an agreement (whether or not in writing) between an executing party and another party, where the executing party is engaged for any one or more of the following activities:
Agreement entered into and commencement of the Act
3.3. While the Act was passed into law on 29 July 2013 its commencement was subject to a Ministerial Order which was not issued until 15 April 2016.2 Pursuant to this Ministerial Order, under Statutory Instrument No. 165 of 2016 (âSI No. 165â), the Act only applies to construction contracts entered into after 25 July 2016.
3.4. SI No. 165 provides that 25 July 2016 is the date appointed pursuant to Section 12(2) of the Act and that the Act âshall apply in relation to construction contracts entered into after that dateâ. Section 12(2) similarly provides that âThis Act applies in relation to construction contracts entered into after such day as the Minister may by Order appointâ. The critical phrase, in the Ministerial Order, SI No. 165 and Section 12(2), is âentered intoâ. The interpretation as to when a contract is âentered intoâ, as opposed to when it is executed or purports to take effect from, has been considered extensively by the UK Courts.
3.5. In Christiani v Lowry,3 His Honour Judge (HHJ) Thornton QC held that a contract entered into after, but taking effect before, the commencement of the UK Act was nevertheless governed by the UK Act. Work under the contract began on foot of an 11 August 1997 letter of intent, which incorporated the UK standard-form engineering contract, ICE Conditions. A formal contract was signed on, and dated, 1 December 1998. The formal contract superseded the letter of intent and specified that âNotwithstanding the date of execution of this Agreement, the Agreement shall take effect from 11 August 1997â. The UK Act provides that disputes under construction contracts entered into after 1 May 1998 may be referred to adjudication. A dispute arose when Lowry deducted liquidated damages from contractual sums due to Christiani. Lowry argued against the right to adjudicate the dispute because the contract was to take effect from 11 August 1997, thus predating the UK Act. The adjudicator disagreed, deciding that the dispute could be referred to adjudication, and he therefore had jurisdiction to decide the dispute. Judge Thornton agreed with the adjudicator, holding that the letter of intent was clearly intended to have a limited life and the contract aimed to ensure it covered work undertaken before its execution. The judge held that the âNotwithstandingâ provision was an attempt to avoid the UK Actâs operation and was ineffective as the contract was actually entered into on 1 December 1998, after the operative date of the UK Act. Consequently, the judge held that either party was entitled to refer a dispute to adjudication. Lowry also argued that even if the UK Act applied, Christiani was estopped from referring the dispute to adjudication as it waived its entitlement to rely upon the Act by agreeing to the clause that the contract would take effect from 11 August 1997 which predated the UK Actâs operative date. However, this argument hadnât been advanced before the adjudicator. Consequently, Judge Thornton held that it would be unfair to allow Lowry to rely upon the ground, who, by failing to raise this argument previously, waived the right to argue it before the court. Judge Thornton emphasised that, in any event, an estoppel was not raised because such a clause depriving Christiani of its statutory right to adjudicate would be invalid as parties cannot contract out of the UK Act.
3.6. The key date, therefore, is the date on which the contract is entered into and not the date on which it is actually executed. In the construction industry it is common for contracts to be executed on a date following the date on which the parties actually entered into agreement. Under the Act, the date on which the contract is entered into is the one which determines whether any payment dispute thereunder may be referred to adjudication. The date on which the contract was actually entered into may be evidenced by an exchange of emails or correspondence or by the contractorâs commencement of the works on site.
3.7. In Atlas v Crowngate,4 Crowngate issued a letter of intent to Atlas on 18 December 1997 authorising expenditure up to ÂŁ1.3m. The letter stated that if a contract was signed it would have retrospective effect and include works executed under the letter. On 3 April 1998 the parties signed a UK standard-form subcontract. However, there were material matters unfinished between the parties when signing the contract, including the extent of the work scope and a finalised accurate bill of quantities. Thus, Crowngate issued a further letter of intent on 15 May 1998 increasing the authorised expenditure but dating it the same as the first letter despite its actual date. One year later, in final account discussions, the parties agreed to execute the subcontract without delay and a signed version was sent to Crowngate on 12 April 1999. Crowngate argued that the retrospective nature of the contract meant that the right to adjudicate could not be implied. However, Judge Thornton held that while a contract may include a provision so as to operate with retrospective effect, that provision does not affect the date on which the contract was entered into. The judge concluded that the activities, actions, expressions and statements in documentation emanating from Crowngate clearly pointed away from there being in the minds of the parties a concluded contract on or after 3 April 1998. The judge held that the second letter was inconsistent with Crowngateâs position for a contract being formed before 15 May 1998 and that the contract came into existence on 12 April 1999 and was therefore subject to adjudication.
3.8. Consequently, a distinction must be drawn between the date on which the parties enter into a contract and a provision within that contract which states that the contract is to have retrospective effect in respect of any work carried out prior to that date. Under the Act where a contract is entered into after the operative date of 25 July 2016, even if the contract purports to have retrospective effect, then (based on the Christiani and Atlas principles) either party may refer a payment dispute to adjudication.
3.9. In Earls v Waterloo,5 Judge Seymour QC held that where parties entered into a construction contract before the operative date, but varied the contract thereafter, the variation wouldnât usually bring the contract within the scope of the UK Act unless the variation by itself can be construed as a construction contract. The parties entered into an agreement dated 4 December 1996 but agreed (solely for the purpose of the court application) that the agreement came within the definition of a construction contract under the UK Act. Both parties also agreed that the UK Act did not apply to the agreement as it predated the operative date. The agreement was subsequently amended by a deed of variation on 20 July 1998, after the operative date of the UK Act. Earls sought a court declaration that the agreement, amended by the subsequent deed, was not a construction contract within that definition under the UK Act but merely amended the fee payable to Waterloo and deleted a sub-clause in the principal agreement. Earls accepted that while the deed was signed after the operative date, the variation itself did not amount to a construction contract. The main issue before the court was whether the 20 July 1998 deed (not in itself a construction contract) which varied the terms of the 4 December 1996 contract had the effect to bring the entirety of the two agreements within the scope of the UK Act. Judge Seymour held that the deed simply modified the fee provisions and so did not bring the principal agreement within the UK Act. He commented, however, that it is possible that a variation (which post-dated the operative date) to a construction contract (which pre-dated the operative date) could constitute a construction contract where the entirety of the varied agreement came within the scope of the UK Act. As the deed in itself in this case did not amount to a construction contract, the judge held that the adjudicatorâs decision related to a construction contract entered into before the operative date. Consequently, the adjudicator had no jurisdiction to act and accordingly his subsequent decision was a nullity.
3.10. In Yarm...