Often contractors and sub-contractors agree on work without a written contract. Whilst this absence presents issues, you may have legal protection from a concept called Contract by Conduct.
The Problem
I am a sub-contracted carpenter, and most of my work comes from one main contractor. We have a verbal agreement.
They send a list of tasks for the following week every Friday. Then I invoice them for each job at the end of the week. We agreed verbally that the contractor would transfer the payment into my bank account seven days after the invoice. I have worked this way for several months.
However, I did not receive payment on 31st March. I brought it up with the contractor, who said the total amount would arrive the following Friday. Unfortunately, this payment did not appear, and after chasing them, they claimed that one of my jobs was unsatisfactory. I immediately attended to it, only to be told they were still unsatisfied and had employed someone else to fix the problem. Since then, they have told me they are contra-charging me for the cost and halting all payments until they know this cost. They said that without a written agreement defining the payment terms, the payment is not late.
Can they contra-charge me for the new sub-contractors without notifying me that they still had an issue with the work and allowing me to correct it?
I have since sent three final payment demands without a reply. Nor have they sent a Pay Less Notice. The payment was due on 31st March 2017, so have they now missed the final date for payment and the chance to issue a Pay Less Notice?
Name withheld
Response
You entered a binding contract with the contractor when you commenced the work, as the commencement signifies your acceptance of their offer to carry out the work listed in the email. This is known as a contract by conduct.
Although written terms are absent, there are implied terms and terms established by your previous dealings with the contractor. These terms may be incorporated into the contract if there is a reasonable expectation that the term you rely upon would apply and no contrary terms.
Additionally, the Housing Grants, Construction and Regeneration Act 1996 (as amended) applies to your contract, meaning that part 2 (payment) of the Scheme for Construction Contracts also applies. Though you are unlikely to be entitled to stage payments (as the contract’s duration must be estimated to be at least 45 days), you are entitled to payment by the ‘final date for payment’. However, this date must be at least 47 days after the work’s completion, much longer than the seven days you agreed.
The answer to your question about Pay Less Notice time frames depends on whether your previous dealings or the Scheme for Construction Contracts applies. Despite these considerations, the contractor would likely have missed their chance.
On the contra-charge, the contractor must allow you to amend the issue. Your circumstances will determine whether or not your first attempt is considered an adequate opportunity. However, the contractor cannot deduct from the due amount without a timeous Pay Less Notice.
What is a Contract by Conduct?
Contract by conduct refers to an agreement that is not officially signed but where actions imply legally binding contractual terms.
What is a Contract?
To form a contract, you must prove that:
- Party A made an offer that Party B accepted
- Both Party A and Party B intended to form a legally binding agreement
- Both Party A and Party B could legally sign the contract
- At least one party has received consideration (goods or services of value) from another party
- The parties followed the terms and conditions
What is an Offer?
An offer is a promise to provide specific goods or services in exchange for another party’s goods or services. It must be accepted for a contract to exist.
An invitation to a deal is not an offer; it merely invites a party to make an offer. Statements of possible terms and information requests are also not considered offers.
Your offer expires when it is not accepted before a set deadline, is rejected, revoked, does not meet requirements or receives a counteroffer.
What is Acceptance?
To form a contract, Party B must accept Party A’s offer. They can do so verbally or via their conduct as long as they respond to and abide by the offer’s terms. Once they begin acting this way, a legally binding contract exists, despite the lack of a written agreement.
You can accept an offer in three ways:
Express Acceptance
Explicit agreement to the offer.
Implied Acceptance
The parties’ actions indicate that they agree to the offer and are in a legally binding contract. Any purchase of goods or services demonstrates implied acceptance.
Conditional Acceptance
Also known as qualified acceptance, conditional acceptance occurs when Party B accepts Party A’s offer providing that particular requirements are met. It is considered a counter-offer and must be accepted before a contract exists.
Get Our Legal Support
If you need legal support with a construction dispute, contact our Construction Disputes Solicitors by emailing us at info@witansolicitors.co.uk or completing our contact form. We will be happy to help you.
The advice provided is intended to be a general guide only and should not be viewed as providing a definitive legal analysis.
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