This is the second part of my discussion on the consequences of not having a written and signed contract in place.
A s can be seen from the cases described in this article these consequences can be dire for your business, if you do not take the trouble to have signed and executed contracts to protect you in your business projects.
Can a JCT Building Contract be made even though it is not signed?
- The answer is, yes it can, but the wisest course of action is always to negotiate and agree a written contract and to make sure it is properly executed.
- What happens if a contract is not signed? Some of the construction decisions in the Technology and Construction Court illustrate the difficulties the courts face in their investigations of whether a contact has been made, where a signed contract does not exist.
- A Letter of Intent can be replaced by a contract even if the contract is not signed. In the Technology and Construction Court decision of Spartafield Limited -v- Penten Group Limited  EWHC 2295 the court decided that a Letter of Intent was replaced by a JCT Intermediate Form of Contract (the JCT contract) even though it had not been signed by the parties. The Contractor had declined to sign the contract after promising to do so. The Contractor began to wind down its resources on site unless payment was made under the Letter of Intent whereas the developer asserted that it was only obliged to make payment for works properly certified under the JCT contract and that the cessation of work by the Contractor breached the contract.
- The court decided that the JCT conditions were incorporated into the Letter of Intent because the sum contained in it was founded on the works contained in the cost plan and tender which had been based on the application of the JCT contract conditions and under the Letter of Intent the Contractor was required to meet the cost plan and tender.
- Although there is no principle of law that mere performance of the work must lead to a conclusion that a contract has been made, it is a very relevant factor pointing in that direction.
- The court decided it is perfectly possible to contract on the JCT form of contract despite it not being signed and executed. The TCC decided that although the Contractor said that they would not sign the contract “it was not legally entitled to withdraw from the replacement contract into which it had already entered…”.
- The court concluded that all the essential terms had been agreed. Although the JCT contract had not been signed nevertheless it had come into existence and it replaced the Letter of Intent.
- The lesson for all businesses is that it is foolhardy to leave the risks of a transaction to chance. There will some fundamental risks that you would be advised to exclude and if a signed contract does not exist these will not even have been addressed. Don’t be wise after the event. Protect your before the deal is done!