Does the Architect have the power to issue Instructions and Certificates when no formal contract has been executed?
It is advisable that formal contracts should always be signed by both parties before the Contractor commences any works in respect of the project. Accordingly the use of letters of intent is not to be encouraged, because they lead to a false sense of security to the Contractor. If the parties had contracted on what can be termed a simple contract where the contractor agrees to carry out work for a price and start and completion dates were agreed, the Architect would have no power to issue either certificates or instructions. Indeed, an Architect in these circumstances would have no power at all because there would be no mention of the Architect in such a simple contract. Certain clauses would be implied by statute or under the general law, but the presence of an Architect, Engineer or indeed a Quantity Surveyor for that matter, would not be one of them.
If work is being carried out under a true letter of intent, a very limited contract would be formed of the ‘if’ variety: ‘If you do some work, I will pay you a reasonable amount of money.’ But few, if any, other terms would be implied and certainly the Architect would again have no rights or obligations under this.
In a situation where the Contractor has been invited to tender on the basis of drawings and specification or bills of quantities and these documents include the clearest details of the contract to be executed, including how all the contract particulars will be completed and the Contractor submits an unqualified tender on that basis. Then if the Employer proceeds to accept the tender without any equivocation, a binding contract will be formed incorporating all the details of the drawings and other documents in the invitation to tender and, most importantly, incorporating the terms of the contract specified in the documents. The Architect will then be able to act exactly as if the parties had executed the formal contract documents.
If the acceptance or the invitation to tender makes reference to acceptance being subject to the execution of formal documents, no contract will be in place until that is done. Alternatively, tenders may have been submitted with qualifications or letters of acceptance may include conditions that make them counter-offers, but the qualified tender may have been unmistakably accepted or the counter-offer may have been accepted by the Contractor and a binding contract come into existence in that way. The possible permutations are probably endless and great care is required where a formal contract has not been executed.