Recent construction cases round-up 2

United Kingdom

ACT Construction Limited v E Clarke and Sons (Coaches) Limited, Court of Appeal, 16.7.02 (2002) EWCA CIV 972

The Claimant undertook demolition and construction works for the Defendant. Nearly three years after the work had been discontinued and the Claimant had left the site the Claimant submitted a final account claiming nearly £200,000. The sum was the difference between the cost of the works calculated by the Claimant and the amount paid by the Defendant following various interim payment applications by the Claimant.

The Claimant issued proceedings for the recovery of the £200,000. The Defendant counterclaimed arguing that sums had been overpaid, that there was a failure to complete the works in a reasonable time and that there were also defective works. The Defendant also claimed that there had been an agreement between the parties that the works were to be completed for a total sum of £815,000. The Claimant denied there was any such agreement and explained that the work had been undertaken on a time and materials basis.

The court at first instance found that there was no contract because the scope of work and the price had never been agreed – the work was carried out on a non-contractual basis. The Court found that the Claimant’s entitlement to be paid had not been previously challenged by the Defendant and the Defendant was not therefore entitled to re-open the interim applications already paid.

The Defendant appealed the decision and the Claimant cross-appealed arguing that there was a contract to carry out the work on a time and materials basis.

The Court of Appeal found that the parties had conducted their business on an informal basis and that the decision to go ahead with the project lacked precision but held that there was a contractual quantum meruit. It held that there was no cap of £815,000 as claimed by the Defendant. Whilst the Judge at first instance was right that there was no “building contract in respect of some of the work, there was still an agreement to carry out work. Provided there were instructions to carry out work and acceptance there was a contract and the court could imply an obligation to pay a reasonable amount for that work.

In relation to the cross-appeal the Court of Appeal found that there was no course of dealing and that arrangements between the parties had never been confirmed in writing.

(1) Britvic Soft Drinks Limited (2) Bass Brewers Limited (3) Thomas Hardy Packaging Limited (4) Brothers Drinks Co Limited v (1) Messer UK Limited (2) Terra Nitrogen (UK) Limited [2002] EWCA Civ 548 Court of Appeal

The First Defendant supplied the Claimants with drinks which were found to be contaminated with benzene, a carcinogen. The benzene was contained in the CO2 supplied by the Second Defendant. The Defendants sought to escape liability by relying on exclusion and limitation clauses contained in their agreements with the Claimants. It was held by the Court in the first instance that there was a breach of contract by both of the Defendants in that the goods were not of satisfactory quality.

Mr Justice Tomlinson in reaching his decision carried out an analysis of exclusion and limitation clauses which had been inserted into the agreement between the parties. He held that it was wholly unreasonable for a supplier of a bulk commodity such as CO2 to seek to exclude liability in relation to the implied terms relating to satisfactory quality and being fit for purpose. The liability clauses failed the requirements of reasonableness laid down by the Unfair Contracts Terms Act 1977.

Furthermore Mr Justice Tomlinson held that any parties who wish to exclude the implied term of satisfactory quality must use clear words if they are to do so effectively. He held that the following clauses were not sufficiently clear.

“11.7 the customer shall... sub clause 11.7.3 determine the suitability, compatibility and proper use of the gas supplied by Messer... Clause 12 warranty 12.1 Messer warrants that the purity of the gas is not less than that laid down in the standard... Sub-clause 12.4 it is the customer’s responsibility to satisfy itself that the gas is suitable for the purpose for which the customer intends to use it. Recommendations relating to the use of the gas made by Messer, in writing or otherwise, are given in good faith but no warranties given as to the suitability of the gas for any particular purpose.

The Defendants appealed, but the Court of Appeal upheld the decision, agreeing with Mr Justice Tomlinson that the liability clauses failed the reasonableness test.

Allied Carpets Plc v Macfarlane and others (trading as the The Whicheloe Macfarlane Partnership), Technology and Construction Court, [2002] ALL ER (D) 81 (June)

The Claimant was the owner of a leasehold interest in a recently developed retail warehouse and the Defendant was a firm carrying on business as architects and structural engineers. His Honour Judge Bowsher QC heard a trial of a preliminary issue as to whether the Claimant was entitled to the benefit of a warranty.

The Claimant bought the warehouse from the liquidator following the liquidation of a company called “Harris. Harris had previously entered into an agreement for lease with a property developer (“Bicknell). As a property developer Bicknell had entered into a contract with the Defendants for them to act as architects and structural engineer in relation to development works at the warehouse. The warranty which was the subject of the preliminary issue was a warranty entered into between the Defendant and Harris.

Following its acquirement of the warehouse the Claimant had discovered faults with it and thereby wished to bring a claim against the Defendant under the warranty.

His Honour Judge Bowsher considered, amongst others, clause 6 of the warranty which provided:

“The company shall be entitled to assign the benefit of this deed and the rights and remedies available to it hereunder to any persons whom it shall also assign the benefit of the Agreement.

The Agreement being the Agreement for Lease.

The court however found that there was no evidence to suggest that there had been any assignment whether at law or in equity of the warranty to the Claimant. It found that the fact that the warranty had been handed over to the Claimant by the liquidator had no bearing on the question of the intention to assign the warranty.

The court thereby found that as there had not been an assignment the Claimant could not rely on the warranty between Harris and the Defendant.

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