How adjudicators are coping with contract validity disputes

Facts

Kilker Projects had a contract for refurbishment works at the Dorchester Hotel and paid Mr Purton to carry out extensive joinery works.  The parties never agreed what the terms of their contracts were and Kilker denied that any contract existed.  Richwood went to adjudication and the adjudicator (1) established the terms of a contract and (2) ordered Kilker to pay £147,000.  Kilker refused to pay and Richwood went to Court.

Held

1. There was a contract, not least because Richwood had done a large amount of work, and Kilker had paid approximately £654,000 for this work.  It was highly unlikely that the parties would behave like this without having any intention to enter into a legally binding relationship.
2. That contact was obviously a contract for construction operations and therefore the adjudicator had acted in accordance with his jurisdiction and that finding was valid and would be enforced.

Comment

Kilker tried to persuade the Court that because the dealings between the parties had been very vague, and were not a sufficient basis to find a contract; or else that the adjudicator had not sufficiently identified the whole of the contract.  The Court's response was extremely robust.  Although some commentators have suggested that adjudicators would struggle to deal with the difficult issue of whether a contract exists or not, where the parties have failed to clearly conclude one, the Judge indicated that one can rely upon the Court of Appeal's guidance in Percy Trentham v Archital Luxfer (1992).  In other words where a contract has already been performed wholly or substantially, there is usually going to be sufficient evidence of "intention to form legal relationships" to enable the Court to find the existence of a contract.

For more information, help or advice please contact Rob Langley on 0191 211 7975 or via [email protected].