Builders win damages from client over contract breach

A contractor that was left more than £100,000 out of pocket when a customer cancelled a building project has been awarded damages by the High Court.

The compensation was awarded even though the firm didn’t have a signed contract.

The issue arose after the firm won a tender to build an extension to a house. During negotiations over final pricing, the customer was sent a blank copy of the proposed contract and the JCT Standard Building Contract which included an adjudication agreement. These were never signed.

During pre-contract meetings, a price was agreed, together with a commencement date and a 33-week contract period. The firm attended the site to start work and took delivery of equipment and materials.

However, because of changed circumstances, the customer wanted to put the job on hold and instructed the firm not to proceed. The firm claimed for aborted costs and the adjudicator ruled in its favour.

The customer claimed that no contract had been agreed so the adjudicator had no power to make such a decision.

The High Court ruled in favour of the firm. It said that in deciding such matters, the court had to apply an objective test as to whether the sides had to all outward appearances reached an agreement. That certainly appeared to be the case in this instance.

The judge said: “By their words and conduct the parties had reached a binding agreement on the essential terms of a contract, including as to scope, commencement and completion, contract sum, payment mechanism, the mechanism for change, valuation procedures and on the terms of the JCT form.”

The customer was therefore liable to pay the firm £104,852 to cover its costs and lost profits.

Please contact Simon Porter if you would like more information about the issues raised in this article or any aspect of contract law.