Problem: Strong relationship with contractor jeopardised by waiting for a contract?
I have been working on a large building site for the past six months as a contractor. The site has been split into five phases, and I have almost finished phase 2, and have submitted my tender for the next 3 phases.
I have done a few small jobs on phase 3 which I have been paid for at my tendered rates. I have spoken to the contracts manager about a written contract for the remainder of phase 3 and phases 4 and 5, and he replied: “Just crack on with it”. But I have my reservations about doing this without a contract or at least a letter of intent.
I have had no problem with payment in the past from this company, and don’t expect any problems in the future. I would like some advice about how to tackle the situation, as I do not want to upset what has so far been a good working relationship, and where I stand health and safety wise working on a phase of the site that I have no contract for.
Response: Importance of waiting for a written contract from contractor to prevent disputes
Although I understand that you do not wish to upset a good client that has, no doubt, provided a good source of income, it is vital that you ensure you have a written contract in place before you start your next phases.
What you are essentially doing when you record the agreement in writing with your client, is taking out insurance on the contract. No matter how big or small a construction project may be, the majority of contracts once signed, will be stored and never the see the light of day again. However, when there is a construction dispute, the second thing that a company will do (the first being to instruct its lawyers!), is to open the bottom drawer of the filing cabinet and take out the contract that has been laying there since the start of the project.
As regards so-called letters of intent, I am definitely not a fan!
A true letter of intent only expresses a party’s intention to enter into a contract at a future date. Yet the amount of letters I have seen that are headed ‘Letter of Intent’, which are in fact binding agreements. I understand that on some projects, there is a need to start the works very quickly, meaning that a contractor needs to be appointed on at least the work that are at the early stages of the programme, and where this happens, a combined Early Engagement Letter and Letter of Intent can be drafted which allows a contractor to commence part of the works under a contract, whilst waiting for the main works contract to be drafted out.
Regarding health and safety, although no doubt this will form part of your written contract, there will still be strict requirements that you will need to observe, which are implemented by statute, for example, the CDM Regulations 2015. As an employer you will have duties that are also governed by statute, for example, to provide adequate information, instruction, training and supervision to enable your operatives to carry out their work in a safe manner. Even self-employed persons have duties under construction law in relation to their own health and safety and ensure that their work does not put others at risk.
© Michael Gerard 2017
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.