Getting the basics right
Sometimes a judgment will be interesting not because it definitively answers a point of uncertainty or deals with an existing principle in a new way, but because it is a reminder of how important it is to get the basic principles right. The recent case of Cartwright Pond Ltd v Wild [2021] EWHC 1600 (TCC) deals with the familiar topics of:
- The contract
- Responsibility for the provision of design information
- Repudiatory breach of contract and termination
and gives useful reminders on the importance of getting the basics right in relation to these topics, which will help avoid costly disputes.
Background
The contractor, Cartwright Pond, carried out works at Ms Wild’s residential property. The work was delayed and the contractor eventually left site, with each party claiming the other was at fault.
Despite the relatively modest value of the sums in dispute, it encompassed a whole ‘kitchen sink’ of issues. The parties disagreed about who was responsible for delay, the valuation of alleged variations, who wrongfully repudiated (terminated) the contract, the employer’s claim for defects and the cost of completion, and the contractor’s claim for loss of profit – even the terms of the contract were not agreed.
The contract
The starting point when trying to resolve any issue on a construction project is the contract. In this case, like many others, there was no signed contract. The specification identified the RIBA form as being the contract and identified some of the particulars which would need to be inserted into the RIBA form, such as the site location and the contract administrator but, not all of them.
Despite the express reference to the RIBA form the court held that it was not part of the contract, because no such contract was ever drawn up with all of the details included or signed. The court instead found that there was a so-called “simple contract” which incorporated the tender documents, various correspondence and other relevant documents.
Whilst such a finding is always fact-specific, the employer maintained throughout the case that the RIBA form applied because it was expressly referred to in the specification. This uncertainty could have been avoided by having the contract properly put together at the outset. This would have been beneficial to both the employer and the contractor.
The Employer must decide what it wants
Both parties blamed each other for delay. Part of the employer’s case was that she blamed the contractor for being insufficiently proactive in putting forward proposals for revised designs.
Although one must bear in mind that the court found that the contractor had no express design responsibility, it held that where an employer decides to vary the works then it is the employer’s obligation to provide the necessary details as to what it wishes to be done. Unless the contract provides otherwise, the contractor is under no obligation to provide alternative details for consideration, whether at all or within any specific timeframe, and is under no risk of being in breach should the consequence of this delay lead to overall delay to the works, unless the contractor voluntarily agrees to provide alternative details (in which case it is must do so within a reasonable time).
This sort of scenario arises frequently and this case is a useful reminder that where changes are requested, the employer has the obligation of deciding what it wants.
Contractors must be aware of such issues and take action if appropriate, such as submitting notices requesting extension of time and loss and expense – if such notices are not submitted as required by the contract then entitlements can be lost.
Repudiation
When projects go very wrong, as they did in this case, it is not uncommon for allegations of repudiatory breach to be made by both sides. In other words, both parties claim that they are entitled to terminate because the other party committed a serious breach of the contract.
The judge described the case as being “one of those cases where both parties allege that the other was guilty of repudiatory breach, which each party contends that it accepted as discharging the contract”.
Where a party is in repudiatory breach, the other ‘innocent’ party is entitled to either 1. affirm the contract (i.e. continue it) or 2. communicate its acceptance of the breach as bringing the contract to an end.
The innocent party is entitled to damages for breach of contract so the difference in outcome can be extreme depending on who is right – either the contractor is entitled to payment of profits and overheads on the remaining work, or the employer is entitled to payment of its losses including delay and the additional cost of having the work completed by others, which will usually come at an inflated cost.
Whether or not a particular action is a repudiatory breach is usually a topic of fierce debate. A commonly-used test of whether the breach is repudiatory or not is whether the breach deprives the innocent party of substantially the whole benefit of the contract or goes to the root of the contract, such that it makes further performance of the contract impossible, or whether one party so acts or so expresses himself as to show that he does not mean to accept the obligations of a contract any further.
Whilst the court found that the contractor was in breach in that it was in culpable delay and there were defects in the works, that:
- was not enough to demonstrate a repudiatory breach on the part of the contractor; and
- the employer did not clearly and unequivocally convey that she was treating the contract as being at an end.
Meanwhile, the employer failed to permit the contractor to return to site to continue the works or to confirm that she was willing to do so, which the court found was a repudiatory breach. Unlike the employer, the contractor emailed with a clear statement that it was treating the employer’s continuing silence as a breach which it accepted.
The employer was therefore the one in repudiatory breach and the contractor, as the innocent party, clearly accepted that breach.
Conclusion
This judgment is a timely reminder of the importance of getting the basis right on every project, no matter the value:
- Get the contract set up correctly at the outset.
- Be aware of each party’s obligations under the contract and take action to preserve your entitlements.
- When faced with issues such as repudiation, take stock of your position and make an informed decision about what to do. Getting this wrong can be extremely costly.
How CCC can help you
Whatever stage your project is at, CCC can provide advice and assistance. This will ensure that practical steps are taken so that you achieve the best outcome when dealing with variations, just as we have helped many others. This includes:
- Providing advice to help you make sure that you are taking the right steps at the right time.
- Assisting with interim applications and final accounts, and presenting backup to variation accounts. It is important to do this in a way that is likely to result in a good outcome when presented to a third party such as an adjudicator.
- Formal dispute resolution, such as adjudication and arbitration.
