Renowned American film producer Samuel Goldwyn once said: ?A verbal contract isn?t worth the paper it?s printed on.??? This warning is wise, particularly for those with construction jobs. Those who have learned their lessons would tell you that although informal agreements and oral bargains are common in the construction industry, they rarely sustain in legal disputes.

Formal and written agreements naturally take longer to produce, as they require careful and thorough assessment of all present and foreseeable factors. These agreements also provide very little flexibility for subsequent modification or even renunciation, because the underlying promises are visible and open to only one interpretation.

Unfortunately, in order to win contracts quickly and quietly, many with construction jobs have chosen to avoid written agreements. The result can be devastating, as demonstrated in the recent Court of Appeal case Furmans Electrical Contractors (the Contractor) vs. Elecref (the Client) in 2009. The two sides entered into agreement to install electrical cabling on a meterage-installed basis, but later changed this to a daily rate. The Contractor charged the daily rate on a nine-hour day for four men, even though the Client was working 11-hour days.

The Client had been paying the Contractor using the invoices provided by the latter. However, disputes arose when the Client finally realised that its working hours were different from those of the Contractor and refused to make any further payment. At court, the Contractor argued for its own case that there was an oral agreement, while the only proof the Client could find to contradict such argument was in the form of a fax. Worse, the Contractor claimed that it had never received the fax sent by the Client.

The case is likely to be one of the messiest cases anyone has ever heard of. However, the valuable lesson learned by those with construction jobs is that without a formal and written contractual agreement, a client could simply refuse to pay for the hard work done by its contractor. Gentlemen?s agreement in the form of a handshake is now a thing of the past. No written agreements, no construction jobs.