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Save trouble, get the contract right

It pays to get thing down in writing - if problems arise a well-drafted contract can save a lot of legal wrangling, says Suzanne Reeves

When seeking professional advice on problem jobs one of the first things you will be asked about is the contract. Is there one and, if so, what are its terms?

This is because the contract - what you have agreed to do, for how much and by when, together with its other terms - is fundamental to determining legal rights and entitlements.

Life is a lot easier for you and your advisors if an agreement is clear and unambiguous.

Get the contract right and, at a stroke, disputes are reduced and your chances of getting paid are improved.

The core elements of a legally binding construction contract are an offer to undertake work or supply goods and services which is accepted by the party requiring that work to be carried out. The essential terms of that contract also need to be agreed.

The law will sometimes fill the gaps, for example if there is no final agreement on the price, by implying that a reasonable sum should be paid and similarly a reasonable time allowed for completion if a timescale is not agreed.

But where a dispute arises it is much more difficult and costly to establish implied terms rather than parties being able to refer to an express agreement - which may have avoided the dispute in the first place.

In construction, the contractual process usually starts with an invitation to tender or estimate.

Negotiating an agreement

This is in effect an invitation to negotiate and the parties then narrow any differences they may have in a series of rejections and counter offers until they get to a stage where everything is agreed.

This eventually results in what the law regards as an acceptance. It must be unequivocal and unqualified, particularly on essential terms.

The acceptance can be oral, in writing or by contact, for example by starting work on site. Legally speaking an oral acceptance is perfectly acceptable, and more common than it should be.

In the interests of evidencing precisely what has been agreed and what has not, best practice dictates that any acceptance should be made in writing.

In practice this can mean acceptance by correspondence, the issuing of an order, a letter of intent or the signing of a formal contract.

It goes without saying that the agreement reached should be recorded in writing before works start on site and you should make that your golden rule.

But if it is not possible then at the very least ensure that where you have got to in the negotiations - what has been agreed and what is outstanding - is recorded.

As well, make sure that those outstanding points are resolved as soon as possible - all too often they never are.

In future articles I will be giving tips on how to get a contract right, covering the process from tender/estimate through to acceptance and giving practical tips for doing so.

Some of these tips may be well known and obvious but they bear repeating.

If all goes well, a contract may never be referred to. But it is invaluable when anything goes wrong.

Suzanne Reeves is a partner in Wedlake Bell solicitors construction team.