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Why it pays to put contractual arrangements down in writing

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legal matters

As a lawyer I am a little irritated by those who believe that contractual arrangements cannot exist unless they are recorded in writing. The point was argued in its most extreme form when my plastering clients were refused payment for work which, everyone accepted, they had carried out over several weeks, because the plasterers had failed to sign and return the order acknowledgement. No signature, argued the contractor, meant no contract and no obligation to pay.

Needless to say, the court made short work of this argument and asked the purely practical question of just what did the contractor think the plasterers were doing on site if not carrying out work pursuant to the contractor's request?

The fact that contracts are agreed in any number of ways, of which the back of an envelope is one of the more sophisticated, is reflected in the Housing Grants Act which defines a contract in writing in a number of ways, the most bizarre of which is probably 'an exchange of written submissions in legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party and not denied by the other party in his response'.

Yes, it does require a bit of thought, I agree. The importance of writing important things down has, however, been emphasised in the recent case of Pride Valley v Hall & Partners (Contract Managers) . Pride Valley, a producer of speciality breads, engaged Hall to act as project manager for the procurement of a new factory. Pride Valley's managing director, Mr Rezaei, was keen to keep costs to a minimum and also wanted to use expanded polystyrene ESP panels in the specification. ESP panels were customarily used in food production factories but were known to be highly combustible.

When the factory was destroyed by fire after only a year or so in operation, fire experts agreed that the cause of the fire was cooking deposits, which had accumulated in one of the ovens, igniting. Once the oven flue became hot, however, it caused the ESP panels to ignite, after which there was no prospect of saving the factory building.

Pride Valley's Mr Rezaei said that Hall ought to have warned him of the dangers of using ESP panels and that, had it done so, the fire would have been limited or prevented. Hall accepted that it was under a duty to advise Mr Rezaei of fire risks. It said that it had advised Mr Rezaei fully of the risks he was taking but that its advice was rejected. Hall maintained that Mr Rezaei was so determined to keep costs down that he would not have accepted any alteration to the specification unless it had been a specific requirement of the planning or fire authorities or his insurers, all of which were prepared to accept the specification as built.

Hall went further to say that even if it had failed to give appropriate warnings, it made no difference since Mr Rezaei was so set on ESP panels he would not have listened anyway.

The judge in this case had, first of all, to decide what duties project managers in such situations owe. He identified a recurrent problem, namely that there is no recognised profession of project manager.

It is necessary, therefore, to decide what the project manager was asked to do before applying the appropriate professional test to determine whether it failed to do it. Hall had been engaged as quantity surveyor, so the evidence of Pride Valley's expert, who was an architect, was of limited use to the judge.

He found that Hall ought to have warned Pride Valley that the use of ESP panels seriously compromised safety. Hall was adamant that it had given this advice to Mr Rezaei. The judge found that it had not.

On what basis did he find against Hall? The judge said: 'Had Halls given the advice in the form in which they say they did, I have no doubt that they would, as a competent and prudent firm of quantity surveyors and project managers, have given that advice in writing.'

The message is clear. If your client rejects your advice, for heaven's sake make a note of it!

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