be contained in a formal contract to be drawn up and signed in the future, this did not preclude the conclusion that they had already informally contractually committed themselves on exactly the same terms.
The residential occupier/employer’s argument that the adjudication clause was an unfair term was dismissed on the grounds that it was the consumer/employer who had stipulated that a standard form contract should apply (the JCT Standard Form of Building Contract, Private with Quantities, 1998 Ed.) to the works in the first place.
Lord Justices Pill and Clarke and Mr Justice Rimer – Court of Appeal (Civil Division)
Mr. Boston bought two adjacent flats with a view to converting them into one large flat. He appointed an architect and a quantity surveyor. The latter invited tenders from a number of contractors, including B&L. The tender provided that the JCT Form would apply, subject to the variations listed. The JCT Form contained a clause entitling parties to refer disputes to adjudication.
The QS sent B&L a letter accepting their tender, stipulating that the contract would be executed under the JCT form and that, should the project not proceed, B&L’s reasonable ascertainable costs would be recoverable from Mr Boston. The letter was not countersigned nor was the contract ever executed.
Works progressed under the contract and in due course, when a dispute arose, it was referred to adjudication. Mr Boston failed to comply with the adjudicator’s decision and B&L sought an enforcement order from the court.
It was common ground that a contract had been entered into. However, Mr Boston resisted the application for enforcement on the ground that the JCT form had not been incorporated and therefore the adjudicator had no jurisdiction (Mr Boston was a residential occupier, which meant that B&L’s right to adjudication under the HGCRA was excluded). In the alternative, Mr Boston argued that the adjudication clause was an unfair term and therefore unenforceable pursuant to the Unfair Terms in Consumer Contract Regulations 1999 (“UTCCR”).
At first instance, the judge found that the JCT form had not been incorporated into the contract, therefore the adjudicator had no jurisdiction. He also commented that, in his view, Mr Boston’s alternative case, namely that the adjudication clause was an unfair term and therefore unenforceable, would have failed. B&L appealed against the judge’s decision, whereas Mr Boston asserted that the judge had been wrong to rule against his alternative case under the UTCCR.
Ruling of the Court of Appeal
The Court of Appeal unanimously allowed the appeal, holding that, by the time the QS sent the letter to B&L, all of the terms of the contract had been agreed. The words “should the project not proceed” in the QS’ letter related to the limited period between the writing of the letter and the commencement by B&L of the work on the property, during which period Mr Boston impliedly retained the right to resile from the contract. In the event that he exercised that right, he would compensate B&L for their reasonable costs of any preparatory work performed. The fact that two parties proposed that their agreement should be contained in a formal contract to be drawn up and signed in the future did not preclude the conclusion that they had already informally contractually committed themselves on exactly the same terms.
As regards the second issue, the Court of Appeal agreed with the judge at first instance, holding that the adjudication clause was not an unfair term on the basis that the consumer was the party who had stipulated, through his agent, that the standard form would apply. B&L was entitled to assume that Mr Boston had been advised by the QS as to the consequences of contracting on those terms.
Thus, on appeal, the adjudicator was found to have jurisdiction and B&L were entitled to enforcement of the adjudicator’s decision.
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