Contracts are not always pieces of paper to sign but can be as simple as a series of exchanges on Whatsapp, according to a recent High Court ruling over a construction dispute between a developer and a contractor.
Thrings’ Heads of Construction Natalia Sokolov takes a look at the dispute over the agreement of a construction contract and discusses what businesses might want to consider to avoid being caught out when agreeing contract terms.
Jaevee Homes v Fincham – the dispute
This dispute centred around correspondence between developer Jaevee Homes and demolition contractor Fincham over email and Whatsapp relating to the former contracting the latter for demolition works to a night club in Norwich.
Following an adjudication ruling in favour of the contractor, the developer bought a claim in the Technology and Construction Court (TCC) – a specialist court within the High Court – regarding whether a formal contract applied, or whether a basic contract arose through the informal exchange of the messages between the parties.
Within these exchanges, taking place between April and May 2023 was a quote for £248,000 that was agreed over Whatsapp, with monthly payment terms of 28-30 days following the date of invoice. Meanwhile, a demolition contract emailed to Fincham along with a purchase order was neither acknowledged nor signed.
Four invoices in total were issued by Fincham to the sum of more than £195,000 (plus VAT), but only part of this was paid by the developer who claimed that they were not liable for the outstanding sum because the contract being made over Whatsapp was not valid under the Housing Grants Construction and Regeneration Act 1996 (HGCRA) or the Scheme for Construction Contracts Regulations 1998 (SCCR).
The ruling
In taking a common-sense approach, the TCC ruled that the contract was concluded over Whatsapp, despite the formal unsigned sub-contract sent over email not being incorporated or accepted. The court also confirmed that both the HGCRA and SCCR should be implied into the contract. It found that all four invoices were valid, and therefore Jaevee Homes was ordered to pay a substantial portion of the outstanding sum due.
What does this mean?
Informal and casual conversations in the construction industry can have serious consequences along with the security and confidentiality risks using messaging platforms may bring.
Many developers and construction companies use platforms like Whatsapp whilst on site as a mainstream communication tool and, while this looks to be useful for day-to-day operations, it is not without legal issues.
Even if they could be considered poor and brief, any communications could constitute a formal contractual notice, changes to scope, extensions of time and programming issues, all of which may conflict with the formal written contract which may underpin the project works.
Most larger scale construction projects benefit from established formal project management portals to ensure the lines are not blurred between day-to-day issues and formal notices or contractual requirements, but this isn’t the same for every case and developers should be vigilant in ensuring such discussions take place in a more formal manner.
As shown in this case, the importance of clearly defining and formalising contractual arrangements in writing before work begins is vital, as is the avoidance of over-replying on messaging apps or verbal arrangements to avoid costly time-wasting disputes.
If in doubt, developers and other businesses concerned about the impact of similar correspondence on the legitimacy of their contracts should seek legal advice as soon as possible.
Thrings’ Construction and Engineering lawyers are well-versed in advising those in the construction and real estate industry in navigating ever-changing regulation, as well as managing contract agreements and disputes, with expertise in supporting clients with property portfolios, investment and transactions. For more information, get in contact today.
