Do we hate paperwork so much that we are prepared to start multi-million pound construction projects without a contract?
The NBS Contracts and Law Survey 2018 (like its predecessors) highlights that roughly 1/3 of projects start without a proper contract being finalised. Like the 2015 survey it found:
Just over two thirds (67%) tell us they typically sign contracts before construction commences. That still leaves 30% who sign only after work has commenced. Three percent either do not typically sign contracts or do so only after completion. This must be a cause for some concern.
David Mosey, a solicitor and author of PPC2000, calls the delay in signing a contract ‘a depressing convention of any construction procurement process.’ What really happens to stop you getting your contract signed? Is it one of the factors set out here?
Failing to sign a contract is not good practice. Contract set out the expectations of the companies involved, define the works and services to be provides, describe the aims that the project has to achieve, create trust and help to motivate the people involved.
In RTS v Molkerei the Supreme Court said:
The different decisions in the courts below and the arguments in this court demonstrate the perils of beginning work without agreeing the precise basis upon which it is to be done. The moral of the story to is to agree first and to start work later
What should you do?
You should treat this not as good practice BUT as the bare minimum – agree all relevant contracts before you start work, and if you can’t agree the full contract use a proper letter of intent for limited initial works. But don’t ignore that paperwork or treat it lightly.
If you’re in any doubt, the contract should come first!
[Updated November 2018]