If it walks like a duck …

It is extraordinary how often construction lawyers come across disputes that hinge on whether or not there was a contract between the parties. This often arises after all the work in question has been done. The reasons why parties want to raise the issue are many and various; for instance, a party that has performed badly on the project might wish to avoid being sued for breach of contract: if there is no contract there can be no such damages. Another reason is that the contractor might find that it has made a big loss that could not be recovered through its tendered rates and prices: by suing on an extra-contractual basis, such as quantum meruit, the contractor will hope to make a better recovery.

Most important contracts are written and signed, so no dispute arises about their legal existence. A significant number, however, come into being by way of the legal principles of "offer" and "acceptance". The contractor is asked to price and tender; this offer is accepted by the employer and in law the contract is created. Of course, there are variants, the most common of which involves further negotiation after the submission of the offer; this is sometimes accompanied by a "battle of the forms" with each party trying to get the other to agree its preferred terms. This process is, in legal terms, often confused by the conduct of the parties. For instance, when work begins before there has been a final agreement on all the terms.

Acceptance can be by word of mouth or in writing but it can also be by conduct. An example would be when an employer, after receipt of a lump sum quote, allows the contractor to start work; that may be considered as an acceptance of the tender unless qualified in some way.

Although there was no express acceptance, both parties acted as if the subcontract had come into existence

In Yorkshire Water Services Ltd vs Taylor Woodrow Construction Northern Ltd and others (16 May 2003) an issue arose between Taylor Woodrow and Biwater Treatment over whether there was any subcontract between them and, if there was, what terms were incorporated. By a certain stage in the negotiations they had agreed everything except Biwater's liability for performance guarantees for the project, a sewage treatment plant. This was in the context of extensive negotiations over two years, and while Biwater had been proceeding with the subcontract work for 18 months. Biwater then presented its proposal on the performance guarantee issue to Taylor Woodrow. Thereafter, although there was no express oral or written acceptance, both parties acted as if the subcontract had come into existence; for instance, Biwater applied for a takeover certificate under the contractual procedures.

The judge, Mr Justice Forbes, decided that a subcontract had come into being because Taylor Woodrow had consistently acted in such a way as to imply that it was its intention to accept Biwater's final proposal on the only matter that had divided them. A contract did exist; and the proof of that was the conduct of the party.