18 JAN 2021

Keating on
Construction
Contracts 10th
Edition
Sweet & Maxwell

This PDF Contains

1. Introduction, p.1

Chapter 2: Formation of Contract, p.15

Chapter 3: Construction of Contracts, p.42

Chapter 4: The Right to Payment and Varied Work, p.83

Chapter 5: Employer’s Approval and Architect’s Certificates, p.116

18 JAN 2021 PAGE 1
Keating on Construction Contracts 10th Edition
Chapter 1: The Nature of a Construction Contract
1. Introduction

CHAPTER 1

THE NATURE OF A CONSTRUCTION CONTRACT

CONTENTS
1. Introduction 1-001
2. The Persons Concerned in a Construction Contract 1-003
3. Contract Documents 1-015
4. Contractual Arrangements 1-023
5. A Typical Construction Operation—Traditional Procedure 1-029
6. Design and Build Contracts 1-034
7. Management and Construction Management Contracts 1-044
8. Contracts with Financial and Operating Obligations 1-045
9. Partnering 1-047
10. Smaller Works Contracts 1-050
11. Dispute Resolution 1-052

1. INTRODUCTION
1-001

“A building contract is an entire contract for the sale of goods and work and labour for a
lump sum price payable by instalments as the goods are delivered and the work is
done.”1

1-002
Relation to the general law of contract. The phrase “construction contract” is used
to include any contract where one person2 agrees for valuable consideration to carry
out construction works, which may include building or engineering works, for another.
The phrase thus covers every contract from, for example, a simple oral agreement to
repair a garage roof to elaborate public works contracts. The law of construction
contracts is a part of the general law of contract3 and is not governed by any general
codifying statute.4 All of the elements of a simple contract must be present5 and the
general rules of performance and discharge of contract apply to a construction
contract. Where the general principles of the law of contract apply to problems of
common occurrence in construction contracts they have been dealt with in detail in
this book. However, where they apply to problems which rarely arise in construction
contracts, e.g. mistake avoiding a contract, a mere outline has been given and for
further information reference must be made to one of the standard works on the law
of contract.6
 2. THE PERSONS CONCERNED IN A CONSTRUCTION CONTRACT
1-003
The employer and the contractor. The employer for whose benefit the work is
carried out and the contractor who must carry out the work are the principal parties to
a construction contract. The employer has frequently been termed “the building
owner”, and the contractor the “builder”7 or the “building contractor”. For the sake of
clarity and because both the Standard Form of Building Contract8 and the
Infrastructure Conditions of Contract (2014 edition)9 use the terms, the parties are
generally referred to in this book as “employer” and “contractor”, unless a reference to
a decided case involves the use of other terms.

1-004
Other persons. In addition to the parties to the contract, there are usually several
other persons involved in a construction contract. These may include the architect or
engineer, the quantity surveyor and other consultants. Although they are not parties to
the construction contract, they may materially affect the legal relationship between the
contractor and the employer. There is no requirement of the law that there shall be
such persons employed in a construction contract and many smaller contracts are
entered into and completed without their employment.

1-005
The architect. The term is ordinarily used in this book to describe the person who is
engaged by the employer to carry out the duties of an architect referred to in Ch.14.10
In the broadest sense its duties are to prepare plans and specifications and supervise
the execution of the works on behalf of the employer so that they may be completed in
accordance with the contract. The architect is therefore the agent of the employer and
owes the employer a contractual duty of professional care. The employer and
contractor ordinarily contract on the understanding that many matters may arise
under the contract where the architect has to make a decision in a fair and unbiased
manner.11 A surveyor or some other person may carry out the duties and occupy the
position of an architect in a building contract.

1-006
The engineer. In an engineering contract the person who carries out the duties and
occupies a position similar to that of an architect in a building contract is normally
termed the engineer.12

1-007
The quantity surveyor. The quantity surveyor is employed by or on behalf of the
employer to estimate the quantities of the proposed works and set them out in the form
of bills of quantities for the purposes of tender. The quantity surveyor may also be
employed to measure and value variations and to do such other works of measurement
and valuation as the architect may require.13 In some cases, particularly small
contracts, the architect may perform the tasks of the quantity surveyor. In engineering
contracts, the task is generally performed by the engineer.

1-008
Consultants. In large construction contracts, consultants other than the architect and
quantity surveyor or the engineer are often engaged by the employer for special
purposes. There may, for instance, be a structural engineer, a mechanical and electrical
engineer, an acoustics consultant or others. Their roles are often not defined in the
contract but generally their functions are confined to the design and supervision of
those parts of the works within their special expertise.

1-009
 Project manager. In some large construction contracts, the employer may engage a
project manager in addition to the architect and some or all of the consultants
mentioned above. A project manager’s role is organisational but its exact relationship
with the architect, consultants, contractor and sub-contractors varies from one contract
to another. Contractors sometimes also employ a person called the project manager.

1-010
Clerk of works. In large construction contracts, the employer may also employ a
clerk of works whose functions have been described as being “the eyes and ears of the
employer” on the site. Sometimes the role of the clerk of works is prescribed by the
contract.

1-011
Employer’s agent or representative. Where the employer chooses a contract which
does not provide for an architect or engineer, the employer often appoints an agent or
representative who carries out certain administrative functions and is often a qualified
construction professional. The extent of the authority of the person appointed will,
generally, depend on each contract.

1-012
Sub-contractors. The contractor frequently sub-contracts, or, as it is sometimes
termed, sub-lets, part of the work to sub-contractors.14 The sub-contractor may be
“domestic”—that is, chosen by the contractor alone—or may be “nominated”—that is,
chosen by the employer and nominated under the provisions of the contract. There are
also “named” and other sub-contractors whose selection and legal position may be
different.

1-013
Suppliers. A supplier generally supplies goods or materials under the contract.
Again, the supplier may be domestic, nominated or have some other means of
selection.

1-014
Sureties. Persons known as sureties may give various guarantees. They may
guarantee the performance of the works by the contractor or due payment by the
employer, or less commonly the good faith of the architect or other persons having
control of money.15

3. CONTRACT DOCUMENTS
1-015
Introduction. Contract documents contain the terms of the contract and are to be
distinguished from other documents such as invitations to tender16 or mere
representations17 not intended to form part of the contract. It is a question partly of
fact and partly of construction18 to determine which documents are contractual, but
those here briefly referred to are common.19

1-016
Agreement or articles of agreement. This usually sets out the date, the parties, the
intended works and the consideration. It may also name the architect and quantity
surveyor or the engineer and provide for their replacement.

1-017
Conditions of contract. Elaborate conditions of contract are often made part of the
contract and attempt to provide for the various matters which can arise during and
after the execution of the works.
1-018
Plans and drawings. In some contracts these may show the works in full detail but
further detailed drawings and instructions are often necessary and their timely
production can be a source of dispute.

1-019
Specification. This term usually means a document which describes the work to be
done and the goods to be supplied. Generally, the meaning must be considered in each
contract. In the Standard Form of Building Contract where quantities do not form part
of the contract, it has the meaning just stated, whereas it does not have such meaning
in the version where quantities form part.20 In the Infrastructure Conditions of
Contract it has the meaning stated above, although it does not give quantities of work.
This function is performed by a separate bill of quantities.

1-020
Bills of quantities. Bills of quantities quantify the works in detail and are ordinarily
prepared in accordance with an agreed standard method of measurement. Their
purpose “is to put into words every obligation or service which will be required in
carrying out the building project”.21 They may not form part of the contract although
they are submitted to the contractor for tender.22 Generally it requires express words
in the articles of agreement to make the bills of quantities a contract document.23 They
often contain a preamble, which includes further provisions on the method adopted in
their preparation or the basis on which they are to be priced. The contractor’s prices
against each item, whether a rate for a quantity or a price for an item, usually form the
basis for valuing the work when applied to appropriate measurements.

1-021
Schedule of rates. Some contracts are based on lump sum or other prices which are
not subject to measurement of the work. In such contracts there may be a schedule of
rates which will be used, for instance, as a basis for valuing additional work.

1-022
Other documents. The tender or invitation to tender may be incorporated into the
contract documents. In addition, a variety of other documents such as letters, estimates
and memoranda may also be incorporated and can give rise to difficulties in
interpretation. Generally, where parties have apparently finally stated their agreement
in a document, it may be difficult to show that other documents (or oral statements)
not expressly incorporated or referred to contain terms of the contract.24

4. CONTRACTUAL ARRANGEMENTS
1-023
Introduction. The traditional arrangement or method of procurement for
construction contracts has developed since the nineteenth century. It consists of a
procedure where the design is carried out by the architect or the engineer on behalf of
the employer. The contractor then executes the works to that design under a contract
that is administered by the architect or engineer as agent of the employer. That
arrangement is the basis of both the main Standard Form of Building Contract and the
Infrastructure Conditions of Contract. Other arrangements include “design and build”,
“project management”, “construction management”, partnering together with
contracts where a degree of financial or operating risk is transferred to the contractor.

1-024
Standard forms of contract. In addition to the Standard Form of Building Contract
the JCT also publish other specific forms.25 The ACE/CECA now publish the suite of
forms which were formerly published as ICE Conditions.26 The Institution of Civil
 Engineers now only publishes the Engineering and Construction Contract, 3rd edn,
(2005), often known as NEC3 after the title of the first edition, the “New Engineering
Contract”.27 The form consists of core clauses and option clauses and is a departure
from other standard forms in both language and content. It was endorsed in the
Latham Report28 as a standard contract for engineering and construction work. A
commentary on NEC3 is included in Ch.23.29

1-025
Specialist forms. There are other organisations which provide standard form
contracts that are designed for particular purposes. These include the Model Form of
General Conditions of Contract for the Supply of Electrical, Electronic or Mechanical
Plant with Erection MF/1, 2014 edn (Revision 6)30 and the I Chem E Forms of
Contract.31 Each form of contract generally also has a number of variants to cover non-
traditional arrangements and one or more forms of sub-contract for use with the main
contract standard forms. The Association of Consultant Architects (ACA) has produced
a suite of standard forms of contract32 for partnering contracts designed for use where
partnering is used and containing provisions dealing with that arrangement.

1-026
Government forms. Historically the UK Government published and used the
standard form GC/Works/1 and associated suite of contracts. While the GC/Works/1
suite of contracts remains available,33 it is no longer being updated by the Government
which has adopted for general use NEC3.

1-027
Standards terms of appointment. There are also standard terms of appointment of
architects and engineers. The Royal Institute of British Architects (RIBA) publishes the
RIBA Agreements 2010 (2012 revision).34 The Association for Consultancy and
Engineering (ACE) publishes a number of forms of ACE Agreement 2009 which are
applicable to the appointment of engineers depending on the engineering discipline
and the scope of the services.35 The ACA also publishes forms of architectural
appointment.36

1-028
International forms. International contracts often adopt the FIDIC Conditions of
Contract. These forms of contract are published by the International Federation of
Consulting Engineers. Although there have been a number of editions of the main
form,37 new editions were published in 1999,38 including the well-known Red Book.
Those conditions are based, broadly, on the former ICE Conditions. A commentary on
the FIDIC Conditions of Contract is included in Ch.22.

5. A TYPICAL CONSTRUCTION OPERATION—TRADITIONAL PROCEDURE

1-029
The scope of the law of construction contracts and some of the problems that may
arise are illustrated in the following summary.39
1-030
The employer has or obtains a sufficient interest in the land upon which it proposes
to build to enable it to give the contractor possession of the site. If the contract is of any
substance the employer usually instructs an architect who, if authorised to do so,
engages a quantity surveyor on behalf of the employer. The architect translates the
employer’s wishes into detailed plans and the quantity surveyor measures the amount
of work and materials necessary to complete the plans and sets this out in detail in bills
of quantities. Any appropriate planning consents are obtained and all statutory
 requirements taken into account.40 The contract must then be placed. This is done
either by open or limited competition41 or by individual negotiation.42 Forms of tender
are sent out with bills of quantities, specification, plans and conditions of contract, or
such other documents as the architect may think desirable. If good practice is followed,
the documents intended to form part of the contract will be clearly stated. The
contractor estimates the cost of the works on the basis of the amount of work and
materials shown on the plans and described in the bills of quantities and the
specification or other documents supplementing or replacing the bills of quantities.
The contractor then submits an estimate in the form of a tender. It is the normal
practice that such tender is an offer capable of acceptance. Where there is more than
one tender, the employer with the advice and assistance of its architect selects one of
the tenders, usually, though not necessarily, the lowest. When the employer notifies the
contractor of its unqualified acceptance, a binding contract comes into existence. The
contract is frequently expressed in a formal document and may incorporate a standard
form of contract.
1-031
The works are carried out by the contractor under the supervision of the architect.
It is usual for interim payments of the contract sum to be made from time to time as
the architect certifies that work of a certain value has been carried out.43 Such
payments are subject to the retention of a percentage of the value of the work carried
out, the money retained (“retention money”) being held by way of security until
completion of the works. After the completion of the works it is usual for the contractor
to be under an express obligation to make good any defects which appear during a
certain period, often termed the “defects liability” or “maintenance” period.44
1-032
Numerous difficulties may arise. For example, the completion of the works may be
delayed by the ordering of variations, by late or inadequate instructions, by shortage of
materials or delay on the part of sub-contractors. The contractor may find that it is
required to execute more work or spend more money to complete than it originally
estimated. A third party injured by a falling object or annoyed by dust and noise may
make a claim against the contractor or the employer. One of the parties may become
bankrupt or go into liquidation. A breach of contract by one of the parties may give rise
to a claim by the other for damages or even to bring the contract to an end, either by
virtue of an express clause or under the general law of contract. After completion,
disputes may arise about defects alleged to exist or to have appeared during the defects
liability or maintenance period. Any of these events may affect the obligations of a
surety.45
1-033
When the works have been completed the architect usually has the power to decide
the amount of money payable to the contractor and to state its decision in the form of a
certificate. In arriving at the final sum the architect may have to take into account
many matters, some of which are mentioned above. The result may be that the final
certificate is for a very different sum from that stated as the original contract sum.46
The contract may provide that the architect’s decision on certain matters shall be
binding and conclusive. If the parties cannot agree on the amount to be paid under the
contract or on some other matter which has arisen during the course of the
construction operations, there may be a dispute which can be resolved a number of
ways. If the contract contains a provision for adjudication then the dispute may be
referred to an adjudicator for a temporarily binding decision. The parties might also
decide to seek to resolve the dispute by alternative dispute resolution (ADR) leading to
a negotiated settlement rather than a determination of the dispute. If the parties are
unable to resist solves dispute in one of those ways, they may seek to have it resolved
by litigation or, if there is an arbitration agreement, by arbitration.47

6. DESIGN AND BUILD CONTRACTS

1-034
Introduction. The traditional procedure outlined above is still applied today in many
building or engineering contracts, sometimes in a modified form. The principle that the
employer, through its agents, provides the design which the contractor carries out is
not consistently applied,48 and in any event there are contracts where the contractor
has, to a greater or lesser degree, accepted responsibility for design.
1-035
It is common for contractors to offer, in addition to building the works, to perform
some or all of the duties of architect, engineer or other professionals, as performed in
traditional contracts. The commercial argument for such an approach is either that it is
necessary because the contractor alone possesses the specialist knowledge and skill to
design and carry out specialist works or, in other cases, that there will be savings of
costs or time or both compared with the traditional procedure. Such contracts are
sometimes termed “design and build” or “package deal” contracts.49 The term
“turnkey” contract is sometimes used in design and build contracts. It may be that it is
intended to indicate that upon completion the key can be turned and everything will be
ready. It has been said that it is not a term of art,50 as it has no precise legal meaning.51

1-036
Standard Contract Forms. The JCT publish the Design and Build Contract (2011) and
the Standard Form of Building Contract, which incorporates a Contractor’s Designed
Portion option, whilst there is a design provision in the Infrastructure Conditions of
Contract52 and the ACE/CECA also publish a separate Infrastructure Conditions of
Contract Design and Construct Version.
1-037
Both of the special standard forms make provision for there to be Employer’s
Requirements and for the contractor to provide details of its proposed design at tender
stage. The Employer’s Requirements and the Contractor’s Proposals (JCT) or
Contractor’s Submission (Infrastructure Conditions of Contract) then form part of the
contract and the contractor has to complete the design of the works as well as their
construction. Difficult questions arise as to liability for inconsistencies and ambiguities
in or between the Employer’s Requirements and the Contractor’s Proposals and also as
to the extent of the contractor’s liability for the design contained in the Employer’s
Requirements. Often the point of handover of the design is difficult to establish and the
distinction between design development and changes in design is not plain.
1-038
Under the JCT Design and Build Contract (2011) the contractor has an equivalent
design liability to the employer “as would an architect … acting independently under a
separate contract with the employer”. Under the Infrastructure Conditions of Contract
the contractor has to exercise reasonable skill and diligence in designing any part of
the permanent works for which it is responsible.

1-039
General obligations. In so far as the contractor is performing duties of architects,
engineers and surveyors, cases dealing with such duties when performed by persons as
independent professionals53 may be of some assistance, although care must be taken to
have regard to the different subject matter. Again when considering the performance
of duties similar to those carried out by a contractor in a traditional contract, some of
the decided cases may help but caution is required. Apparently identical terms of
contract may, because of the different subject matter, have a different meaning. An
obvious example is that relating to a “defects” clause.54 In the traditional type of
contract it ordinarily excludes defects of design, while in design and build contracts it
ordinarily includes them.

1-040
Design obligations. In a design and build contract there may be an implied term that
 the finished work will be reasonably suitable for the purpose for which the contractor
knows it is required.55 However, the nature of the design obligation will depend on the
terms of the contract56 and it is desirable to define the design obligation in an express
term. Where a contractor is invited to tender to design and build and submits a design
which is adopted by the employer’s architect acting in the traditional sense and
thereafter a formal contract is entered into whereby the contractor’s obligations are
limited to performing specific works described in the contract, the contractor is not
liable in damages for breach of contract if the works do not fulfil the result which, to
their knowledge, was sought to be achieved by the employer.57 However, the
contractor may be liable if they have expressly guaranteed the result,58 and might in
special circumstances be liable in tort.59 Subject to the application of the Defective
Premises Act 1972 for dwellings,60 the contractor’s design liability for consequential
loss may be limited to a specific agreed sum.

1-041
Professionals. Contractors sometimes engage independent professionals to carry out
design and other services to fulfil part of the contractor’s obligations to the employer.
Arising out of such engagement they owe the contractor a duty to carry out their work
properly. The requisite standard will be at least one of reasonable skill and care.61
Where they know that the contractor is under an absolute duty to provide finished
work reasonably suitable for a purpose of which they have knowledge, they are, it
seems, ordinarily under such a duty themselves to the contractor in carrying out
design or other services.62 Further, although not engaged by the employer, they might
in certain circumstances owe them a duty of care in tort.63
1-042
The employer may engage independent professionals to protect their interests. They
owe the employer a duty of care arising out of the engagement.64 An architect or
engineer in such a position usually is, or is supposed to be, an inspector only, whether
of the design, the works or both. If such architect or engineer is given authority as
agent of the employer, the terms of such agency and their actions should be such as not
to interfere with the duties of design, administration and supervision undertaken by
the contractor towards the employer. If there is such interference, liabilities may
become confused and the employer may find itself deprived of, or hindered in the
enforcement of, their remedy against the contractor by the operation of doctrines of
law such as variation, waiver or estoppel.65
1-043
Employers sometimes engage a surveyor or other professional to check the
contractor’s valuations, to price variations and to perform some other duties
comparable with those carried out by a quantity surveyor in the traditional procedure.
This can usually be accommodated without great difficulty in a design and build
contract and some contractors encourage it, presumably on the basis that it will help to
avoid disputes over payment.

7. MANAGEMENT AND CONSTRUCTION MANAGEMENT CONTRACTS

1-044
For large construction projects, management contracts are now fairly common.66
They are more akin to the traditional procedure than to design and build contracts.
They have varying procedures but the main feature is that there is a management
contractor or construction manager who generally does little or no direct construction
work except organising and co-ordinating those who do. The management contractor is
usually paid the prime cost of the works67 plus a fee which may be increased by a
bonus related to the amount by which the actual cost of the works is less than a target
cost. The construction works are carried out by works or trade contractors who may be
 sub-contractors of the management contractor or in direct contract with the employer.
Architects, quantity surveyors and other consultants are sometimes engaged by the
employer and their engagement may be transferred to the contractor at some stage.
The increasing use of management contracts reflects, among other things, an
appreciation that the complexity of modern construction requires the planning and
organisational skills of specialists. On the other hand, with the employer engaging a
larger number of parties, responsibility is diffused and legal liability is more complex.

8. CONTRACTS WITH FINANCIAL AND OPERATING OBLIGATIONS

1-045
A requirement to finance projects has led to procurement methods in which the
contractor also becomes involved in the financial and operating risks of the project.
The contractor may therefore be involved in a consortium arrangement which includes
the provision of project finance. Sometimes, the contractor may take a concession in
the form of a lease or licence of the project, so as to recoup part of the expenditure and
share in the risk, prior to the project reverting to the other party who has organised the
project. These projects adopt arrangements that include those referred to as BOT (Build
Operate Transfer), BOOT (Build Own Operate Transfer) and DBFO (Design Build
Finance Operate).

1-046
Private finance initiative. A combination of limits on public spending, privatisation
of public services and the need for capital and infrastructure projects has led to these
concepts being applied to projects in the United Kingdom. The Government’s
introduction in 1992 of the Private Finance Initiative increased the opportunity for
such arrangements. Each project requires an individual contract which achieves the
particular range of planning, design, construction, financing and operating obligations.
The PFI initiative was the subject of review and reform resulting in the Private Finance
2 (PF2) which provided a new approach to the delivery of public private
partnerships.68

9. PARTNERING

1-047
Partnering, sometimes referred to as alliancing, is a management approach that
encourages collaboration between the parties involved in a construction contract. It
seeks to avoid the adversarial approach which existed in the traditional approach to
construction. Instead, by engendering a co-operative and collaborative approach and
by encouraging openness and trust between the parties, partnering seeks to build good
working relationships between the team of participants in the construction process:
the employer, contractor, professionals, subcontractors and suppliers. In this way the
team overcomes problems and seeks solutions to the problems which frequently
arise.69

1-048
Contractual arrangements. Partnering can be applied either to the traditional
contractual arrangement by additional provisions or a partnering addendum or by the
use of a form of contract which has been prepared on the basis of a partnering
arrangement.70

1-049
Partnering obligations. When partnering applies, the partnering obligations often
have an effect on many of the obligations under the construction contract, which have
to be considered in the light of the nature of the partnering arrangement and the
particular partnering provisions.71
 10. SMALLER WORKS CONTRACTS
1-050
Whilst, in principle, there is no objection to the use of the more sophisticated
standard contract forms for contracts involving smaller construction works, many of
the elaborate provisions may unnecessarily complicate the position.

1-051
Standard forms. The JCT publishes an Intermediate Building Contract (2011) and a
JCT Minor Works Building Contract (2011). As an example of the simplification, the
2011 Intermediate Form retains the policy adopted in the 1998 contract of replacing
nominated sub-contractors by named sub-contractors. These being sub-contractors
who are named in the contract documents and who the contractor is obliged to employ
upon a standard form of named sub-contract. In the Minor Works Form, which is much
briefer, sub-contracting is forbidden without the written consent of the architect,
which is not to be unreasonably withheld. The ACE/CECA similarly publishes a Minor
Works version of the Infrastructure Conditions of Contract. FIDIC also publishes the
FIDIC Short Form of Contract—The Green Book.

11. DISPUTE RESOLUTION

1-052
The resolution of construction contract disputes by litigation or arbitration tends by
its very nature to be lengthy and expensive for all parties. In an industry where
cashflow is important, it is undesirable that parties should have to wait months or even
years to have their disputes resolved. Growing dissatisfaction led the construction
industry to consider possibilities other than litigation or arbitration. These forms of
dispute resolution are often referred to as ADR to indicate that they are alternatives to
litigation or even arbitration.

1-053
Adjudication. Under the Housing Grants, Construction and Regeneration Act 1996, as
amended by the Local Democracy, Economic Development and Construction Act 2009,
there is a mandatory right to adjudication in certain circumstances.72 This provides a
rapid interim decision on disputes arising under construction contracts.73

1-054
ADR. There are various forms of ADR. In addition to adjudication, there is a variety of
other methods which both parties can use in order to try to settle their differences
cheaply and quickly.74 These include mediation,75 conciliation, early neutral
evaluation and the use of Dispute Boards.76 The courts also now emphasise the
importance of considering ADR.77 The Technology and Construction Court itself has a
scheme for early neutral evaluation and has introduced a court settlement process.78

1-055
Encouragement of ADR. There have been a number of decisions where the court has
commented on the desirability of parties engaging in ADR. In appropriate
circumstances, sanctions in the form of adverse costs orders have been applied to
parties when the courts have considered that they have unreasonably refused to
undertake ADR.79

FOOTNOTES
1Lord Diplock in Modern Engineering v Gilbert-Ash [1974] A.C. 689 at 717, HL. This
definition was also cited by Lord Hope in Beaufort Developments (N.I.) Ltd v Gilbert-Ash
(N.I.) Ltd [1999] 1 A.C. 266, HL. For entire contracts, see para.4-004. Not all construction
contracts provide for payment by instalments; see para.4-007.

2This includes a corporation—see para.2-066.

3English law is referred to throughout the book unless the contrary is indicated.

4The Housing Grants, Construction and Regeneration Act 1996 (as amended by the Local
Democracy, Economic Development and Construction Act 2009 Pt 8) imposes certain
statutory requirements in relation to construction contracts—see Ch.18 and App.A.

5See para.2-001.

6e.g. Chitty on Contracts, edited by H. Beale, 32nd edn (London: Sweet & Maxwell, 2015).

7This term received judicial consideration under a now repealed statute formerly
relating to bankruptcy law—see H.B.C. (7th edn, 1946), p.105. It has also been defined for
the purpose of the London Building Acts 1930–1939 in s.4 of the London Building Acts
(Amendment) Act 1939. See also ss.121–123 of the Building Act 1984.

8Joint Contracts Tribunal Standard Form of Building Contract (2011 edn). See further
Ch.20. Further references will normally be to the “Standard Form of Building Contract”.

9See further Ch.21.

10See para.14-002. Thus references to “architect” do not refer to a person who, though
qualified as an architect, does not practise as such but acts as, say, an expert adviser or
salaried assistant to a large contractor.

11Sutcliffe v Thackrah [1974] A.C. 727, HL. See further, para.5-062. The architect may also
owe its client a parallel professional duty in tort—see “Professional negligence” at
para.7-048.

12See generally, para.14-010. Note that surveyors, engineers and others may not term
themselves architects unless registered under the Architects Act 1997.

13See generally para.14-149.

14See generally para.13-044.

15See generally para.11-037 and following.

16See para.2-002.

17See para.6-001.

18See para.3-001.

19See Ch.19 for the contract documents in the various versions of the Standard Form of
Building Contract.

20See Ch.20. In the Standard Form of Building Contract, with quantities, there is no
reference to a specification, although Cl.2.9.1.1 does refer to “descriptive schedules or
other like documents necessary for use in carrying out the Works”—see para.20-098.

21“The Placing and Management of Building Contracts” (HMSO, 1944), the Simon Report,
para.55.

22See paras 4-048 and 6-037.

23See para.4-048.

24See para.3-005.

25The JCT publishes a suite of contracts which, in addition to the Standard Building
Contract, includes a Minor Works Building Contract (MW) and Minor Works Building
Contract with contractor’s design (MWD); Intermediate Building Contract (IC) and
Intermediate Building Contract with Contractor’s Design (ICD); Design and Build Contract
(DB); Major Project Construction Contract (MP); Construction Management Agreement
(CM/A) and Construction Management Trade Contract (CM/TC); Management Building
Contract (MC) Management Works Contract Conditions (MCWK/C) Prime Cost Building
Contract (PCC); Measured Term Contract (MTC); Housing Grant Works Building Contract
(HG); Framework Agreement (FA); Building Contract and Consultancy Agreement for a
Home Owner/Occupier (HO/C); and Building Contract for a Home Owner/Occupier who
has not appointed a consultant to oversee the work (HO/B). The JCT published a
Constructing Excellence Contract (CE) in December 2006, derived from the Be
Collaborative Contract, which has an associated Contract Project Team Agreement (CE/P)
and Contract Guide (CE/G) for use in collaborative working or partnering projects.

26The ACA/CECA suite of contracts, the Infrastructure Conditions of Contract, includes

the Measurement Version (derived from the ICE Conditions of Contract, 7th edn.), a
“With Quantities Version” published in November 2014, a Design and Construct Version,
Target Cost Version, Term Version, Minor Works Version, Ground Investigation Version,
Archaeological Investigation Version, as well as a Partnering Addendum. There is also a
New Measurement Version incorporating NR8 Track Amendments which was drafted in
conjunction with Network Rail and designed for use on Network Rail’s Plain Line
contracts.

27There is also the NEC3 Engineering and Construction Subcontract (ECS); Short Contract
(ECSC); Short Subcontract (ECSS); NEC3 Professional Services Contract (PSC); NEC3
Professional Services Short Contract (PSSC); NEC3 Term Service Contract (TSC); NEC3
Term Service Short Contract (TSSC); NEC3 Supply Contract (SC); NEC3 Supply Short
Contract (SSC); NEC3 Framework Contract (FC); and NEC3 Adjudicator’s Contract (AC). All
of the NEC3 contracts were issued in an amended form on 1 April 2013.

28“Constructing the Team” (“The Latham Report”) (London: HMSO, 1994).

29See Ch.23 for a commentary on NEC3. For a more detailed consideration of NEC3, see
D. Thomas QC, Keating on NEC, 1st edn (London: Sweet & Maxwell, 2012).

30In addition to MF/1 there are also MF/2, MF/3 and MF/4 all of which are published
jointly by the Institutions of Mechanical Engineers and Electrical Engineers.

31Published by the Institution of Chemical Engineers. These now include in the UK

versions: The Red Book: Lump-sum Contracts, 5th edn (2013), The Green Book:
Reimbursable Contracts, 4th edn (2013), The Burgundy Book: Target Cost Contracts, 2nd
edn (2013), The Yellow Book: Subcontracts, 4th edn (2013), The Brown Book: Subcontract
for Civil Engineering Works, 3rd edn (2013), The Orange Book: Minor Works Contracts,
2nd edn (2003) and The Silver Book: Professional Services Agreement, 1st edn (2015). In
2007 the Institution of Chemical Engineers also introduced international editions of the
Red, Green, Burgundy and Yellow Books.

32Standard Form of Contract for Project Partnering, PPC2000 (2013); Standard Form of
Contract for Term Partnering, TPC2005 (2008); Standard Form of Specialist Contract for
Project Partnering, SPC2000 (2008); Standard Form of Specialist Contract for Project
Partnering, SPC2000 Short From (2010) and Standard Form of Specialist Contract for
Term Partnering, STPC2005 (2010).

33GC/Works/1 includes With Quantities (1998), Without Quantities (1998), Single Stage
Design and Build (1998), Two Stage Design and Build (1999), With Quantities
Construction Management Trade Contract (1999), and Without Quantities Construction
Management Trade Contract (1999). GC/Works/2 to 10 include Minor Works (1998);
Mechanical and Electrical Engineering Works (1998); Building, Civil Engineering,
Mechanical and Electrical Small Works (1998); Appointment of Consultants (1998);
Daywork Term Contract (1999); Measured Term Contracts (1999); Specialist Term
Contract for Maintenance of Equipment (1999); Operation, Repair and Maintenance and
Electrical Plant, Equipment and Installations (1999); and Facilities Management Contract
(2000). There is also a GC/Works Sub-contract (1999).

34The RIBA Agreements 2010 include the RIBA Standard Agreement 2010 (2012 revision):
Architect; the RIBA Standard Agreement 2010 (2012 revision): Consultant; Concise
Agreement 2010 (2012 revision): Architect; Domestic Project Agreement 2010 (2012
revision): Architect; and Sub-consultant Agreement 2010 (2012 revision). In addition, an
addendum to the RIBA Appointment Agreements has been published for use when
architects are providing services as Principal Designer under the CDM Regulations 2015
as well as an RIBA Plan of Work 2013 Form.

35ACE Agreement 1: Design; ACE Agreement 2: Advisory, Investigatory and other

Services; ACE Agreement 3: Design and Construct; ACE Agreement 4: Sub-Consultancy;
ACE Agreement 5: Homeowner; ACE Agreement 6: Expert Witness (Sole Practitioner);
ACE Agreement 7: Expert witness (Firm); and ACE Agreement: Adjudicator. The ACE has
published an ACE Short Form Agreement 2015.

36Standard Form of Agreement for the Appointment of an Architect, ACA SFA (2012) and
Appointment of a Consultant Architect for Small Works, ACA98.

37The Red Book (Conditions of Contract for Works of Civil Engineering Construction)
(1987); The Yellow Book (Conditions of Contract for Electrical and Mechanical Works
including Erection on Site) (1987); and The Orange Book (Conditions of Contract for
Design-Build and Turnkey) (1995).

38The Red Book (building and engineering works designed by the Employer) (1999); The
Yellow Book (M&E, building and engineering works designed by the Contractor) (1999);
The Orange Book (design, build and turnkey works) (1995); The Green Book (short form of
contract) (1999); The Silver Book (turnkey contract) (1999); the amended Red Book (for
use by Multilateral Development Banks) (2005); The Gold Book (Design, Build and
Operate contracts) (2007); The Turquoise Book (dredging and reclamation works) (2006);
and The White Book (model services agreement) (2006).

39For further reading see “Constructing the Team” (London: HMSO, 1994) (the “Latham
Report”), “Rethinking Construction” (London: DETR, 1998) (the “Egan Report”).

40Town and country planning law, the detail of building regulations and other statutory
controls are outside the scope of this book.

41See the “Code of Procedure for Single Stage Selective Tendering” (revised 1996)
published by the National Joint Consultative Committee for Building, JCT Tendering
Practice Note 2013 and the Code of Practice for the selection of main contractors
published by the Construction Industry Board (1997).
42For relevant EC public procurement legislation see Ch.15.

43If the contract qualifies as a construction contract under the terms of the Housing
Grants, Construction and Regeneration Act 1996 (as amended) then the contractor has a
statutory right to interim payments: see Ch.18.

44See para.11-028.

45Discussion of the various matters appearing in this paragraph appears in subsequent

chapters.

46Under the Standard Form of Building Contract, the contract sum can be varied by the
operation of numerous clauses.

47See Ch.17.

48See para.3-078 for fitness for purpose; para.13-069 for design by specialist sub-
contractors; para.20-118 for the contractor’s position under the Standard Form of
Building Contract.

49For an example judicially considered, see Viking Grain Storage v T.H. White
Installations (1986) 33 B.L.R. 103.

50Cable (1956) Ltd v Hutcherson Ltd (1969) 43 A.L.J.R. 321 at 324 (Australia HC).

51See “Legal terms of art” at para.3-036.

52See Cll.4.7 and 4.8 at paras 21-034 and 21-035 and Cll.6.3 and 6.4 at paras 21-057 and
21-058.

53See Ch.14. See MT Højgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd
[2015] EWCA Civ 407.

54See para.11-028.

55Greaves & Co Ltd v Baynham Meikle [1975] 1 W.L.R. 1095 at 1098, CA; considered in
Douglas Robert Cheal v Hale Allen (1997) 59 Con. L.R. 106.

56In MT Højgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd [2015]
EWCA Civ 407 it was held that very clear words are required to impose a “fitness for
purpose” duty on a design and build contractor. If any obligations are intended to be
absolute, these should be made clear and distinguished from those that are subject to
reasonable care and skill. See further, “Fitness for purpose of completed works” and
“Design and build” at paras 3-078 and 3-080.

57Cable (1956) Ltd v Hutcherson Ltd (1969) 43 A.L.J.R. 321 (Australia HC).

58Steel Co of Canada Ltd v Willand Management Ltd [1966] S.C.R. 746 (Canada SC);
considered in MT Højgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd
[2015] EWCA Civ 407.

59See generally Ch.7 and in particular “Contractor’s pre-contract information” at para.7-

005.

60See para.16-001 for the Defective Premises Act 1972.

61See para.14-043.

62Greaves & Co Ltd v Baynham Meikle [1975] 1 W.L.R. 1095, CA.

63See generally, “Negligent misstatement” at para.7-055 and in particular “Consultants”

at para.7-072.

64See para.14-042.

65See Ch.12.

66The JCT publishes a Management Building Contract (MC) and Management Works
Contract Tender & Agreement (MCWK), together with a Management Works Contract
Conditions (MCWK/C) and Management Works Contract/Employer Agreement (MCWK/E).

67Most management contracts define “prime cost” in an elaborate schedule. The

expression usually denotes the basic cost to the management contractor of carrying out
the works. Their profit and overheads and sometimes their site and supervision costs
may be allowed for separately or covered by the fee. Compare “P.C. or prime cost sums”
at para.4-058.

68A New Approach to Public Private Partnerships (London: HMSO, 2012).

69See S. Roe and J. Jenkins, Partnering and Alliancing in Construction Projects (London:
Sweet & Maxwell, 2003).
70See the ACA forms referred to at para.1-027, the JCT Constructing Excellence (JCT/CE)
form, the ICE Partnering Addendum and the NEC Partnering Agreement.

71Birse Construction Ltd v St David Ltd (No.1) [1999] B.L.R. 194 reversed on appeal on
other grounds: [2000] B.L.R. 57, 70 Con. L.R. 10; and the following decisions which
considered ACA standard forms of partnering agreement Willmott Dixon Housing Ltd v
Newlon Housing Trust [2013] EWHC 798 (TCC): PPC2000 Form; TSG Building Services plc v
South Anglia Housing Ltd [2013] EWHC 1151 (TCC): TPC2005 Form and Lovell
Partnerships Ltd v Merton Priory Homes [2014] EWHC 1615 (TCC): TPC2005 Form.

72See s.108 and the Scheme for Construction Contracts Regulations 1998 (SI 1998/649) as
amended by the Scheme for Construction Contracts (England and Wales) Regulations
1998 (Amendment) (England) Regulations 2011 (SI 2011/2333) and the Scheme for
Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales)
Regulations 2011 (SI 2011/1715). The amended Act is at App.A and the Amended Scheme
is at App.B.

73See para.18-021.

74See para.18-024.

75See Section 11 of Ch.17.

76See Section 12 of Ch.17.

77See CPR r.1.4.2(e) and S. Blake, J. Browne and S. Sime, The Jackson ADR Handbook, 1st
edn (Oxford: Oxford University Press, 2013).

78See paras 7.5 and 7.6 of the TCC Guide, 2nd edn, 3rd revision (London, April 2014).

79See Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576; [2004] 1 W.L.R.
3002; PGF II SA v OMFS Co 1 Ltd [2013] EWCA Civ 1288; [2014] 1 All E.R. 970; Northrop
Grumman Mission Systems Europe Ltd v BAE Systems (Al Diriyah C4I) Ltd [2014] EWHC
3148 (TCC); [2014] T.C.L.R. 8.
18 JAN 2021 PAGE 15
Keating on Construction Contracts 10th Edition
Chapter 2: Formation of Contract

CHAPTER 2

FORMATION OF CONTRACT
CONTENTS
1. Elements Of Contract 2-001
2. Offer And Acceptance 2-002
(a) Invitation to tender 2-002
(b) Tender 2-005
(c) Letters of intent 2-010
(d) Estimates 2-013
(e) Standing offers 2-014
(f) Rejection of offer 2-016
(g) Revocation or lapse of offer 2-017
(h) Acceptance 2-019
(i) Essential terms 2-027
(j) Subject to contract 2-029
(k) Certainty of terms 2-031
(l) Agreement to negotiate 2-041
(m) Negotiations after contract 2-045
(n) Acceptance by conduct 2-047
(o) Communication of acceptance 2-049
(p) Notice of terms 2-053
(q) Course of dealing 2-055
3. Formalities of Contract 2-058
(a) Contracts requiring writing 2-059
(b) Deeds 2-063
4. Capacity of Parties 2-064
(a) Minors (or infants) 2-065
(b) Corporations and companies 2-066
(c) Contracts by local authorities 2-067
(d) Government contracts 2-068
(e) Partnerships 2-069
(f) Unincorporated associations 2-070
 1. ELEMENTS OF CONTRACT

2-001
The essence of a building contract, like any other contract, is agreement. In deciding
whether there has been an agreement and what its terms are, the court looks for an
offer to do or forbear from doing something by one party and an acceptance1 of that
offer by the other party, turning the offer into a promise.2 The law further requires
that a party suing on a promise must show that it has given consideration for the
promise, unless the promise was given by deed. There is consideration where:

“…an act or forbearance of the one party or the promise thereof is the price for which
the promise of the other is bought.”3

In the ordinary building contract the consideration given by the employer is the price
paid or the promise to pay,4 and by the contractor is the carrying out of the works or
promise to carry them out. The parties must have the capacity to make a contract,5 and
any formalities required by law must be complied with.6 Both the consideration and
the objects of the contract must not be illegal.7 If there is fraud or misrepresentation
then the contract may be voidable,8 while if there is a mutual mistake about some
serious fundamental matter of fact this may have the effect of making the contract
void.9 In addition there must be an intention to create legal relations.10

2. OFFER AND ACCEPTANCE

(a) Invitation to tender

2-002
The employer, often acting through its architect or engineer, sends out an invitation
to tender for the proposed works. This document usually includes the proposed
conditions of contract, plans, and a specification and often unpriced bills of quantities,
i.e. a bill with the quantities of work set out but the price column blank. An invitation
to tender is not normally an offer binding the employer to accept the lowest or any
tender. It is comparable to an advertisement that one has a stock of books to sell or
houses to let and such advertisements have been described as “offers to negotiate—
offers to receive offers—offers to chaffer”.11 It follows that the clause frequently
inserted in tenders to the effect that the employer does not undertake to accept the
lowest or any tender is probably unnecessary in law.12 But an express offer to accept
the lowest tender can be binding and have the effect of turning the invitation to tender
into an offer.13 It may possibly be a unilateral or “if” contract, being an offer which the
offeror may be free to revoke until the offeree starts to perform its condition.14 To be
considered an offer in law, an invitation to tender must be construed as a contractual
offer capable of being converted by acceptance into a legally enforceable contract.15
2-003
Where tenders are solicited from selected parties all of them known to the invitor
and the invitation prescribes a clear, orderly and familiar procedure, a tenderer
submitting a conforming tender before the prescribed deadline may be contractually
entitled at least to have its tender opened and considered in conjunction with all other
conforming tenders. An invitor who failed to open or consider such a tender was held
to be in breach of contract.16 A tenderer is always at risk of having its tender rejected,
either on its intrinsic merits or on the ground of some disqualifying factor personal to
the tenderer.17
2-004
Statements of fact in the invitation to tender about such matters as the quantities,
 the site or existing structures may, if a contract is entered into, have no legal effect at
all, they may take effect as representations, they may form collateral warranties, they
may give rise to a claim for negligent misstatement, or they may subsequently become
incorporated into the contract.18 It is a question partly of fact and partly of
construction, to determine the nature and effect of such statements.

(b) Tender
2-005
The contractor’s offer to carry out the works is usually termed a tender.19 It may
well happen that as a result of negotiation20 it is the employer who eventually makes
the offer. In any event a statement, to amount to an offer, must be definite and
unambiguous.21 The person making the offer is for the purposes of this part of the law
termed the offeror; the person to whom it is made, the offeree.

2-006
Costs of tendering. The cost to the contractor of preparing the tender, including any
amended tender necessitated by bona fide alterations in the bills of quantities and
plans, may be considerable, but in ordinary circumstances there is no implication that
the tenderer will be paid for this work.22 The tenderer hopes that the cost will be met
out of the profits of contracts as are made as a result of successful tenders.23
2-007
The contractor may be able to recover a reasonable sum for work done at the
employer’s request which falls outside the normal work which a contractor performs
gratuitously. This includes work carried out subsequent to the tender and used by the
employer.24 This was held to be on the basis of an implied promise to pay but may now
be in quasi-contract or restitution.25 If the employer invites a tender without any
intention of entering into a contract and the contractor, believing the invitation to
tender to be genuine, incurs expense in tendering, the contractor may have a claim for
damages in fraud against the employer.26

2-008
Costs of tender design. As part of the process of tendering, in particular under
design and build contracts, specialist contractors may carry out design. In the absence
of agreement,27 the costs of such works are part of the costs of tendering and are
irrecoverable unless the employer makes some use of the design or causes the
contractor to carry out work beyond what is normal in the circumstances.28

2-009
Restrictive tendering arrangements. There is United Kingdom and European Union
legislation aimed at promoting competition, preventing restrictive tendering
agreements and prohibiting national or local restrictions on contracting. This is
discussed in Ch.15.

(c) Letters of intent

2-010
Documents so described are frequently sent. It is a question based upon the facts of
each case whether the sending of a letter of intent can give rise to any, and if any, what,
liability.29 The phrase “Letter of Intent” is not a term of art; its meaning and effect
depend on the circumstances of each case:

“Some are merely expressions of hope; others are firmer but make it clear that no legal
consequences ensue; others presage a contract and may be tantamount to an agreement
‘subject to contract’; others are contracts falling short of the full-blown contract that is
 contemplated; others are in reality that contract in all but name. There can therefore be
no prior assumptions, such as looking to see if words such as ‘letters of intent’ have or
have not been used.”30

2-011
A letter of intent ordinarily expresses an intention to enter into a contract in the
future but creates no liability in regard to that future contract. Construed in its factual
context, it may have no binding effect. It may take effect as an executory ancillary
contract entitling the recipient to interim costs if the intended future contract is not
made and, perhaps, imposing liabilities, for instance, for the quality or suitability of
work done. It may effect an “if” contract under which the writer asks the recipient to
carry out a certain performance31 and promises that, if it does so, the under will
receive remuneration in return. But an “if” contract must contain the necessary terms.
It may result in no contract, although the law may nevertheless impose an obligation
on the party who makes a request to pay a reasonable sum for such work as has been
done pursuant to the request if the intended future contract is not made. If the
intended future contract is made, the rights of the parties are normally governed by
that contract, with the letter of intent then ceasing to have effect.32 Where the letter of
intent includes an express provision giving a right to payment, it is common for an
employer to cap its liability under a letter of intent and this may limit recovery.33
2-012
In Turriff Construction v Regalia,34 a design and build contractor35 offered to the
employer to undertake certain urgent works of design necessary to obtain estimates
and planning permission provided he obtained an assumption of liability to pay for
such work. He indicated that he would regard receipt of a letter of intent as an
acceptance of his offer. The employer sent a letter of intent and it was held that he was
liable to pay for the work carried out. In British Steel v Cleveland Bridge,36 suppliers of
steel castings were held entitled to a reasonable sum in quasi-contract or restitution. In
Wilson Smithett v Bangladesh Sugar,37 a letter of intent was construed as an acceptance
of an offer binding both parties. In Drake & Scull v Higgs and Hill38 a letter of intent
was sent and the correspondence was held to have led to the agreement of an
indemnity in respect of reasonable expenditure incurred.

(d) Estimates

2-013
There may be an offer although the contractor makes it on a document called an
estimate. If an employer seeks a tender and a contractor submits a document described
as an estimate that may still amount to an offer.39 There is no custom that an estimate
cannot amount to an offer and, if such a custom existed, it would unenforceable.40 In a
Canadian case, an employer was liable for the inaccuracy of an “estimate” of the cost of
part of the works, it being intended as a reliable basis for a tenderer’s calculations.41

(e) Standing offers

2-014
Tenders are sometimes invited for the periodic carrying out of work.42 If the
contractor tenders and there is an acceptance, the result depends upon the
construction of the documents, but can have one of three well-known consequences.43
First, there may be a contract for the carrying out of a definite amount of work during
a certain period. Secondly, there may be a contract in which the employer agrees to
order such work as it needs during the period. In such a case the employer is in breach
of contract if during the period it place orders for the work elsewhere, and the
contractor is in breach if it refuses to carry out the work during the period.44 Thirdly,
 there may be a standing offer on the part of the contractor to carry out certain work
during the period if and when the employer chooses to give an order.45
2-015
The contractor may revoke its offer for future orders unless there is consideration
to keep it open or the documents are under seal,46 but if before revocation an order in
the terms of the agreement is given, a contract comes into existence for that order and
the contractor must carry it out.47 If no order at all is given during the period48 or if
less work is ordered than the probable amount indicated in the invitation to tender,
whether because the work is given to another contractor or otherwise,49 the contractor
has no action for breach of contract.50 Contracts of indefinite or very long duration
may be construed as determinable upon reasonable notice, particularly if they are
affected by inflation.51

(f) Rejection of offer

2-016
A rejection, which takes effect when it is communicated to the offeror, kills the offer
so that it cannot thereafter be accepted.52 It is a matter of construction whether a
particular statement does or does not constitute a rejection. A counter-offer operates as
a rejection killing the offer which it addresses, and a purported acceptance may in law
be a counter-offer if it materially alters the terms proposed.53

(g) Revocation or lapse of offer

2-017
Revocation. An offer may be revoked at any time before acceptance unless
consideration has been given to keep it open54; or the offeror is, in special
circumstances, estopped from acting inconsistently with the existence of the offer.55
Revocation of the offer is not effective until it has been communicated to the offeree.56
An offeree who has acted on the offer cannot recover damages in tort if the offer is
revoked before acceptance.57

2-018
Lapse. An offer can expressly state the time within which it is open for acceptance. If
that time expires without acceptance, the offer lapses. Where negotiations were taking
place between contractor and employer in the course of which the contractor’s offer
lapsed but the contractor proceeded to carry out the work without ever concluding an
express contract with the employer, the contractor was entitled to recover a reasonable
sum.58 If no time is stated then the offer remains in force for a reasonable time and
upon the expiry of that time it lapses.59 What is reasonable depends on whether on the
facts the offeree should, in fairness to both parties, be regarded as having refused the
offer. The parties’ conduct after the making of the offer is relevant.60

(h) Acceptance
2-019
Unconditional acceptance. There is an acceptance of the offer bringing a binding
contract into existence when the offeree makes an unconditional acceptance.61 The
contractual acceptance has to be a final and unqualified expression of assent to the
terms of the offer. The test as to whether there has been such agreement is an objective
one so that conduct which demonstrates an apparent intention to accept can be
sufficient, despite uncommunicated reservations on the part of the offeree.62 If the
offeree proposes any new terms then there cannot be an acceptance and this may
 amount to a fresh offer,63 although a mere request for information about the terms of
an offer does not amount to a counter-offer.64
2-020
In order for a concluded agreement to be reached it is not necessary for the
agreement to have been perfected in every degree. What is required is that when
objectively viewed it can be said that the parties have undoubtedly reached a point
whereby a binding agreement has been concluded, taking account of what sensible
businessmen would expect.65

2-021
Specified means of acceptance. Where there is specified means of acceptance, there
may still be agreement if that specified means of acceptance has not been complied
with where, on the usual principles, there was an offer and acceptance and the
specified means of acceptance was not a condition precedent. The parties may enter
into a contract but merely envisage that their agreement would be recorded in a more
formal document.66 The words “such settlement to be recorded in a suitably worded
agreement” may not be a condition precedent to a concluded contract but may indicate
that the terms of the settlement agreement would be committed to writing as a record
of what had already been agreed.67 A clause in a mediation agreement which stated
that any agreement reached between the parties in the mediation could not be
complete until reduced to writing and signed by or on behalf of each of the parties was
effective to prevent an agreement when not complied with.68 Where preliminaries in
contract documents provided that there was no agreement until the parties entered
into a deed, there was no agreement.69 A contract came into existence by conduct
despite the buyer failing to sign a draft contract which required a signed contract as
the prescribed mode of acceptance as an offeror can waive its prescribed mode of
acceptance.70

2-022
“Battle of forms”. This expression refers to an offer followed by a series of counter-
offers where each party successively seeks to stipulate different terms, often relying on
their own standard printed terms. “In some cases the battle is won by the man who
fires the last shot”,71 the other party being taken to have agreed the final terms by its
conduct in proceeding to perform the agreement without objection. Sometimes
agreement is reached by an amalgamation of both parties’ proposed terms and
conditions construed together.72 Such battles quite often occur with building
contracts.73 It is not possible to lay down a general rule that will apply in all cases
where there is a battle of the forms. It depends on an assessment of what the parties
must objectively be taken to have intended. The usual principles of offer and
acceptance apply in battle of the forms cases. That has the great merit of providing a
degree of certainty which is both desirable and necessary in order to promote effective
commercial relationships.74 In some circumstances there may be an agreement to
which neither party’s standard terms apply.75

2-023
Negotiations for a contract. It is sometimes difficult to determine whether a
concluded contract has come into existence when there have been negotiations
between the parties but no formal contract has ever been signed. It is suggested that a
useful approach is to ask whether the following can be answered in the affirmative:76

(a) In the relevant period of negotiation, did the parties intend to contract?77
(b) At the time when they are alleged to have contracted, had they agreed with
sufficient certainty upon the terms which they then regarded as being
required in order that a contract should come into existence?78
 Did those terms include all the terms which, even though the parties did not
(c)
realise it, were in fact essential79 to be agreed if the contract was to be
legally enforceable and commercially workable?
(d) Was there a sufficient indication of acceptance by the offeree of the offer as
was then made complying with any stipulation in the offer itself as to the
manner of acceptance?80

2-024
On such an approach the court’s task is to review what the parties said and did and
from that material to infer whether the parties’ objective intentions as expressed to
each other were to enter into a mutually binding contract.81
2-025
All negotiations should be considered.82 This is important, especially where there
have been meetings at which oral statements were made showing that essential terms,
not referred to in certain correspondence, were still awaiting agreement at the time of
such correspondence.83

2-026
Effect of performance. Whilst performance of the transaction may make it easier to
conclude that there was a binding agreement, such performance is not conclusive. If a
transaction has been fully performed, there may be a concluded contract even though
an analysis which identifies the coincidence of offer and acceptance cannot strictly be
made:

“The fact that the transaction was performed on both sides will often make it unrealistic
to argue that there was no intention to enter into legal relations. It will often be difficult
to submit that the contract is void for vagueness or uncertainty. Specifically, the fact that
the transaction is executed makes it easier to imply a term resolving any uncertainty, or,
alternatively, it may make it possible to treat a matter not finalised as inessential.”84

However:

“The fact that the work was performed was not conclusive in itself that the parties must
have entered into a contract however it is plainly a very relevant factor pointing in that
direction. Whether the court will hold that a binding contract was made depends upon
all the circumstances of the case, of which that is but one.”85

(i) Essential terms

2-027
The parties are to be regarded as masters of their contractual fate in determining
what terms are essential.86 It is for the parties to decide whether they wish to be bound
and, if so, by what terms, whether important or unimportant.87 Even if certain terms of
economic or other significance to the parties have not been finalised, an objective
appraisal of their words and conduct may lead to the conclusion that they did not
intend agreement of such terms to be a pre-condition to a concluded and legally
binding agreement.88
2-028
Essential terms may include parties, price, time and description of works and these
are normally considered necessary to make the contract commercially workable. Lack
of agreement as to parties can arise when companies have common directors and
there is confusion as to which company is intended to be a contracting party.89 It can
also arise when there is an issue as to whether a contract is with an agent or its
principal.90 Silence by the parties as to either price or time may not alone prevent a
contract coming into existence, for if the other essential terms are agreed then a
 reasonable charge or time for completion will be implied by the Supply of Goods and
Services Act 1982.91 The description of the works may be in wide terms92 and it may be
subject to the retrospective operation of a variation clause. Thus in Trollope & Colls Ltd
v Atomic Power Constructions Ltd93 an offer was made in February 1959 to carry out
certain works for £x. In June 1959, while the parties were still negotiating the terms of
the contract, work commenced and was still continuing in April 1960 when the parties
agreed upon all the essential terms including a clause providing for the variation of the
contract work. By April 1960, as a result of variations, the work to be carried out and
the price to be paid if there was a contract differed from the work and price referred to
in the February 1959 offer, but it was held that a contract came into existence upon the
terms finally agreed in April 1960.

(j) Subject to contract

2-029
If a purported acceptance is expressed to be “subject to contract”, or some other
words94 are used which show that further negotiations or events are contemplated,
there is no concluded contract.95 The words “subject to contract” have acquired a
definite ascertained legal meaning.96 They mean more than that acceptance must be in
writing and at the lowest those who use them guard against being contractually bound
without further action on their part.97 Very exceptionally the words may be used in
relation to an agreement which is nevertheless binding.98 There may be a concluded
contract where the parties have agreed upon all the terms and merely agree that these
shall later be embodied in a formal document.99 The fact that a party starts work while
a contract is being negotiated subject to contract does not, of itself, mean that there was
contract on the terms agreed subject to contract. It all depends on the
circumstances.100

2-030
Waiver of “subject to contract”. In a “subject to contract” case, the question was
often whether the parties have nevertheless agreed to enter into contractual relations
on particular terms notwithstanding their earlier understanding or agreement. It is
possible for an agreement “subject to contract” or “subject to written contract” to
become legally binding if the parties later agreed to waive that condition, for they were
in effect making a firm contract by reference to the terms of the earlier agreement or
waiving the “subject to written contract” term or understanding.101 Whether the
parties agreed to enter into a binding contract, waiving reliance on the “subject to
contract” term depends upon all the circumstances of the case, but the court will not
lightly so hold.102

(k) Certainty of terms

2-031
Certainty of terms. In order to constitute a valid contract the parties must so express
themselves that their meaning can be determined with a reasonable degree of
certainty.103 The courts will strive to construe terms so as to find the requisite degree
of certainty and will strain to be the preserver and not the destroyer of bargains,
especially where the parties have acted upon their apparent agreement.104 The courts
are reluctant to conclude that what the parties intended to be a contractual agreement
is too uncertain to be of contractual effect: this is more so where a party has acted
upon it.105
2-032
In some cases the meaning may not be capable of determination. Thus agreements
for the sale of goods “on hire-purchase terms over two years”,106 and “subject to war
 clause”,107 have been held to be too vague.108 However:

“…a distinction must be drawn between a clause which is meaningless and a clause
which is yet to be agreed. A clause which is meaningless can often be ignored while still
leaving the contract good; whereas a clause which has yet to be agreed may mean that
there is no contract at all because the parties have not agreed on all the essential
terms.”109

2-033
Reference to reasonable requirements or standards is not too vague. The court or
arbitrator, when there is an arbitration clause can, in default of agreement, determine
what is reasonable.110 The presence of an arbitration clause may assist the courts to
hold that a contract is sufficiently certain or is capable of being rendered so, by
indicating a commercial and contractual mechanism by which, in the absence of
agreement, the parties may resolve their dispute.111

2-034
Meaningless words. An apparent agreement containing meaningless words may be
treated in one of three ways: the meaningless words may be ignored and the rest of the
clause in which they appear enforced; the clause in which they appear may be struck
out but the rest of the agreement enforced; or the whole agreement may exceptionally
be vitiated. Which of these may occur depends on the importance which the parties are
considered to have attached to the clause and, presumably, on the remaining integrity
of the agreement shorn of the meaningless words.112 If a clause taken literally is
almost incomprehensible, the court may be prepared to “translate” it if the parties’
intention is clear, even though this might involve using words not to be found in the
contract.113
2-035
Where an otherwise clear acceptance was expressed to be subject to “the usual
conditions of acceptance” and there were no usual conditions of acceptance so that the
words were meaningless, the court ignored the words quoted and held that the writer
of the words was bound by the clear terms of the rest of the document and there was a
contract in existence.114 A contract made upon “usual terms” as to one of its incidents
can be valid, and the term will be enforced if the contents of the term and its general
use by the class of persons who make such contracts is proved.115

2-036
Use of endeavours. A contractual obligation to use best endeavours may not be so
uncertain that it is incapable of giving rise to a legally binding obligation and should
usually be held to be an enforceable obligation and given practical content. However, it
might be difficult to define the precise limits of the obligation in advance and in any
given case to determine whether the term had been breached.116 Such contractual
provisions cannot be enforced if the object of an obligation to use best endeavours is
too vague or elusive to be itself a matter of legal obligation or if the parties have
provided no criteria to assess whether best endeavours have been or can be used.117

2-037
Price. In the vast majority, at least, of substantial transactions the price will be an
essential term, but it is a question of construction whether it indeed is.118 An
agreement to do specified work which is silent as to price can be binding if the price is
not in the circumstances essential. If there is a binding agreement, the law implies a
promise on the part of the employer to pay a reasonable charge.119 The parties may
agree upon the price after work has commenced but so as to show that they intended
the agreement to operate retrospectively to cover the work already carried out.120
2-038
Price to be agreed. If there is an agreement to do work “at a price to be agreed” by
the parties and the agreement is executory so that nothing had been done by either
party in performance of the agreement, there is no binding contract.121 If the
agreement is executed wholly or in part, the employer must pay a reasonable price for
work done, and it seems, the terms of the contract are binding.122 Where a binding
contract already exists, a provision that prices for future years as “to be agreed” is
likely to remain binding.123 An agreement where there is a formula or other
machinery for determining the price is valid. If the machinery breaks down for any
reason, the court may substitute its own machinery to determine a fair and reasonable
price if, on the true construction of the agreement, the machinery was a subsidiary and
non-essential part of the contract.124 Arguments that contractual machinery is
inadequate “exert minimal attraction”125 and arguments that the contractual
machinery has broken down are difficult.126 An agreement to do work at a price to be
agreed or, in default of agreement, to be determined by arbitration is valid, it being a
question of construction whether a document containing an arbitration clause has this
effect. Where there is such an agreement there is an obligation on the parties to try to
agree the price and refusal to discuss is a repudiation. Where work was carried out
pursuant to an offer stating; “The above quotations will remain fixed price until 3 June
1975; any work carried out after this date to be negotiated”, it was held that there was a
concluded contract which continued after 3 June 1975 and that it was subject to an
implied term that rates for subsequent work would be reasonable.

2-039
Formula to determine price. An agreement where there is a formula or other
machinery for determining the price is valid. If the machinery breaks down for any
reason, the court may substitute its own machinery to determine a fair and reasonable
price if, on the true construction of the agreement, the machinery was a subsidiary and
non-essential part of the contract.127 Arguments that contractual machinery is
inadequate “exert minimal attraction”128 and arguments that the contractual
machinery has broken down are difficult.129

2-040
Price payable by another. There can be a contract with the employer to do work for
the employer, subject to implied duties owed to the employer to exercise reasonable
skill and complete within a reasonable time, but upon terms that payment is not to be
by the employer but by another person,130 and such a contract can exist at the same
time as a separate contract with that other person.131

(l) Agreement to negotiate

2-041
Agreement to negotiate. In Walford v Miles132 the House of Lords decided that the
law does not recognise a bare agreement to negotiate a contract because it would be
too uncertain to have any binding force. But an agreement not to negotiate for a
specified period with anyone except a particular party may be enforceable,133 and a
clause dependent on future agreement between the parties may be unenforceable
without vitiating the whole contract.134 The applicability of the decision in Walford v
Miles to an express provision in an agreement to “negotiate in good faith” was
considered, obiter, by the Court of Appeal in Petromec Inc v Petroleo Brasileiro SA.135
2-042
In Walford v Miles there was no concluded agreement and the parties were
negotiating “subject to contract”. One party, the vendor of a business, agreed not to
negotiate with any third party and to negotiate only with the other party, a prospective
 purchaser. The House of Lords held that this agreement was unenforceable because
there was no provision saying how long it was to last and the vendor contended that it
was an implied term of the agreement that, while the vendor wanted to sell the
business, they would negotiate in good faith with the claimants. In concluding that it
was impossible to imply such a term since it was unworkable in practice and
inherently inconsistent with the position of a party negotiating “subject to contract”
Lord Ackner, with whom the members of the House of Lords agreed, said:

“…while negotiations are in existence either party is entitled to withdraw from those
negotiations, at any time and for any reason. There can be thus no obligation to continue
to negotiate until there is a ‘proper reason’ to withdraw. Accordingly, a bare agreement
to negotiate has no legal content.”

In Petromec v Petrobas the parties agreed in Cl.12.4 of a supervision agreement “to

negotiate in good faith” certain additional costs. The Court of Appeal held, obiter, that
this was not a bare agreement to negotiate and said that to decide that it had “no legal
content” would deliberately defeat the reasonable expectations of honest men. It
observed that Walford v Miles did not bind it to hold that an express obligation to
negotiate contained in Cl.12.4 of the Supervision Agreement was completely without
legal substance.136 It is arguable therefore that the decision in Walford v Miles does not
decide that an express contractual obligation to negotiate in good faith is completely
without legal substance.
2-043
An agreement to “attempt in good faith to resolve the dispute or claim” was not void
where the parties had prescribed the precise means to reach resolution.137 An
agreement to enter into a prescribed procedure for mediation is capable of giving rise
to a binding obligation,138 but an agreement to seek to have the dispute resolved
amicably by mediation, with no provision for the process did not create an obligation
to commence or participate in a mediation process. At most it might impose an
obligation to invite the other to join in an ad hoc mediation but the content of such an
obligation was so uncertain as to render it impossible of enforcement in the absence of
some defined mediation process.139 In a multi-tier dispute resolution clause providing
finally for arbitration, the tiers prior to arbitration were unenforceable as those
obligations were not sufficiently clear and certain to be given legal effect.140 An
agreement to engage in time limited “friendly discussions” was an enforceable
condition precedent to arbitration.141 An agreement to offer a party an opportunity to
invest on the terms to be agreed and to be negotiated in good faith was
unenforceable.142 An agreement that parties “shall in good faith agree (acting
reasonably) financial agreements” with disputes being dealt with by expert
determination was held to be enforceable.143
2-044
Agreements to use reasonable endeavours to agree, unlike agreements to use best
endeavours to obtain a result144 are unenforceable. This is due to the difficulty in
drawing a line between what is to be regarded as reasonable or unreasonable in an
area where the parties may legitimately have differing views or interests but have not
provided for any criteria on the basis of which a third party can assess or adjudicate
the matter in the event of dispute.145

(m) Negotiations after contract

2-045
“Where negotiations are in progress between parties intending to enter into a
contract the whole of those negotiations must be looked at to determine when if at all,
the contract comes into being … Once the contract comes into being, however,
subsequent negotiations by either party seeking, for example, to obtain better terms
 will not affect the existence of the previously concluded contract.”146
2-046
Where there is a concluded contract subsequent negotiations may lead to a
variation of the contract.147

(n) Acceptance by conduct148

2-047
Acceptance can be by conduct showing an intention to accept the terms of the
offer.149 It is a question in each case as to whether conduct, known to the offeror,
shows such an intention.150 Conduct will amount to an acceptance if it is clear that the
offeree did the act in question with the intention of accepting the offer. The conduct
must be clearly referable to the offer and, in the absence of knowledge of the offeree’s
reservations, not reasonably capable of being interpreted as anything other than
acceptance.151 Thus if an offer is made to a contractor for the performance of certain
work upon stated terms, and without making any express acceptance, or counter-offer,
the contractor carries out the work, it is bound by the terms of the offer.152 The same
principles apply to an employer who, without any express acceptance, or counter-offer,
permits a contractor to carry out work the subject matter of an offer subject to certain
terms. The contractor is bound by those terms.153 Where a cheque is sent on terms that
presentation of the cheque shall be treated as full and final settlement of certain
claims, the presentation of the cheque raised a rebuttable presumption that it was
acceptance of that offer.154 Where services were performed by reference to a
memorandum containing terms of a licensing agreement there was a binding contract,
notwithstanding the breakdown of negotiations for a long form agreement intended to
replace the memorandum.155
2-048
Silence or inactivity by a party in response to an offer does not generally amount to
acceptance, it being “difficult to imagine how silence and inaction can be anything but
equivocal”.156 The party making the offer cannot bind the other party even by a
stipulation that silence will amount to acceptance.157 There may be exceptional
circumstances in which acceptance may be inferred from silence.158 This may arise
from an express undertaking or implied obligation to speak159 or may amount to
custom.160 Where a party to a contract was proceeding on the assumption that
something was agreed but the other party knew it was disputed, the other party might
be under a duty to make its disagreement known or be subject to estoppel by
acquiescence.161

(o) Communication of acceptance

2-049
The general rule is that acceptance must be communicated to the offeror, and does
not become effective until it reaches them.162 Where a method of acceptance is
stipulated in an express term, it will require clear words to exclude other methods of
acceptance.163 Where other methods of acceptance are permissible, an acceptance
which accomplishes the object as well as or better than the stipulated method may be
effective acceptance.164

2-050
Acceptance by post. If the acceptance is by post special rules may apply. Where the
circumstances are such that the parties must have contemplated that the post might be
used as a means of communication, the acceptance is complete as soon as it is
posted165 although the ordinary rule still applies that revocation of the offer is not
 effective until it reaches the offeree. Therefore, if in such circumstances an acceptance
is posted before the offeree knows of the revocation of the offer a contract comes into
existence.166 The artificial concept of acceptance by posting yields to the express terms
of the offer. Thus where an option to purchase a freehold was exercisable by “notice in
writing to” the defendant, it was held that actual communication of the acceptance was
necessary notwithstanding that the parties contemplated that the post might be
used.167 Accordingly there was no valid exercise of the option where the notice was
lost in the post.168 Where a method of acceptance is stipulated in an express term, an
acceptance which accomplishes the object as well as or better than the stipulated
method may be effective acceptance.169

2-051
Acceptance by electronic means. The special rules as to acceptance by post were
held not to apply where there was a contract by telex. Where telex communication was
instantaneous and between principals the contract was concluded where and when
acceptance was received by the offeror. Where communication was not instantaneous
or was not intended to be communicated immediately to a principal then no universal
rule applied. It was held that in considering communications by telex, reference had to
be made to the intentions of the parties, sound business practice and in some cases to a
judgment where the risks should lie.170
2-052
There is no authority about the formation of a contract using communication by fax,
email or other electronic methods. In relation to the formation of contracts by email,
the Law Commission provide advice.171 It is submitted that there is no essential
difference between acceptance by fax, email or other electronic methods and
acceptance by telex.

(p) Notice of terms

2-053
A party to a contract cannot be bound by a term of which it has no notice. In
particular, if the other party seeks to rely on some clause limiting its common law
obligations it must prove strictly that the clause on which it seeks to rely is part of the
contract.172 The party can do this by a signed contract, which includes the clause, for a
person who has signed a contract is ordinarily, in the absence of fraud or
misrepresentation173 or undue influence,174 bound by its terms whether it has read it
or not.175 The signature of a contractual document acts as the incorporation and
acceptance of all its terms.176 Failing such a document, it is a question in each case
whether reasonably sufficient steps have been taken to give notice of the terms.177
2-054
To succeed in enforcing a particularly onerous or unusual printed clause, a party
has to show that it was brought fairly and reasonably to the attention of the other
party.178 In a case where work was done in pursuance of a typewritten offer which had
on the face of it, in very small print, an exemption clause relating to delay caused by
strikes, it was held that the employer was bound by the clause although they had never
read it.179 If in such a case the clause had been on the back of the document with no
reference to its existence on the face of the document the contractor might not have
been able to rely on it.180 An offer “subject to our General Conditions of Contract
obtainable on request” was held to refer to the conditions current at the time of the
offer.181

(q) Course of dealing

2-055
 If two parties have made a series of similar contracts each containing certain
conditions, and then they make another without expressly referring to those conditions
it may be that those conditions ought to be implied.182 This principle occasionally
applies in building contracts.183 More often, the complexity of both subject matter and
of the terms usually contained in express written contracts precludes it.184

2-056
Contracts formed by estoppel. In cases where there is a dispute as to whether a
binding contract has been entered into it is sometimes argued that a party is estopped
from denying the existence of a contract by reason of there being a common
assumption that there was one. The argument often relies on an estoppel by
convention. Whilst this argument has been successfully relied upon to establish a term
of a binding contract,185 its applicability to the question of whether there is a binding
contract is more uncertain. There is some authority at first instance to support the
argument186 and some to the contrary.187 There may be difficulty in establishing the
necessary common assumption.188

2-057
Entire agreement. A contract may include an entire agreement clause which
precludes a party to a written agreement from asserting that any promises or
assurances made in the course of negotiations can be relied on as having contractual
effect189 although it does not, without more, preclude or exclude liability for
misrepresentation.190 An entire agreement clause may not preclude reliance upon
representations that could ground an estoppel.191

3. FORMALITIES OF CONTRACT

2-058
The general rule of law is that no formalities are required for the formation of a
contract. It may be written, oral or partly oral and partly in writing.192 To this rule
there are, for the purposes of the law relating to building contracts, two exceptions:
first, contracts for the sale of land can now only be in writing and, secondly, contracts
of guarantee must be written or evidenced in writing.

(a) Contracts requiring writing

2-059
Contracts for the sale of land. A contract for the sale or other disposition of an
interest in land can only be made in writing and only by incorporating all of the terms
which the parties have expressly agreed in one document or, where contracts are
exchanged, in each.193 Where a contract for the sale of land is varied, the formalities
prescribed by the Law of Property (Miscellaneous Provisions) Act 1989 also apply to the
variation.194 An option to purchase land is such a contract, but not a notice exercising
an option to purchase,195 nor an independent collateral contract196 nor a “lock-out”
agreement relating to the sale of land197 nor any other agreement that has a disposing
effect but lacks a disposing purpose.198 Terms may be incorporated by reference to
some other document.199 The document incorporating the terms must be signed by or
on behalf of each party to the contract.200
2-060
Since a contract to which these rules apply can only be made in writing, contracts
which do not comply are, it seems, void and the former law relating to part
performance no longer applies.201 If the parties fail to record all the terms of an
agreement in writing, either party may apply to the court for rectification202 or there
 may be possible remedies in estoppel,203 by means of a collateral contract,204 or on the
basis of a constructive trust.205
2-061
A normal building contract is not a contract for the sale or other disposition of an
interest in land because the contractor is merely given a licence to enter the land.206
Although s.2 did not permit parties to a composite transaction which included a land
sale to place terms upon which performance of the land sale was conditional in a
separate document, nothing in s.2 prevented parties from structuring their bargain so
that the land contract was genuinely separated from the rest of the transaction.207 A
contract to grant a building lease—i.e. a lease, part of the consideration for the grant of
which consists of a promise by the lessee to build on the demised land—must be
evidenced in writing.208 It seems that proprietary estoppel cannot be used to
circumvent the requirements of s.2.209 Where an offer is made under CPR Pt 36 to
settle proceedings which involve disposition of an interest in land and the defendant
accepts the offer, the court will enforce the agreement, notwithstanding s.2 of the
Act.210

2-062
Contracts of suretyship and guarantee. A contract of guarantee211 is a promise to
answer for the debt, default or miscarriage of another and must be contained in, or
evidenced by, a note or memorandum in writing signed by the surety or its agent,212
although the writing need not show the consideration for which the promise was
given.213 A contract of guarantee intended to be made by more than one co-surety is
not binding unless all anticipated parties become bound.214 It may sometimes be
difficult to distinguish between a guarantee, which is required to be evidenced in
writing, and an indemnity, which is not. A statement “Go on and do the work, and I will
see you paid” was an indemnity as the person had assumed a primary liability to pay
and had not entered into a mere contract of guarantee, which requires a principal
debtor who is primarily liable, and a surety who becomes liable only on their
default.215

(b) Deeds

2-063
Deeds,216 sometimes called “specialty contracts”, were formerly always documents
which had to be effected under seal. A seal is generally no longer required and is
validly executed by an individual if it is signed by them in the presence of a witness
who attests the signature and if it is delivered as a deed.217 For companies regulated by
the Companies Act there was an alternative method which did not require the
affixation of a seal.218 An instrument is not a deed unless it makes clear on its face that
it is intended to be a deed by the person making it and is validly executed as a deed.
Sealing is still required by parties other than individuals. Modern practice does not
require a wax or wafer seal.219 The main characteristics of deeds are that they do not
require consideration and that they have a 12-year limitation period.220

4. CAPACITY OF PARTIES
2-064
There are certain categories of persons whose capacity to make contracts is less
than that of the ordinary person, or in respect of whose contracts special rules apply.

(a) Minors (or infants)

2-065
A minor221 is a person under 18 years of age.222 The general position is that
contracts made by a minor are not binding on them save that they must pay a
reasonable price for necessaries which they have received.223 A contract for building
work might be a contract for necessaries,224 but a minor cannot hold any legal estate in
land.225

(b) Corporations and companies

2-066
A corporation is a legal person, that is to say it is regarded by the law as a legal
entity quite distinct from the person or persons who may for the time being be the
member or members of the corporation. A corporation sole is composed of one office
holder such as a bishop or the Public Trustee,226 and a corporation aggregate of more
than one person such as the members of a company.227 Local authorities are
corporations.

(c) Contracts by local authorities

2-067
A local authority must make standing orders with regard to the making of contracts
by them or on their behalf for the execution of works,228 but a person entering into a
contract with a local authority is not bound to inquire whether the standing orders
have been complied with and non-compliance does not invalidate any contract entered
into by or on its behalf.229 Local authority contracts do not have to be under seal.230

(d) Government contracts

2-068
Contracts with government departments can be enforced by or against the
Crown.231

(e) Partnerships
2-069
Partnership is “the relationship which subsists between persons carrying on
business in common with a view to profit”.232 A partnership is not a corporation and in
general a partner acting for the purposes of the partnership can enter into a contract
on behalf of the other partners so as to make them liable.233

(f) Unincorporated associations

2-070
An unincorporated association is a general term given to a group of persons, neither
a corporation nor a partnership, who act together for certain purposes.234 A typical
example is a club. As it has no corporate existence, contracts cannot be made on its
behalf and a member is not liable unless that member made the contract or authorised
or ratified it.235 Members of the committee who enter into the contract are liable, and
in general a person dealing with a club is normally entitled to look to the members of
the management committee.236
FOOTNOTES
1See “Offer and Acceptance” at para.2-002.

2See Chitty on Contracts, edited by H. Beale, 32nd edn (London: Sweet & Maxwell (2015),
Vol.1, Ch.2. For application of the offer and acceptance analysis see Tekdata v Amphenol
[2009] EWCA Civ 1209; [2010] Lloyd’s Rep. 357, Longmore LJ at [11] and Dyson LJ at [25].

3P.H. Winfield, Pollock’s Principles of the Law of Contract, 12th edn (London: Stevens &
Sons, Ltd, 1946), p.130, adopted by Lord Dunedin in Dunlop v Selfridge [1915] A.C. 847 at
855, HL. See also, Currie v Misa (1875) L.R. 10 Ex. 153 at 162. For a case where
forbearance was held to be valuable consideration see Comyn Ching v Oriental Tube
(1979) 17 B.L.R. 47 at 79, CA; cf. IBA v EMI and BICC (1980) 14 B.L.R. 1, HL, where
forbearance did not result in a collateral warranty.

4For the consideration given where the employer was not to pay, see Charnock v
Liverpool Corp [1968] 1 W.L.R. 1498 at 1505, CA. For performance of an existing
contractual duty as consideration, see New Zealand Shipping Co Ltd v A.M. Satterthwaite
& Co Ltd [1975] A.C. 154, PC; North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd
[1979] Q.B. 705; Pao On v Lau Yiu Long [1980] A.C. 614 (PC); Comyn Ching v Oriental Tube
(1979) 17 B.L.R. 47, CA; Williams v Roffey Brothers [1991] 1 Q.B. 1, CA; Southern
Carribbean Trading Ltd v Trafigura Beheer BV [2005] 1 Lloyd’s Rep. 128 at 149; Re
Selectmove [1995] 1 W.L.R. 474 at 481, CA.

5See Section 4 of this chapter.

6See Section 3 of this chapter.

7See Ch.6, Section 8.

8See Ch.6, Sections 1 and 2.

9See Bell v Lever Bros [1932] A.C. 161, HL, reviewed by Steyn J in Associated Japanese
Bank v Credit du Nord [1989] 1 W.L.R. 255 at 264; William Sindall v Cambridgeshire CC
[1994] 1 W.L.R. 1016, CA; Great Peace Shipping v Tsavliris Salvage [2003] Q.B. 679, CA;
Chitty on Contracts, 32nd edn (London: Sweet & Maxwell, 2015),Vol.1, Chs 3 and 6. For
rectification where there has been a mistake in expressing the contract, see para.12-015
and following. For the equitable powers of the court in cases of mistake, see Solle v
Butcher [1950] 1 K.B. 671, CA; Grist v Bailey [1967] 1 Ch. 532; Curtin v GLC (1970) 114 S.J.
932, CA; Magee v Pennine Insurance Co Ltd [1969] 2 Q.B. 507, CA; Laurence v Lexcourt
Holdings [1978] 1 W.L.R. 1128, HL; cf. William Sindall v Cambridgeshire CC [1994] 1
W.L.R. 1016 at 1035, CA; Great Peace Shipping v Tsavliris Salvage [2003] Q.B. 679, CA.
10See Edwards v Skyways Ltd [1964] 1 W.L.R. 349.

11Bowen LJ in Carlill v Carbolic Smoke Ball Co [1893] 1 Q.B. 256 at 268, CA; Grainger &
Son v Gough [1896] A.C. 325 at 334, HL. See also the building contract case of Moore v
Shawcross [1954] C.L.Y. 342; [1954] J.P.L. 431.

12Cf. Pauling v Pontifex (1852) 2 Saund. & M. 59. For E.U. requirements for tenders, see
para.15-001 and following.

13Cf. South Hetton Coal Co v Haswell Coal Co [1898] 1 Ch. 465, CA, approved in Harvela
Ltd v Royal Trust Co [1986] A.C. 207, HL; Warlow v Harrison (1859) 1 E. & E. 309.

14See Lord Diplock in Harvela Ltd v Royal Trust Co [1986] A.C. 207 at 224, HL; Daulia Ltd
v Four Millbank [1978] 1 Ch. 231 at 238, CA.

15See Gibson v Manchester CC [1979] 1 W.L.R. 294, HL, where a statement that “the
corporation may be prepared to sell the house to you at the purchase price of £2,725”
was not an offer. For other examples of offers not capable of acceptance, see also, Gerson
v Wilkinson [2001] Q.B. 514 at 530 where the offer stated “I am willing to make an
outright sale for £319,000”, and iSOFT Group v Misys Holdings [2003] EWCA Civ 229;
[2003] All E.R. (D) 438 (Feb).

16Blackpool and Fylde Aero Club v Blackpool BC [1990] 1 W.L.R. 1195, CA.

17Fairclough Building v Borough Council of Port Talbot (1992) 62 B.L.R. 86, CA where,
without personal impropriety, a director of a tenderer was the husband of the Council’s
Principal Architect.

18For a full discussion, see Ch.6 and for negligent misstatement, see para.7-055 and
following.

19The term is here used in a completely different sense from that of the tender of goods
or money which may amount to a defence under a contract—see Chitty on Contracts,
edited by H. Beale, 32nd edn (London: Sweet & Maxwell, 2015), Vol.1, Ch.21, Section 5.

20See “Negotiations for a contract” at para.2-023; “Acceptance” at para.2-019;

“Negotiations after contract” at para.2-045.

21Falck v Williams [1900] A.C. 176, PC; Harvey v Facey [1893] A.C. 552, PC; Bigg v Boyd
Gibbins Ltd [1971] 1 W.L.R. 913, CA. An acceptance must also be unambiguous; see Peter
Lind & Co Ltd v Mersey Docks and Harbour Board [1972] 2 Lloyd’s Rep. 234.
22William Lacey (Hounslow) Ltd v Davis [1957] 1 W.L.R. 932. The principle is based on
custom; see William Lacey Ltd v Davis at 934 and 935. For expenses of entering an
architectural competition, cf. Jepson & Partners v Severn Trent Water Authority (1982) 20
B.L.R. 53, CA.

23William Lacey (Hounslow) Ltd v Davis [1957] 1 W.L.R. 932 at 934.

24William Lacey (Hounslow) Ltd v Davis [1957] 1 W.L.R. 932.

25British Steel v Cleveland Bridge [1984] 1 All E.R. 504 at 511 and (1981) 24 B.L.R. 94 at
122; Marston Construction Co v Kigass (1989) 46 B.L.R. 109; cf. Turriff Construction v
Regalia (1971) 9 B.L.R. 20; Regalian Properties v London Dockland Development Corp
[1995] 1 W.L.R. 212; M.S.M. Consulting v Republic of Tanzania [2009] EWHC 121 (QB),
(2009) 123 Con. L.R. 154, at [170]-[171]. See also Lord Goff of Chieveley and G. Jones, Goff
and Jones: The Law of Unjust Enrichment, 8th edn (London: Sweet & Maxwell, 2011),
Ch.16; Chitty on Contracts, 32nd edn (London: Sweet & Maxwell, 2015) Vol.1, para.29-077
and also para.4-031.

26Cf. Richardson v Silvester (1873) L.R. 9 Q.B. 34. For fraud, see para.6-012.

27For an example of such an agreement arising out of a letter of intent, see Turriff
Construction v Regalia (1971) 9 B.L.R. 20. See also, M.S.M. Consulting v Republic of
Tanzania [2009] EWHC 121(QB), (2009) 123 Con. L.R. 154, at [170]-[171].

28By analogy with William Lacey (Hounslow) Ltd v Davis [1957] 1 W.L.R. 932 at 934.

29See generally, S.N. Ball, “Work Carried Out in Pursuance of Letters of Intent—Contract
or Restitution?” (1983) 99 L.Q.R. 572; M. Furmston, T. Norisada and J. Poole, Contract
Formation and Letters of Intent (Chichester: John Wiley & Sons, 1998). For a case where
acceptance of a letter of intent gave rise to a contract, see Durabella v Jarvis & Sons (2001)
83 Con. L.R. 145 at 150. See also, Associated British Ports v Ferryways [2009] EWCA Civ
189, [2009] 1 Lloyd’s Rep. 595, at [24-27].

30ERDC Group Ltd v Brunel University see ERDC Group Ltd v Brunel University [2006]
B.L.R. 255 at 265. See also Diamond Build Ltd v Clapham Park Homes Ltd [2008] EWHC
1439 (TCC); 119 Con. L.R. 32, [41]-[50].

31A.C. Controls Ltd v British Broadcasting Corporation [2002] 89 Con. L.R. 52 at 65.

32This paragraph is based on British Steel v Cleveland Bridge [1984] 1 All E.R. 504; Turriff
Construction v Regalia (1971) 9 B.L.R. 20 and Monk Construction v Norwich Union (1992)
62 B.L.R. 107, CA. See also, Kleinwort Benson v Malaysia Mining [1989] 1 W.L.R. 379 at
391, CA, for the concept of a “comfort letter”; Associated British Ports v Ferryways [2009]
EWCA Civ 189; [2009] 1 Lloyd’s Rep. 595, [24]-[27] where Kleinwort Benson was
considered. See M. Furmston, T. Norisada and J. Poole, Contract Formation and Letters of
Intent: A Comparative Assessment (Chichester: John Wiley & Sons, 1998).

33Mowlem Plc v Stena Line Ports Limited and Diamond Build Limited v Clapham Park
Homes Limited [2008] EWHC 1439 (TCC); 119 Con. L.R. 32.

34(1971) 9 B.L.R. 20.

35For a discussion of such contracts see para.1-034.

36[1984] 1 All E.R. 504.

37[1986] 1 Lloyd’s Rep. 378.

38(1995) 11 Const. LJ 214.

39Croshaw v Pritchard (1899) 16 T.L.R. 45; sub nom. Crowshaw v Pritchard, H.B.C. (4th
edn), Vol.2, p.274. See also Sykes v Packham t/a Bathroom Specialist [2011] EWCA Civ 608.

40H.B.C. Report, p.276.

41Cana Construction v R. (1973) 37 D.L.R. (3d) 418.

42Most of the cases deal with the supply of goods but the principle applies to contracts of
work and labour; R. v Demers [1900] A.C. 103, PC.

43Percival Ltd v LCC Asylums Committee (1918) 87 L.J.K.B. 677 at 678. In Bentley
Construction v Somerfield Property (2001) 82 Con. L.R. 163 a standing arrangement gave
rise to a separate offer for each item of work which could be accepted or rejected.

44Percival Ltd v LCC Asylums Committee (1918) 87 L.J.K.B. 677 at 679; cf. Att Gen v
Stewards & Co Ltd (1901) 18 T.L.R. 131, HL; Kelly Pipelines v British Gas (1989) 48 B.L.R.
126.

45Percival Ltd v LCC Asylums Committee (1918) 87 L.J.K.B. 677 at 678.

46Offord v Davies (1862) 12 C.B. (N.S.) 748; G.N. Railway v Witham (1873) L.R. 9 C.P. 16 at
19.

47G.N. Railway v Witham (1873) L.R. 9 C.P. 16.

48See R. v Demers [1900] A.C. 103, PC.

49See Att Gen v Stewards & Co Ltd (1901) 18 T.L.R. 131, HL.

50Att Gen v Stewards & Co Ltd (1901) 18 T.L.R. 131, HL; Gilmour v McLeod (1893) 12
N.Z.L.R. S.C. 334; Pitcaithly & Co v Mclean & Son (1911) 31 N.Z.L.R. 648.

51Re Spenborough UDC’s Agreement; Spenborough Corp v Cooke Sons & Co Ltd [1968] Ch.
139; Staffordshire Health Authority v South Staffordshire Waterworks [1978] 1 W.L.R.
1387; cf. Kirklees MBC v Yorkshire Woollen (1978) 77 L.G.R. 448. For a case where it was
held that the contract was not determinable on reasonable notice see Balcombe Group
Plc v London Development Agency [2007] All E.R. (D) 32, [77]-[81]. See also, Jani-King (GB)
Ltd v Pula Enterprises [2008] All E.R. (Comm) 451, at [58]-[66].

52Tinn v Hoffman and Co (1873) 29 L.T.R. 271 at 278; Trollope & Colls v Atomic Power
Constructions Ltd [1963] 1 W.L.R. 333 at 337. See also Chitty on Contracts, 32nd edn
(London: Sweet & Maxwell, 2015), Vol.1 para.2-093.

53Trollope & Colls v Atomic Power Constructions Ltd [1963] 1 W.L.R. 333 applied in Butler
Machine Tool v Ex-Cell-O Corp [1979] 1 W.L.R. 401, CA. See also Chitty on Contracts, 32nd
edn (London:, Sweet & Maxwell, 2015), Vol.1, para.2-097 and “Battle of forms” at para.2-
022.

54Byrne v Van Tienhoven (1880) 5 C.P.D. 344.

55Watson v Canada Permanent Trust Co (1972) 27 D.L.R. (3d) 735 (British Columbia SC),
applying the principle sometimes known as that stated in Central London Property Trust
Ltd v High Trees House Ltd [1947] K.B. 130. See para.12-002.

56Byrne v Van Tienhoven (1880) 5 C.P.D. 344; cf. Dickinson v Dodds (1876) 2 Ch D. 463, CA.

57Holman Construction Ltd v Delco Timber Co Ltd [1972] N.Z.L.R. 1081 (New Zealand SC),
discussed at para.7-066.

58Peter Lind & Co Ltd v Mersey Docks & Harbour Board [1972] 2 Lloyd’s Rep. 234.

59Ramsgate Victoria Hotel Co v Montefiore (1866) L.R. 1 Ex. 109.

60See Manchester Diocesan Council for Education v Commercial & General Investments
Ltd [1970] 1 W.L.R. 241 at 248.
61See Nicolene v Simmonds [1953] 1 Q.B. 543, CA. Problems as to the existence of a
contract and as to its meaning when it is decided that there is a contract are closely
related and it may be useful to refer to the next chapter on construction of contracts.

62Day Morris Associates v Voyce [2003] All E.R. (D) 368 at [3S].

63Hyde v Wrench (1840) 3 Beav. 334; cf. Leslie & Co v Commissioners of Works (1914) 78
J.P. 462; Peter Lind & Co Ltd v Mersey Docks & Harbour Board [1972] 2 Lloyd’s Rep. 234;
and see “Counter-offers” at para.2-016.

64Stevenson v McLean (1880) 5 Q.B.D. 346.

65Adonis Construction v O’Keefe Soil Remediation [2009] EWHC 2047 (TCC); (2009) C.I.L.L.
2784, [42].

66Immingham Storage v Clear Plc [2011] EWCA Civ 89.

67Newbury v Sun Microsystems [2013] EWHC 2180 (QB), [21].

68Brown v Rice [2007] EWHC 625 (Ch).

69Jarvis v Galliard Homes [2000] B.L.R. 33.

70A Ltd v B Ltd [2015] EWHC 137 (Comm).

71Butler Machine Tool v Ex-Cell-O Corporation [1979] 1 W.L.R. 401 at 404, CA; Tekdata v
Amphenol [2009] EWCA Civ 1209; [2010] Lloyd’s Rep. 357.

72Butler Machine Tool v Ex-Cell-O Corporation [1979] 1 W.L.R. 401 at 405, CA.

73e.g. (1985) Rees Hough v Redland 2 Con. L.R. 109; Sauter Automation v Goodman (1986)
34 B.L.R. 81; Chichester Joinery v John Mowlem (1987) 42 B.L.R. 100; Tekdata v Amphenol
[2009] EWCA Civ 1209; A.E. Yates Trenchless Solutions Ltd v Black and Veatch Ltd [2008]
EWHC 3183 (TCC); 124 Con. L.R. 188; Transformers and Rectifiers Ltd v Needs Ltd [2015]
EWHC 269 (TCC); [2015] B.L.R. 336.

74Tekdata v Amphenol [2009] EWCA Civ 1209; [2010] Lloyd’s Rep. 357, Dyson LJ, at [25];
applied in Trebor Bassett Holdings v ADT Fire and Security [2011] EWHC 1936 (TCC);
[2011] B.L.R. 661, [157]; Transformers and Rectifiers Ltd v Needs Ltd [2015] EWHC 269
(TCC); [2015] B.L.R. 336.
75Transformers and Rectifiers Ltd v Needs Ltd [2015] EWHC 269 (TCC); [2015] B.L.R. 336;
John Graham Construction Limited v F.K. Lowry Piling Limited [2015] N.I.Q.B. 40.

76See Pagnan v Feed Products [1987] 2 Lloyd’s Rep. 601 at 610 and 619, CA and
propositions applied by Megaw J in Trollope & Colls Ltd v Atomic Power Constructions
Ltd [1963] 1 W.L.R. 333 at 336 and RTS Flexible Systems v Molkerei [2010] UKSC 14; [2010]
1 W.L.R. 753 which adopted the Pagnan principles at [46]-[54]. See also, British Guiana
Credit Corp v Da Silva [1965] 1 W.L.R. 248, PC; Bushwall Properties Ltd v Vortex Properties
Ltd [1976] 1 W.L.R. 591 at 603, CA.

77For the requirement that the parties intended to create a legal relationship, see
Edwards v Skyways Ltd [1964] 1 W.L.R. 349 and authorities referred to therein: an offer
to make ex gratia payment does not carry necessary or even probable implication that
the agreement is to be without legal effect. See also, Horrocks v Forray [1976]1 W.L.R.
230, CA; Kleinwort Benson v Malaysia Mining [1989]1 W.L.R. 379, CA; Associated British
Ports v Ferryways [2009] EWCA Civ 189, [24]-[27]. The uncertainty of the terms may
reflect on the intention to create legal relations: see Baird Textile Holdings v Marks and
Spencer [2002] 1 All E.R. (Comm) 737.

78See Metal Scrap Trade Corp v Kate Shipping Co Ltd [1994] 2 Lloyd’s Rep. 402 at 409,
where the parties had reached an agreement which contemplated that further terms as
to matters of detail were to be agreed before a binding agreement was reached.

79“If some particulars essential to the agreement still remain to be settled afterwards
there is no contract”; Lord Blackburn in Rossiter v Miller (1878) 3 App. Cas. 1124 at 1151,
HL.

80Holwell Securities Ltd v Hughes [1974] 1 W.L.R. 155, CA; Wettern Electric v Welsh
Agency [1983] Q.B. 796 at 802; Chitty on Contracts, 32nd edn (London: Sweet & Maxwell
2015), Vol.1, para.2-063. For cases where the manner of acceptance was not complied
with, see Jonathan Wren v Microdec (1999) 65 Con. L.R. 157 (acceptance by signature of
both parties); Picardi v Cuniberti [2003] B.L.R. 487, TCC (letter to be returned signed);
Pretty Pictures v Quixote Films [2003] All E.R. (D) 303, QB (signature required); Maple Leaf
v Vouvroy [2009] EWCA Civ 1334; [2010] 2 All E.R. (Comm) 788 at [16] (mere fact that an
agreement leaves a space for signatures is not a “prescription” that the agreement can
only become binding on the appending of signatures); Reveille Independent LLC v
Anotech International (UK) Ltd (2015) EWHC 726 (Comm) (memorandum stating it was
not binding until signed by both parties was binding although not signed).

81R.T.S. Flexible Systems v Molkerei [2010] UKSC 14; [2010] 1 W.L.R. 753; Ove Arup &
Partners International Ltd v Mirant Asia-Pacific Construction (Hong Kong) Ltd [2004]
B.L.R. 49 at 60.

82Pagnan v Granaria [1986] 2 Lloyd’s Rep. 547; Pagnan v Feed Products [1987] 2 Lloyd’s
Rep. 601, CA; V.H.E. Construction Ltd v Alfred McAlpine Construction Ltd (1997) C.I.L.L.
1253; Drake Insurance v Provident Insurance Plc [2004] Q.B. 601 at 632, CA.

83Hussey v Horne-Payne (1879) 4 App. Cas. 311 at 316, HL; Panorama Developments
(Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 Q.B. 711, CA.

84Steyn LJ in G. Percy Trentham v Archital Luxfer [1993] 1 Lloyd’s Rep. 25 at 27, CA; cf.
Pagnan v Feed Products [1987] 2 Lloyd’s Rep. 601 at 620, CA. Stent Foundations Ltd v
Carrillion Construction (Contracts) Ltd (2000) 78 Con. L.R. 188; Harvey Shopfitters Ltd v
A.D.I. Ltd [2004] 2 All E.R. 982, CA. In R.T.S. Flexible Systems v Molkerei [2010] UKSC 14;
[2010] 1 W.L.R. 753 the Supreme Court considered Percy Trentham and Lord Clarke
stated at [54] that there was no conflict between Steyn LJ’s approach and the approach
adopted by Goff J in British Steel Corporation v Cleveland Bridge and Engineering Co Ltd
[1984] 1 All E.R. 504. Each case depends upon its own facts.

85R.T.S. Flexible Systems v Molkerei [2010] UKSC 14; [2010] 1 W.L.R. 753 at [54].

86Pagnan v Feed Products [1987] 2 Lloyd’s Rep. 601 at 611, CA.

87Pagnan v Feed Products [1987] 2 Lloyd’s Rep. 601 at 611, CA at 619; in Mitsui Babcock
Energy Ltd v John Brown Engineering Ltd (1996) 51 Con L.R. 129 (signed agreement,
reserving provisions which were not essential).

88R.T.S. Flexible Systems v Molkerei [2010] UKSC 14; [2010] 1 W.L.R. 753 at [45].

89Cf. Damon v Hapag-Lloyd [1985] 1 W.L.R. 435; Badgerhill Properties Ltd v Cottrell (1991)
54 B.L.R. 23.

90See the Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971]
2 Q.B. 711, CA. See also para.14-031.

91See para.3-053; see also, Malcolm v Chancellor, Masters and Scholars of the University of
Oxford, The Times, 19 December 1990; Drake & Scull Engineering Ltd v Higgs & Hill
Northern Ltd (1994) 11 Const. LJ (lack of agreed daywork could be overcome by a
reasonable rate) and Hescorp Italia SpA v Morrison Construction (2000) 75 Con. L.R. 51
(completion date essential).

92See para.4-044.

93[1963] 1 W.L.R. 333.

94e.g. “subject to strike and lock-out clauses”: Love & Stewart Ltd v S. Instone (1917) 33
T.L.R. 475; “subject to surveyor’s report”: Marks v Board (1930) 46 T.L.R. 424; “subject to
satisfactory survey”: Astra Trust Ltd v Adams & Williams [1969] 1 Lloyd’s Rep. 81;
“subject to satisfactory running trials”: John Howard & Co v J.P. Knight Ltd [1969] 1
Lloyd’s Rep. 364; “subject to appropriate amendments … to be mutually agreed”: Ignazio
Messina & Co v Polskie Linie Oceaniczne [1995] 2 Lloyd’s Rep. 566; the use of the words
“to be agreed” may not prevent a concluded contract: Mamidoil-Jetoil Greek Petroleum v
Okta Crude Oil Refinery [2001] 2 Lloyd’s Rep. 76 at 89; Willis Management Ltd v Cable &
Wireless Plc [2005] 2 Lloyd’s Rep. 597 at 604, CA.

95Rossiter v Miller (1878) 3 App. Cas. 1124, HL; Bozson v Altrincham UDC (1903) 67 J.P.
397, CA; Chillingworth v Esche [1924] 1 Ch. 97, CA; cf. Branca v Cobarro [1947] K.B. 854,
CA; Smallman v Smallman [1972] Fam. 25 at 32, CA; Brown v Gould [1972] Ch. 53; Tiverton
Estates Ltd v Wearwell Ltd [1975] Ch. 146, CA; Munton v GLC [1976] 1 W.L.R. 649, CA. For
a discussion of the principles relating to a contract subject to a suspensive condition, see
Cranleigh Precision Engineering Ltd v Bryant [1965] 1 W.L.R. 1293.

96Chillingworth v Esche [1924] 1 Ch. 97, CA. The words, once introduced, can only cease
to apply if the parties expressly or by necessary implication so agree; see Cohen v
Nessdale [1982] 2 All E.R. 97, CA.

97Fraser Williams v Prudential Holborn (1993) 64 B.L.R. 1, CA; Whittle Movers Limited v
Hollywood Express Ltd [2009] EWCA Civ 1189; Bennett (Electrical) Services Ltd v Inviron
Ltd [2007] EWHC 49 (TCC) at [15].

98As in Alpenstow v Regalian [1985] 1 W.L.R. 721. The cases in which the meaning of
“subject to contract” has been displaced may be described as cases where “something has
gone wrong with the language” so that the meaning can be resolved by the usual methods
of construction: Confetti Records v Warner Music [2003] All E.R. (D) 61, Ch D.

99Rossiter v Miller (1878) 3 App. Cas. 1124, HL; Lewis v Brass (1877) 3 Q.B.D. 667, CA; Love
& Stewart Ltd v S. Instone (1917) 33 T.L.R. 475.

100R.T.S. Flexible Systems v Molkerei [2010] UKSC 14; [2010] 1 W.L.R. 753, [47].

101R.T.S. Flexible Systems v Molkerei [2010] UKSC 14; [2010] 1 W.L.R. 753, [55]-[56]
referring to Galliard Homes Ltd v J. Jarvis & Sons Ltd which cited with approval the
statement of the authors of Megarry and Wade: The Law of Real Property, 5th edn
(London: Sweet & Maxwell, 1984), pp.568-569.

102R.T.S. Flexible Systems v Molkerei [2010] UKSC 14; [2010] 1 W.L.R. 753, [56].

103Lord Maugham in Scammell v Ouston [1941] A.C. 251, at 255, HL; Bushwall Properties
Ltd v Vortex Properties Ltd [1976] 1 W.L.R. 591, CA; cf. Lord Wright, Hillas & Co Ltd v
Arcos Ltd (1932) 147 L.T. 503 at 504, HL and see “Valid meaning”, at para.3-038.

104Scammell v Dicker [2005] 3 All E.R. 838, CA.

105Maple Leaf v Vouvroy [2009] 1 Lloyd’s Rep. 475, not affected by appeal.

106Scammell v Ouston [1941] A.C. 251, HL: “a rare case of uncertainty” Scammell v Dicker
[2005] 3 All E.R. 838, CA.

107Bishop & Baxter v Anglo-Eastern Co Ltd [1944] 1 K.B. 12, CA.

108See also, British Electrical, etc., Ltd v Patley Pressings Ltd [1953] 1 W.L.R. 280: “Subject
to force majeure conditions” too vague; Nicolene v Simmonds [1953] 1 Q.B. 543 at 552, CA;
Hong Guan & Co Ltd v R. Jumabhoy & Sons Ltd [1960] A.C. 684 at 700, PC, a sale “subject to
force majeure and shipment” valid; Edwards v Skyways Ltd [1964] 1 W.L.R. 349; Three
Rivers Trading Co v Gwinear and District Farmers (1967) 111 S.J. 831, CA, sale of “400 tons
(approx.)” of barley not void for uncertainty; Mileform Ltd v Interserve Security Ltd
[2013] EWHC 3386 (QB) where the “exclusivity” term was too uncertain.

109LJ Nicolene v Simmonds [1953] 1 Q.B. 543 at 551, CA; Lovelock Ltd v Exportles [1968] 1
Lloyd’s Rep. 163, CA; Shamrock SS Co Ltd v Storey (1899) 81 L.T. 413, CA; Hobbs Padgett
and Co (Reinsurance) v J.C. Kirkland Ltd [1969] 2 Lloyd’s Rep. 547, CA; Mamidoil-Jetoil
Greek Petroleum v Okta Crude Oil Refinery [2001] 2 Lloyd’s Rep. 76, 89, CA (effect of “to be
agreed” on certainty); Willis Management Ltd v Cable & Wireless Plc [2005] 2 Lloyd’s Rep.
597, 604, CA; and MRI Trading AG v Erdenet Mining Corporation LLC [2013] EWCA Civ
156, CA (where a shipping schedule and certain terms were to “be agreed during the
negotiations of terms for 2010 terms”). See also “subject to contract” above at para.2-029.

110See Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 Q.B. 699, CA.

111Mamidoil-Jetoil Greek Petroleum v Okta Crude Oil Refinery [2001] 2 Lloyd’s Rep. 76 at
90, CA.

112Nicolene v Simmonds [1953] 1 Q.B. 543, CA; Gola Sports v General Sportcraft Co [1982]
Con. L.R. 51, CA; for another example of the first possibility, see Adamastos Shipping v
Anglo-Saxon Petroleum [1959] A.C. 133, HL.

113Esmil v Fairclough (1981) 19 B.L.R. 129; Tropwood A.G v Jade Enterprises [1982] 1
Lloyd’s Rep. 232, CA; Scammell v Dicker [2005] 3 All E.R. 838, CA.

114Nicolene v Simmonds [1953] 1 Q.B. 543, CA.

115Shamrock SS Co Ltd v Storey (1899) 81 L.T. 413, CA.

116Jet2.Com Limited v Blackpool Airport Limited [2012] EWCA Civ 417; (2012) 142 Con.
L.R. 1, CA, [29].

117Jet2.Com Limited v Blackpool Airport Limited [2012] EWCA Civ 417; (2012) 142 Con.
L.R. 1, CA, [69] adopting Phillips Petroleum v Enron Europe Ltd [1997] C.L.C. 329, 343, CA.
Dany Lions Ltd v Bristol Cars Ltd [2014] EWHC 817 (QB).

118BSC v Cleveland Bridge Co [1984] 1 All E.R. 504 and the cases there cited; A.C.T.
Construction v E. Clarke (2002) 85 Con. L.R. 1 at 11, CA, an agreement where neither the
scope of work nor the price were agreed.

119See the Supply of Goods and Services Act 1982 s.15, paras 3-053 and 4-033.

120See Trollope & Colls Ltd v Atomic Power Ltd [1963] 1 W.L.R. 333. For a case where the
contract did not have retrospective effect, see Consarc Design v Hutch Investment (2002)
84 Con. L.R. 36.

121May & Butcher Ltd v R. [1934] 2 K.B. 17, HL; British Bank for Foreign Trade Ltd v
Novinex Ltd [1949] 1 K.B. 623; King’s Motors (Oxford) Ltd v Lax [1970] 1 W.L.R. 426; Smith
v Morgan [1971] 1 W.L.R. 803; Brown v Gould [1972] Ch. 53; Courtney & Fairbairn Ltd v
Tolaini Brothers (Hotels) Ltd [1975] 1 W.L.R. 297, CA.

122Foley v Classique Coaches [1934] 2 K.B. 1, CA; National Coal Board v Galley [1958] 1
W.L.R. 16, CA; see also, Hillas v Arcos (1932) 147 L.T. 503, HL.

123Mamidoil-Jetoil Greek Petroleum v Okta Crude Oil Refinery [2001] 2 Lloyd’s Rep. 76 at
89, CA. In Tramtrack Croydon Ltd v London Bus Services Ltd [2007] EWHC 107 (Comm) a
clause which provided that the parties “shall in good faith agree (acting reasonably) the
financial arrangements” was upheld, in circumstances where any failure to agree was
referred to expert determination. In MRI Trading AG v Erdenet Mining Corporation LLC
[2013] EWCA Civ 156, CA where a shipping schedule and certain terms were to “be
agreed during the negotiations of terms for 2010 terms”, it was held that the terms were
enforceable.

124Sudbrooke Trading v Eggleton [1983] 1 A.C. 444, HL; Didymi Corp v Atlantic Lines
[1988] 2 Lloyd’s Rep. 108, CA.

125Queensland Electricity v New Hope Collieries [1989] 1 Lloyd’s Rep. 205 at 210, PC.

126Secretary of State for Defence v Turner Estate Solutions Ltd [2015] EWHC 1150 (TCC).
127Sudbrooke Trading v Eggleton [1983] 1 A.C. 444, HL; Didymi Corp v Atlantic Lines
[1988] 2 Lloyd’s Rep. 108, CA.

128Queensland Electricity v New Hope Collieries [1989] 1 Lloyd’s Rep. 205 at 210, PC.

129Secretary of State for Defence v Turner Estate Solutions Ltd [2015] EWHC 1150 (TCC).

130Charnock v Liverpool Corp [1968] 1 W.L.R. 1498, CA, a car repair case. For the
consideration given, see Charnock v Liverpool Corp at 1505. See also, Brown and Davis v
Galbraith [1972] 1 W.L.R. 997, CA. For the implied duty of skill, see para.3-053, and the
implied duty as to time, para.8-012.

131Charnock v Liverpool Corp [1968] 1 W.L.R. 1498, CA.

132Walford v Miles [1992] 2 A.C. 128, HL; Courtney & Fairbairn Ltd v Tolaini Brothers
(Hotels) Ltd [1975] 1 W.L.R. 297, CA; Multiplex Construction (UK) Ltd v Cleveland Bridge
(UK) Ltd [2006] EWHC 1341, (2006) 107 Con. L.R. 1 at [633]-[639]; BBC Worldwide Ltd v
Bee Load Ltd [2007] EWHC 134 at [50] “parties should discuss in good faith an extension
of time” unenforceable; Dhanani v Crasnianski [2011] EWHC 926 (Comm) at [95]-[105]
agreement to set up a private equity fund with no indication of any objective criteria
was unenforceable. See also Lord Steyn, “Contract Law: Fulfilling the Reasonable
Expectations of Honest Men” (1997) 113 L.Q.R. 433. Contrast the approach to the duty to
negotiate in good faith in the New South Wales Supreme Court in United Group Rail
Services v Rail Corporation New South Wales (2009) 127 Con. L.R. 202.

133Walford v Miles [1992] 2 A.C. 128, at 139, HL; Pitt v P.H.H. Asset Management [1994] 1
W.L.R. 327, CA.

134Mallozzi v Carapelli [1976] 1 Lloyd’s Rep. 407.

135Petromec IncPetroleo Brasileiro SA [2006] 1 Lloyd’s Rep. 121 at [121]. See also the
decision of the Singapore Court of Appeal in HSBC Institutional Trust Services (Singapore)
Ltd v Toshin Development Singapore Pte Ltd [2012] 4 S.L.R. 378 distinguishing Walford v
Miles on the basis that it involved a standalone agreement with no overarching
contractual framework which governed the parties’ relationship.

136Petromec Inc v Petroleo Brasileiro SA [2006] 1 Lloyd’s Rep. 121 at [121].

137Cable & Wireless Plc v IBM United Kingdom [2003] B.L.R. 89; Holloway v Chancery
Mead Ltd [2008] 1 All E.R. Comm 653.

138Sulamerica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638;
[2013] 1 W.L.R. 102, [33] citing with approval Cable & Wireless plc v IBM United Kingdom
Ltd [2002] 2 All E.R. (Comm) 1041 and Holloway v Chancery Mead Ltd [2008] 1 All E.R.
Comm 653.

139Sulamerica Cia Nacional de Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638;
[2013] 1 W.L.R. 102, [36]. But see International Research Corp plc v Lufthansa Systems
Asia Pacific Pte Ltd [2013] 1 Lloyd’s Rep 24 (High Court of Singapore) upheld on appeal
on this point, that an arbitration clause which referred disputes “which cannot be settled
by mediation” was not too uncertain to be enforceable.

140Wah v Grant Thornton [2012] EWHC 3198 (Ch).

141Emirates Trading Agency v Prime Mineral Exports [2014] EWHC 2104 (Comm).

142Barbudev v Eurocom Cable Management Bulgaria Eood [2012] EWCA Civ 548, [43]-[46].

143In Tramtrack Croydon Ltd v London Bus Services Ltd [2007] EWHC 107.

144Little v Courage Ltd [1995] C.L.C. 164, CA per Millett LJ, 169.

145Phillips Petroleum v Enron Europe [1997] C.L.C. 329 per Potter LJ, 343; Multiplex
Constructions UK Limited v Cleveland Bridge UK Limited [2006] EWHC 1341, [633]-[639];
and Shaker v Vistajet Group Holdings SA [2012] EWHC 1329, [7].

146British Guiana Credit Corp v Da Silva [1965] 1 W.L.R. 248, 255, PC. See also,
“Subsequent conduct” at para.3-008.

147Brogden v Metropolitan Railway Co (1877) 2 App. Cas. 666, HL; Pagnan v Feed Products
[1987] 2 Lloyd’s Rep. 601, CA; Jayaar Impex Ltd v Toaken Group Ltd [1996] 2 Lloyd’s Rep.
437 at 445.

148The first two sentences of this paragraph were cited with approval in Yorkshire Water
Services Ltd v Taylor Woodrow Northern Ltd (No.2) (2003) 90 Con. L.R. 115 at 119, TCC.

149Charnock v Liverpool Corp [1968] 1 W.L.R. 1498 at 1507, CA; cf. G. Percy Trentham v
Archital Luxfer (1992) 63 B.L.R. 44, CA.

150See as examples, Shields Furniture Ltd v Golt [1973] 2 All E.R. 655; Fairline Shipping
Corp v Adamson [1975] Q.B. 180; Wettern Electric v Welsh Agency [1983] Q.B. 796 at 802.
As to the effect of a party’s reservations and the effect of communication of those
reservations, see Day Morris Associates v Voyce [2003] EWCA Civ 189, CA; [2003] All E.R.
(D) 368 (Feb). In McNicholas Construction (Holdings) Ltd v Endemol UK Plc (2003) C.I.L.L.
2049; [2003] All E.R. (D) 203 (Oct) a handshake was not an acceptance.

151Day Morris Associates v Voyce [2003] All E.R. (D) 368 at [35].

152Brogden v Metropolitan Railway (1877) 2 App. Cas. 666, HL; Dartford Union v Trickett
(1888) 59 L.T. 754; Greenwood v Hawkings (1907) 23 T.L.R. 72; Robophone Facilities Ltd v
Blank [1966] 1 W.L.R. 1428; Peter Lind & Co Ltd v Mersey Docks & Harbour Board [1972] 2
Lloyd’s Rep. 235; New Zealand Shipping Co Ltd v Satterthwaite & Co Ltd [1975] A.C. 154,
PC.

153Brogden v Metropolitan Railway (1877) 2 App. Cas. 666, HL. For the position where no
price is fixed see para.2-037. See also Linnett v Halliwells LLP [2009] EWHC 319 (TCC);
[2009] B.L.R. 312 (applying Felthouse v Bindley 142 E.R. 1037; Allied Marine Transport v
Vale do Rio Doce Navegacao SA (“The Leonidas D”) [1985] 1 W.L.R. 925 and Vitol SA v
Norelf Ltd (The Santa Clara) [1996] A.C. 800).

154IRC v Fry [2001] S.T.C. 1715 citing Day v McLea (1889) 22 Q.B.D. 610 at 613, CA;
Hirachand Pumanchand v Temple [1911] 2 K.B. 330 at 336, CA; Stour Valley Builders v
Stuart [2003] T.C.L.R. 8, CA; Re Broderick [1986] 6 N.I.J.B. 36; Auriema v Haigh and
Ringrose (1988) Const. L.J. 200; Magnum Photo Supplies v Viko New Zealand [1999] 1
N.Z.L.R. 395; Cantor Index Ltd v Thomson [2008] All E.R. (D) 271.

155Reveille Independent LLC v Anotech International (UK) Ltd [2015] EWHC 726 (Comm).

156Allied Marine Transport Ltd v Vale do Rio Doce Navegacao SA (“The Leonidas D”) [1985]
1 W.L.R. 925 per Robert Goff LJ at 937E.

157Felthouse v Bindley (1862) 11 C.B. (N.S.) 869; Liberty Insurance Pte Ltd v Argo Systems
FZE [2011] EWCA Civ 1572, [46].

158Allied Marine Transport Ltd v Vale de Rio Doce Navegacao SA (“The Leonidas D”) [1985]
1 W.L.R. 925 at 927, 937; Vitol S.A. v Norelf Ltd [1996] A.C. 800 at 812.

159Gebr. van Weelde Sheepvaartkantor BV v Compania Naviera Orient SA (“The Agrabele”)

[1985] 2 Lloyd’s Rep. 496 at 509, approved [1987] 2 Lloyd’s Rep. 223 at 225; Re Selectmove
[1995] 1 W.L.R. 474 at 478 left open whether an express undertaking to indicate to the
contrary within an ascertainable time could give rise to an acceptance by silence.

160Yona International Ltd v La Reunion Francaise [1996] 2 Lloyd’s Rep. 84 at 110.

161Starbev Gp Ltd v Interbrew Central European Holdings Bv [2014] EWHC 1311 (Comm).
162Entores Ltd v Miles Far East Corp [1955] 2 Q.B. 327, CA.

163Yates Building v Pulleyn (1975) 237 E.G. 183, CA (form of posting directory rather than
mandatory, permissive or obligatory); Manchester Diocesan Council for Education [1970]
1 W.L.R. 242; Edmund Murray Ltd v B.S.P. International Foundations Ltd (1992) 33 Con.
L.R. 1, CA; Anglian Water Services v Laing O’Rourke [2010] EWHC 1529 (TCC), [34]-[50];
Ener-G Holdings Plc v Hornell [2012] EWCA Civ 1059, CA (Lord Neuberger MR and Gross
LJ, Longmore LJ dissenting).

164Tinn v Hoffman & Co (1873) 29 L.T. 271, 274; Manchester Diocesan Council for
Education [1970] 1 W.L.R. 242.

165Henthorn v Fraser [1892] 2 Ch. 27 at 33; Holwell Securities Ltd v Hughes [1974] 1 W.L.R.
155, CA.

166Byrne v Van Tienhoven (1880) 5 C.P.D. 344; see also, Household Insurance Co v Grant
(1879) 4 Ex.D. 216.

167Holwell Securities Ltd v Hughes [1974] 1 W.L.R. 155 at 157, CA. Lawton LJ in his
judgment at 161 set out other qualifications to the concept. See also, Yates Building v
Pulleyn, The Times, 26 February 1975, CA.

168Holwell Securities Ltd v Hughes [1974] 1 W.L.R. 155, CA.

169Tinn v Hoffman & Co (1873) 29 L.T. 271, 278; Manchester Diocesan Council for
Education [1970] 1 W.L.R. 242; Edmund Murray Ltd v B.S.P. International Foundations Ltd
(1992) 33 Con. L.R. 1, CA. See too Anglian Water Services v Laing O’Rourke [2010] EWHC
1529 (TCC), [34]-[50] for application of the relevant principles and in particular,
consideration of whether the stipulation of a means of giving notice was mandatory or
directory.

170Brinkibon Ltd v Stahag Stahl [1983] 2 A.C. 34 at 42, HL, applying Entores v Miles Far
East Corp [1955] 2 Q.B. 327, CA.

171Electronic Commerce: Formal Requirements in Commercial Transactions, December

2001, para.3.56.

172Olley v Marlborough Court [1949] 1 K.B. 532 at 549, CA; Mendelssohn v Normand Ltd
[1970] 1 Q.B. 177, CA; Thornton v Shoe Lane Parking Ltd [1971] 2 Q.B. 163, CA; Hollier v
Rambler Motors (A.M.C.) Ltd [1972] 2 Q.B. 71, CA; cf. s.11(2) and para.(c) of Sch.2 to the
Unfair Contract Terms Act 1977.
173See, e.g. Curtis v Chemical Cleaning Co [1951] 1 K.B. 805, CA; Mendelssohn v Normand
Ltd [1970] 1 Q.B. 177, CA. See also, Dietz v Lennig Chemicals Ltd [1969] 1 A.C. 170, HL; J.
Evans & Son v Andrea Merzario [1976] 1 W.L.R. 1078, CA; Drinkall v Whitwood [2004] 1
W.L.R. 462.

174National Westminster Bank v Morgan [1985] A.C. 686. Bank of Scotland v Etridge (No.2)
[2002] 2 A.C. 773. See Shaw v Finnimore [2009] EWHC 367 (Ch) at [72] which contains a
useful summary of the law in Etridge and Lewison J’s additional observations on Etridge
in Thompson v Foy [2009] EWHC 1076 (Ch), at [100] and [101].

175Parker v S.E. Railway (1877) 2 C.P.D. 416 at 421; L’Estrange v F. Graucob [1934] 2 K.B.
394 at 403, CA. For mistake as to nature of document, see Saunders v Anglia Building
Society [1971] A.C. 1004, HL; United Dominions Trust v Western [1976] Q.B. 513, CA. See
also, Mercury Tax v HMRC [2008] EWHC 2721 (Admin) at [34]-[43] on the alteration of a
document after signature and the transference of signatures from one document to
another.

176Amiri Flight Authority v BAE Systems Plc [2003] 2 Lloyd’s Rep. 767 at 772, CA.

177Parker v S.E. Railway (1877) 2 C.P.D. 416; Thornton v Shoe Lane Parking Ltd [1971] 2
Q.B. 163, CA. For a person not bound by notice in foreign language, see Geier v Kujawa
Western & Warne Bros (Transport) Ltd [1970] 1 Lloyd’s Rep. 364.

178Interfoto Picture Library v Stiletto Visual Programmes [1989] Q.B. 433, CA; cf. s.11(2)
and para.(c) of Sch.2 to the Unfair Contract Terms Act 1977. In Shepherd Homes Ltd v
Encia Remediation Ltd [2007] B.L.R. 135, a clause limiting maximum total liability to the
contract price was held not to be particularly onerous or unusual. In Sumukan Ltd v The
Commonwealth Secretariat [2007] Lloyd’s Rep. 87 an agreement excluding the right of
appeal under the Arbitration Act was held not to be unusual or onerous.

179Frederick Sage & Co Ltd v Spiers & Ponds Ltd (1915) 31 T.L.R. 204; cf. L’Estrange v F.
Graucob [1934] 2 K.B. 394, CA. See also, British Road Services v Crutchley (Arthur V.) Ltd
[1968] 1 All E.R. 811, CA.

180Parker v S.E. Railway (1877) 2 C.P.D. 416; Olley v Marlborough Court [1949] 1 K.B. 532,
CA, and para.2-053; see also, Chapelton v Barry UDC [1940] 1 K.B. 532, CA.

181Smith v South Wales Switchgear [1978] 1 W.L.R. 165, HL.

182Lord Reid in McCutcheon v David MacBrayne Ltd [1964] 1 W.L.R. 125 at 127, HL; see
also, Hardwick Game Farm v Suffolk, etc., Association [1969] 2 A.C. 31 at 90, 104, 105, 130,
HL; Mendelssohn v Normand Ltd [1970] 1 Q.B. 177, CA; Hollier v Rambler Motors (A.M.C.)
Ltd [1972] 2 Q.B. 71, CA; Roberts v Elwells Engineers Ltd [1972] 2 Q.B. 586, CA; British
Crane Hire Corp Ltd v Ipswich Plant Hire Ltd [1975] Q.B. 303, CA; Amalgamated
Investment and Property Co Ltd v Texas Thomas International Bank Ltd [1982] Q.B. 84, CA,
commented on in Keen v Holland [1984] 1 W.L.R. 251, CA; The “Leila” [1985] 2 Lloyd’s
Rep. 172 at 178.

183e.g. Rees-Hough Ltd v Redland (1985) 2 Con. L.R. 109; Hanson v Rapid Civil Engineering
(1987) 38 B.L.R. 106.

184In Balmoral Group Ltd v Borealis (UK) Ltd [2006] 2 Lloyd’s Rep. 629, a contract made
for the supply of a relatively small quantity of a product on one set of terms on only a
few occasions may, depending on the precise circumstances, not establish that a later
contract for large quantities of a different product was also made on those terms.

185Amalgamated Property Company v Texas Bank [1982] Q.B. 84; Norwegian American
Cruises A/S v Paul Mundy Ltd (“The Vistafjord”) [1988] 2 Lloyd’s Rep. 343; Furness Withy
(Australia) Pty Ltd v Metal Distributors (U.K.) Ltd (“The Amazonia”) [1990] 1 Lloyd’s Rep.
236 and see para.12-003.

186Mitsui Babcock Energy Ltd (BEL) v John Brown Engineering Ltd (1996) 51 Con. L.R. 129.

187Russell Brothers (Paddington) Ltd v John Lelliott Management Ltd (1995) 11 Const. L.J.
377; J. Murphy & Sons Ltd v A.B.B. Daimler-Benz (1999) C.I.L.L. 1461. See also, Confetti
Records v Warner Music UK Ltd [2003] EWHC 1274, Ch D. Tesco Stores Ltd v Costain
Construction Ltd [2003] EWHC 1487 (TCC): concept of contracts formed by estoppel was
found to be “logically impossible”. In Haden Young v Laing O’Rourke Midlands Ltd [2008]
EWHC 1016 (TCC) a party may be estopped from denying that a particular term applies,
but where the parties have not agreed an essential term, there is no place for an
estoppel.

188Liberty Mercian Ltd v Cuddy Civil Engineering Ltd (2013) 150 Con. L.R. 124; [2013]
EWHC 4110 (TCC): no common assumption that the contracting party was not the party
stated.

189Inntrepreneur Pub Co v East Crown [2000] 2 Lloyd’s Rep. 611 at 614 citing Deepak v
Imperial Chemical Industries [1998] 2 Lloyd’s Rep. 139 affirmed [1999] 1 Lloyd’s Rep. 387;
McGrath v Shah (1987) 57 P. & C.R. 452; Exxonmobil Sales and Supply Corporation v
Texaco Ltd [2003] 2 Lloyd’s Rep. 686; Ravennavi SPA v New Century Shipbuilding Co Ltd
[2006] 2 Lloyd’s Rep. 280; Mileform Ltd v Interserve Security Ltd [2013] EWHC 3386 (QB).

190J. Cartwright, Misrepresentation, Mistake and Non-Disclosure, 2nd edn (London: Sweet
& Maxwell, 2006), Deepak Fertilisers v ICI Chemicals [1999] 1 Lloyd’s Rep. 387 at 395;
Witter Ltd v T.P. Industries Ltd [1996] 2 All E.R. 573 at 595; Six Continents Hotels Inc v
Event Hotels GmbH [2006] EWHC 2317 at [49]; AXA Sun Life Services v Campbell Martin
[2011] EWCA Civ 133, [2011] 2 Lloyd’s Rep. 1 at [83]-[95]; BSkyB v H.P. Enterprises [2010]
EWHC 86 (TCC); [2010] B.L.R. 267 at [372]-[389].

191Mears Ltd v Shoreline Housing Partnership Ltd [2013] C.P. Rep. 39; [2013] EWCA Civ
639.

192See “Contract only partly in writing” at para.3-028.

193Law of Property (Miscellaneous Provisions) Act 1989 s.2(1).

194McCausland v Duncan Lawrie Ltd [1997] 1 W.L.R. 38, CA; Keay v Morris Homes (West
Midlands) Ltd [2012] EWCA Civ 900.

195Spiro v Glencrown Properties [1991] Ch. 537. Approved by the Court of Appeal in
Bircham & Co Nominees (No.2) Ltd v Worral Holdings Ltd [2001] EWCA 775, (2001) 47 E.G.
149 at [43].

196Record v Bell [1991] 1 W.L.R. 853.

197Pitt v P.H.H. Asset Management [1994] 1 W.L.R. 327, CA.

198Yeates v Line [2013] Ch. 363; [2012] EWHC 3085 (Ch), following the ruling in Joyce v
Rigolli [2004] EWCA Civ 79.

1991989 Act s.2(2).

2001989 Act s.2(3). See Firstpost Homes v Johnson [1995] 1 W.L.R. 1567 at 1576, CA: an
agreement to sell land contained in a letter with plan attached was unenforceable as the
letter was signed by only one party although the plan was signed by both parties.

201See Law Commission No.164 (1987).

2021989 Act s.2(4): Robert Leonard (Developments) Ltd v Wright [1994] N.P.C. 49; for
rectification generally, see para.12-015.

203McCausland v Duncan Lawrie Ltd [1997] 1 W.L.R. 38, CA: arguable that a variation
which did not comply with the Act might give rise to an estoppel; cf. Godden v Merthyr
Tydfil HA (1997) 74 P.&C.R. D1, CA where an oral agreement was void under the Act,
there was no estoppel by convention as it would render valid a transaction which the
legislature made invalid; for estoppel generally, see para.12-001; Shah v Shah [2002] Q.B.
35, CA where an estoppel prevented a party raising a defect in attestation in a deed.
204Record v Bell [1991] 1 W.L.R. 853 where a term agreed in an exchange of letters was
an enforceable collateral contract as it was not itself for a sale of land; for collateral
contracts, see para.6-037. For the difficulties in establishing a collateral contract in
contracts for the sale of land, see Business Environment Bow Land Ltd v Dean Water
Estates Ltd [2007] EWCA 622 at [42].

205Yaxley v Gotts [2000] Ch. 162, CA. See s.2(5) of the Law of Property (Miscellaneous
Provisions) Act 1989.

206Camden v Batterbury (1860) 7 C.B. (N.S.) 864; cf. Lavery v Pursell (1888) 39 Ch D. 508.
See also, Hounslow, LBC v Twickenham Gardens Development Ltd [1971] 1 Ch. 233
discussed in para.12-035; cf. Surrey Heath BC v Lovell Construction (1988) 42 B.L.R. 25 at
51.

207North Eastern Properties v Coleman & Quinn [2010] 1 W.L.R. 2715, CA.

208See Law of Property (Miscellaneous Provisions) Act 1989 s.2(6) and Law of Property
Act 1925 s.205(1).

209Yeomans Row Management Ltd v Cobbe [2008] UKHL 50; [2008] 1 W.L.R. 1752 at [29].

210Orton v Collins [2007] 1 W.L.R. 2953.

211For guarantees generally, see para.11-037.

212Statute of Frauds 1677 s.4; Elpis Maritime v Marti Chartering [1992] 1 A.C. 21, HL;
Actionstrength v International Glass Engineering [2003] 2 A.C. 541, HL, an oral agreement
of guarantee by an employer to a sub-contractor to pay sums due from the contractor
could not be enforced by reason of s.4 of the Statute of Frauds 1677 and the sub-
contractor could not rely on an estoppel inconsistent with the statute. Golden Ocean
Group Ltd v Salgaocar Mining Industries Pvt Ltd [2012] EWCA Civ 265, [21]-[22], s.4 was
intended to prevent the court from having to resolve disputes as to oral utterances not to
prevent it considering a contract of guarantee in emails or other documents which could
constitute an agreement in writing; Mitsui Osk Lines Ltd v Salgaocar Mining Industries
Private Ltd [2015] EWHC 565 (Comm), sufficient evidence that a guarantee was in writing
and signed by the guarantor for it to be enforceable; Gordon James Ramsay v Gary Love
[2015] EWHC 65 (Ch) an agent had sufficient authority to enter into a personal contract
of guarantee and indemnity using a signature machine on the principal’s behalf.

213Mercantile Law Amendment Act 1856 s.3. There were formerly certain other
contracts required to be evidenced in writing, and a large body of law, some of which is
now obsolete, developed. As the subject is now of such limited application to building
contracts, it is not further dealt with here.
214James Graham and Co v Southgate-Sands [1986] Q.B. 80, CA; John Spencer Harvey v
Dunbar Assets Plc [2013] EWCA Civ 952, forged signature of one of four co-guarantors
made a guarantee unenforceable as one of the intended guarantors had not signed it.

215For the distinction between guarantee and indemnity, see Chitty on Contracts, 32nd
edn (London: Sweet & Maxwell, 2015), Vol.2, paras 45-008, 45-043 and 45-046; Goulston
Discount Co Ltd v Clark [1967] 2 Q.B. 493, CA; Pitts v Jones [2008] Q.B. 706, CA;
Commercial Bank of Tasmania v Jones [1893] A.C. 313, PC, novation substituting one
debtor for another.

216For “Construction of Deeds;” see para.3-088.

217Law of Property (Miscellaneous Provisions) Act 1989 ss.1(1)(b), 1(2) and 1(3).

218Companies Act 2006 s.44; Williams v Redcard [2011] EWCA Civ 466.

219First National Securities v Jones [1978] Ch. 109, CA; Whittal Builders v Chester-le-Street
DC (1987) 40 B.L.R. 82, local authority estopped from denying that an agreement was
under seal.

220For the 12-year limitation period, see para.16-025.

221See Family Law Reform Act 1969 s.12.

222Family Law Reform Act s.1.

223Sale of Goods Act 1979 s.3 (goods sold and delivered) the same rule probably applies
to necessaries which are not goods, so that a reasonable price, not necessarily the
contract sum, is payable: Nash v Inman [1908] 2 K.B. 1 at 8, CA. See s.2 of the Minors
Contracts Act 1987 for guarantees of minor’s obligations and s.3 of the Act for the court’s
power to order restitution.

224There is no such case reported.

225Law of Property Act 1925 s.1(6).

226A seal is still required for a corporation sole—see Law of Property (Miscellaneous
Provisions) Act 1989 s.1(10).

227See Chitty on Contracts, 32nd edn (London: Sweet & Maxwell, 2015) Vol.1, paras 10-001
and 10-002.
228Local Government Act 1972 s.135(2).

229Local Government Act 1972 s.135(4). See North West Leicestershire DC v East Midlands
HA [1981] 1 W.L.R. 1396 for consideration of a statutory predecessor.

230The Corporate Bodies’ Contracts Act 1960.

231For the right to sue the Crown and the procedure, see the Crown Proceedings Act
1947.

232Partnership Act 1890 s.1; Keith Spicer Ltd v Mansell [1970] 1 W.L.R. 333, CA.

233Partnership Act 1890 s.5. See generally, R. l’Anson Banks, Lindley & Banks on
Partnership, 19th edn (London: Sweet & Maxwell, 2013) and, e.g. Mann v D’Arcy [1968] 1
W.L.R. 893.

234See further, Chitty on Contracts, 32nd edn (London: Sweet & Maxwell, 2015), Vol.1,
para.10-064 and following; for trade unions, see para.10-081 and following.

235Bradley Egg Farm Ltd v Clifford [1943] 2 All E.R. 378, CA; Wise v Perpetual Trustee Co
[1903] A.C. 139, PC; cf. Howells v Dominion Insurance [2005] EWHC 552 (Admin) in which
Wise v Perpetual Trustee was distinguished and a judgment was held to be enforceable
against all the members of a club.

236Steele v Gourley (1887) 3 T.L.R. 118, 119; cf. Draper v Manvers (Earl) (1892) 9 T.L.R. 73;
Bradley Egg Farm Ltd v Clifford [1943] 2 All E.R. 378, CA; Davies v Barnes Webster & Sons
Ltd [2011] EWHC 2560 (Ch) management committee of a club liable under a building
contract entered into on behalf of the club by the treasurer.
18 JAN 2021 PAGE 42
Keating on Construction Contracts 10th Edition
Chapter 3: Construction of Contracts

CHAPTER 3

CONSTRUCTION OF CONTRACTS
CONTENTS
A. Construction of Contracts 3-001
1. Expressed Intention 3-003
(a) Extrinsic evidence not normally admissible 3-005
(b) When extrinsic evidence is admissible 3-014
2. Rules of Construction 3-029
3. Alterations 3-050
4. Implied Terms 3-051
(a) Statutory implication 3-052
(b) Implication at common law 3-055
5. Construction of Deeds 3-088
6. The Value of Previous Decisions 3-089
B. Risk, Indemnity and Exclusion Clauses 3-091
1. Risk Clauses 3-098
2. Indemnity Clauses 3-099
3. Exclusion Clauses 3-104
4. Legislation Affecting Exclusion and Limitation Clauses 3-110

A. CONSTRUCTION OF CONTRACTS
3-001
Many of the problems likely to arise under a construction contract are concerned
with the meaning to be given to words in a written contract. The process by which the
courts arrive at this meaning is termed construing a contract, and the meaning, as
determined by the court, the construction of the contract.1 In construing a contract:

“The object sought to be achieved in construing any commercial contract is to ascertain

… what each [party] would have led the other reasonably to assume were the acts that
he was promising to do or to refrain from doing by the words in which the promises on
his part were expressed.”2

3-002
As Lord Neuberger has observed, over the past 45 years the House of Lords and
Supreme Court have discussed the correct approach to be adopted to the construction
of contracts in a number of cases.3 While the emphasis on particular aspects of the
principles of construction has differed in those decisions, the underlying principles
 have been constant.

1. EXPRESSED INTENTION
3-003
In construing a contract the court applies the rule of law that:

“…while it seeks to give effect to the intention of the parties, [it] must give effect to that
intention as expressed, that is, it must ascertain the meaning of the words actually
used.”4

For the purposes of construction “intention” does not mean motive, purpose, desire or
a state of mind but intention as expressed, and the common law adopts an objective
standard of construction excluding general evidence of actual intention of the parties.
3-004
While, as set out below, evidence of the circumstances in which the contractual
document was made, of the special meaning of words, of customs and certain other
matters is permitted to assist the court in arriving at the expressed intention of the
parties, nevertheless the fundamental rule is that the words must speak for
themselves,5 although they will be interpreted in a way that a reasonable commercial
person would construe them.6 The presumption is that the parties have intended what
they have in fact said.7 The parties cannot come into court to give evidence of what
they intended to say8 or their declarations of subjective intent9 even if both parties had
the same undisclosed intention.10 If the rule were otherwise, “all certainty would be
taken from the words in which the parties have recorded their agreement”.11

(a) Extrinsic evidence not normally admissible

3-005
It follows from the principle just stated that for a written contract no extrinsic
evidence, outside the document itself, may normally be adduced to contradict, vary,
add to or subtract from the written terms.12

3-006
Blanks. Where a complete blank is left in a material part of the contract, evidence is
not admissible to fill it.13 Thus where the date for completion was omitted, and to
insert it would result in the imposition of an onerous obligation under a liquidated
damages clause, the court refused to admit evidence that each party had been told of
the date.14 It may be possible to fill the blank on the basis of the remaining terms of the
contract and otherwise admissible extrinsic evidence.15

3-007
Preliminary negotiations. Although restricted evidence of the factual background is
admissible,16 when the parties have entered into a final concluded contract in writing,
the preliminary negotiations such as letters cannot be referred to for the purpose of
explaining the parties’ intention.17 In one case18 a covering letter sent with the tender
stated that the tender was “subject to” a certain term. After negotiations a formal
contract was signed which defined the contract documents without including the letter,
although in the contract documents, as defined, there was a reference to part of the
letter for a different purpose. It was held that that term was not part of the contract.

3-008
Subsequent conduct. It is not legitimate to use as an aid in the construction of the
contract anything which the parties said or did after it was made,19 and this rule
 applies even where there is an ambiguity in the contract.20 The rule applies
particularly where a contract is arrived at in the course of correspondence. All the
letters must be looked at in order to determine whether, and at what stage, the parties
intended to make themselves contractually liable, but when that stage has been
established subsequent correspondence cannot be taken into account in construing the
contract.21
3-009
The rule prohibiting evidence of subsequent conduct as an aid to construction of a
written contract does not apply to oral contracts where evidence of what the parties
said or did after the formation of the contract may be used to establish what they said
or did at the time of contract formation.22

3-010
Deletions from printed documents. It is unclear whether in construing a contract it
is permissible to look at deletions from printed documents and, if it is permissible, for
what purpose. There are two schools of thought. One school, supported by weighty, if
elderly, authority23 but followed recently,24 says that you may not take account of such
deletions at all.
3-011
The second school holds that the deleted parts can be considered as part of the
surrounding circumstances in construing what the parties have chosen to leave in.25
Applying this principle, the House of Lords referred to the deletion in an existing
contract of a clause giving the employer an express right of set-off as part of the
surrounding circumstances showing that the parties directed their minds to the
question of set-off and decided that it should not be allowed. This second school has
support to the effect that the court is entitled to look at deleted words to see if any
assistance can be derived from them in solving an ambiguity in words retained,26 and
that a word or phrase in the deleted part of a clause may throw light on the meaning of
the same word or phrase in what remains of the clause.27 However, by deleting a
provision parties are not to be deemed to have agreed the converse. They may have
had all sorts of reasons for making the deletion.28 Further, however, the manner in
which deletions and amendments have been effected may itself provide a powerful
reason for construing the agreement by reference to the deletions and amendments.29
The drafting history of additions made to a standard form may be relied on in
interpreting the contract clause.30 It has further been held that there is no difference
here between a deletion and an omission.31
3-012
It is submitted that the second school is generally to be preferred. Where parties
have made a contract in a document that contains deletions, to look at the deletions
does not offend the principle discussed above which prevents reference to preliminary
negotiations. The deletion is physically contained in the concluded contract. It is
submitted that the court should first construe the retained words. If they are
unambiguous, reference to the deletion is unnecessary. If they are ambiguous,
reference to deletions from printed documents should be permitted to see whether
objectively they throw light on the meaning of the retained words.32 There may be no
logical difference between a visible deletion and an omission proved to have been
made, but it is submitted that the case for considering invisible omissions is less
persuasive, especially if the words of the contract are unambiguous.

3-013
Practice notes. Practice or Guidance notes are often provided by organisations which
publish standard forms of contract to explain those standard forms. Generally such
practice notes are unlikely to be admissible as an aid to construction.33 At most they
give an indication of the views of the organisation producing the standard form. The
 position is different if they are bound into and form part of the contract documents.34

(b) When extrinsic evidence is admissible

3-014
To the general rule that extrinsic evidence is not admissible to interpret a written
contract there are many qualifications and exceptions relevant to construction
contracts, of which the most important are now discussed.

3-015
Factual background. Contracts are not made in a vacuum. There is always a setting
in which they have to be placed.35 Restricted evidence is admissible:

“…of the factual background known to the parties at or before the date of the contract,
including evidence of the ‘genesis’ and objectively the ‘aim’ of the transaction.”36

The court must “place itself in thought in the same factual matrix as that in which the
parties were”.37

3-016
Surrounding circumstances. The court does not ascertain the intention of the
parties by an interpretation based purely on internal linguistic considerations.38 It
must:

“…inquire beyond the language and see what the circumstances were with reference to
which the words were used, and the object, appearing from those circumstances, which
the person using them had in view.”39

3-017
Thus evidence can be given to identify persons and things referred to in the
document and to explain the circumstances existing at the time of its making.40 Notes
forming part of the documentation of a standard form may be admissible.41 Factual
matrix may include prior contracts unless it is common ground that the prior contracts
were superseded by the contract being construed.42 In the case of a lease it may also
include draft leases attached to an agreement for lease.43

“Such facts give very little help in the construction if the words of the deed44 are clear,
but they will help very much if the words are ambiguous.”45

They may assist in deciding what terms, if any, are to be implied.46 However, this
principle does not permit evidence to be made available of negotiations before contract
or of the parties’ subjective intentions.47
3-018
In Investors Compensation Scheme v West Bromwich Building Society,48 Lord
Hoffmann summarised and combined the principles49 relating to the use of evidence
of factual background and surrounding circumstances as follows:

“(1) Interpretation is the ascertainment of the meaning which the document would
convey to a reasonable person having all the background knowledge which would
reasonably have been available to the parties in the situation in which they were
at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the ‘matrix of
fact’, but this phrase is, if anything, an understated description of what the
background may include. Subject to the requirement that it should have been
reasonably available to the parties and to the exception to be mentioned next, it
 includes absolutely anything which would have affected the way in which the
language of the document would have been understood by a reasonable man.50
(3) The law excludes from the admissible background the previous negotiations of
the parties and their declarations of subjective intent. They are admissible only in
an action for rectification. The law makes this distinction for reasons of practical
policy and, in this respect only, legal interpretation differs from the way we would
interpret utterances in ordinary life. The boundaries of this exception are in some
respects unclear. But this is not the occasion on which to explore them.”

3-019
Foreign and technical words. The meaning of foreign and technical words can be
proved.51 If there is no dispute about the meaning of technical words the court can
inform itself about them by any means that is reliable and ready to hand, such as an
explanation by counsel or by reference to dictionaries or in cases of difficulty by calling
in aid an assessor.52 If there is a dispute about the meaning, the court will resolve it on
the usual basis.

3-020
Custom and usage. Evidence is admissible to show that words were used according
to a special custom or usage attaching to the trade or locality applicable to the
contract.53 The custom must be strictly proved and must be notorious so that
everybody in the trade or locality concerned enters into a contract with that custom as
an implied term.54 It must not be inconsistent with the express or necessarily implied
terms of the contract,55 must be reasonable and not against the law.56 In circumstances
where trade practice is insufficiently notorious to amount to a custom, that practice
may be relevant as part of the factual context known to both parties.57

3-021
Identity of the parties. Where an issue arises as to the identity of a party referred to
in a deed or contract, extrinsic evidence is admissible to identify the true contracting
party. If there is an error in the description, it can be corrected as a matter of
interpretation without needing to rectify the written instrument.58

3-022
Parties’ own dictionary. Where the parties have negotiated on the agreed basis that
certain words used in the contract have a meaning which is not one that they would
conventionally bear, it is permissible to look at the negotiations to find out “their own
dictionary meaning”.59 However, this is only permissible in order to support an
unconventional meaning of the disputed words.60 It is an illegitimate extension of the
private dictionary exception to use it to determine which of two conventional
meanings for the disputed words is correct because taken to its logical conclusion this
would destroy the general exclusory rule on extrinsic evidence which the House of
Lords upheld in Chartbrook Ltd v Persimmon Homes Ltd.61 However, the evidence may
be used to show the genesis and object of a provision or that the parties are to be
treated as having negotiated on an agreed basis: Jones v Bright Capital.62

3-023
Agreed factual assumption. When parties have acted in a transaction upon an
agreed assumption that a particular state of facts between them is to be accepted as
true, each is to be regarded as estopped as against the other from questioning as
regards that transaction the truth of the facts so assumed.63 Evidence to establish the
agreed assumption is admissible which, it is suggested, might conceivably include
evidence of facts occurring after the making of the contract in so far as they go to
establish the existence at the time the contract was made of the agreed assumption.
3-024
Attacking the contract. Evidence is admissible to show an unfulfilled condition
precedent, where an obligation was not to arise until an event, such as a third person’s
approval, had taken place and the event has not occurred either at all or within the
time limited by the agreement.64 It is also admissible to show that a contract is void or
voidable because of misrepresentation, fraud, mistake, illegality, duress or some other
reason65 or that the contract has been varied, rescinded or is subject to an estoppel.66
Evidence of rescission can be given even though the original contract was by deed and
the rescission was oral,67 or if the original contract was required to be evidenced in
writing and has been orally rescinded.68

3-025
To claim rectification. Where it is alleged that a document did not record the true
agreement or a common continuing understanding, evidence of such matters is
admissible in a claim for rectification.69

3-026
To show collateral warranties. Where it is alleged that the written contract does not
contain the whole of the agreement entered into and that there is a collateral warranty
(sometimes termed a collateral contract)70 evidence of such a warranty is admissible.71
But so far as there is a collateral contract the sole effect of which is to vary or add to the
terms of the principal contract, it is viewed with suspicion by the law and must be
strictly proved, for any laxity on this point would enable parties to escape from the full
performance of their obligations and lessen the authority of written contracts.72 There
must be a clear intention to contract.73 Although the reluctance of the courts to find
collateral warranties or collateral contracts has been said to be out of date,74 the
reluctance seems to continue.75 An “entire agreement” clause will generally prevent
collateral warranties from being found76 but will not prevent a claim in
misrepresentation absent clear wording to that effect.77

3-027
To show consideration. Extrinsic evidence is admissible to prove the real
consideration where: (a) no consideration, or a nominal consideration, is expressed in
the instrument, (b) the expressed consideration is in general terms or ambiguously
stated, or (c) a substantial consideration is stated, but an additional consideration
exists. The additional consideration must not, however, be inconsistent with the terms
of the written instrument.78

3-028
Contract only partly in writing. Different considerations apply when the contract is
in truth, not exclusively in writing, but partly in writing and partly oral or by
conduct.79 In such a case the court admits evidence of the oral part of the contract or
the conduct and construes the contract according to all its terms gathered from the
documents, words and conduct comprising the contract.80

2. RULES OF CONSTRUCTION

3-029
A rule of law takes effect although the parties may have expressed a contrary
intention, but a rule of construction81 merely “points out what a court shall do in the
absence of express or implied intention to the contrary”.82 It is therefore only applied
to assist the court where there is some ambiguity or inconsistency,83 for if the words
are plain the court gives effect to them.84 No rule of construction is individually of such
 importance that it is regarded as paramount.85 There are no special rules of
construction applicable to construction contracts.86

3-030
Natural and ordinary meaning. In Investors Compensation Scheme v West Bromwich
Building Society87 Lord Hoffmann summarised the approach to the meaning of words
in the following two principles88:

“(4) The meaning which a document (or any other utterance) would convey to a
reasonable man is not the same thing as the meaning of its words. The meaning of
words is a matter of dictionaries and grammars; the meaning of the document is
what the parties using those words against the relevant background would
reasonably have been understood to mean. The background may not merely
enable the reasonable man to choose between the possible meanings of words
which are ambiguous but even (as occasionally happens in ordinary life) to
conclude that the parties must, for whatever reason, have used the wrong words
or syntax.89
(5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’
reflects the common sense proposition that we do not easily accept that people
have made linguistic mistakes, particularly in formal documents. On the other
hand, if one would nevertheless conclude from the background that something
must have gone wrong with the language, the law does not require judges to
attribute to the parties an intention which they plainly could not have had.”90

The court does not derive a mistake from pre-contractual negotiations.91

3-031
With ordinary English words there is a prima facie assumption that they mean what
they naturally say.92 The court will adopt the ordinary meaning and decide as a matter
of fact whether the facts of the case are within the ordinary meaning or not.93 The
ordinary meaning is to be determined in light of contract as a whole.94 In a contract
relating to any art or trade or business, the court will give words any special technical,
trade or customary meaning which the parties must have intended the words to
bear.95

3-032
Commercial meaning. Where literal methods of interpretation give rise to a
construction which is uncommercial or which it is clear for some other reason that the
parties did not intend, the words used will yield to business common sense.96 The
rationale of this approach is that, in determining the meaning of the language of a
commercial contract, the law generally favours a commercially sensible construction
as a commercial construction is more likely to give effect to the intention of the parties.

“Words are therefore interpreted in the way in which a reasonable commercial person
would construe them. And the standard of the reasonable commercial person is hostile
to technical interpretations and undue emphasis on niceties of language.”97

The tendency should therefore generally speaking be against literalism.98

3-033
However, this should now be read in the light of the Supreme Court decision in
Arnold v Britton which emphasised the role of commercial common sense.99 The
reliance placed on commercial common sense and surrounding circumstances should
not be invoked to undervalue the importance of the language of the provision which is
to be construed.100 Unlike commercial common sense and the surrounding
circumstances, the parties have control over the language they use in a contract.
Commercial common sense is not to be invoked retrospectively. The mere fact that a
 contractual arrangement, if interpreted according to its natural language, has worked
out badly, or even disastrously, for one of the parties is not a reason for departing from
the natural language. Commercial common sense is only relevant to the extent of how
matters would or could have been perceived by the parties, or by reasonable people in
the position of the parties, as at the date that the contract was made.101 While
commercial common sense is a very important factor to take into account when
interpreting a contract, a court should be very slow to reject the natural meaning of a
provision as correct simply because it appears to be a very imprudent term for one of
the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The
purpose of interpretation is to identify what the parties have agreed, not what the
court thinks that they should have agreed.102

3-034
Correction of mistakes by construction. As stated above, the governing principle of
construction is to ascertain what a reasonable person would have understood the
parties to the contract to have meant by using the language which they did.103 The
court will be slow to accept that parties have made linguistic mistakes, particularly in
formal documents.104 The less clear the words or the worse the drafting, the more
readily the court will depart from their natural meaning. This is the obverse of the
proposition that the clearer the natural meaning the more difficult it is to justify
departing from it. However, this does not justify the court:

“…embarking on an exercise of searching for, let alone constructing, drafting infelicities

in order to facilitate a departure from the natural meaning.”105

3-035
Where it is clear that something has gone wrong with the language used by the
parties and it is clear what a reasonable person would have understood the parties to
have meant, it is this inferred intention, not the erroneous language used to express it,
which will take precedence. The law does not require a court to attribute to the parties
an intention which a reasonable person would not have understood them to have
had.106 This will particularly be the case where a literal reading of a clause renders it
“arbitrary and irrational”.107 This process has been referred to as “correction of
mistakes by construction”108 although it is simply a tool of construction and not a
separate branch of law or a summary version of an action for rectification.109
Accordingly, previous cases which suggest that if there is no ambiguity the court will
enforce the terms however absurd or unreasonable must be treated with great
caution.110

3-036
Legal terms of art. This is used to describe words or phrases which have acquired a
precise legal meaning ordinarily applied by the courts, but:

“where a word or phrase which is a ‘term of art’ is used by an author who is not a
lawyer, particularly in a document which he does not anticipate may have to be
construed by a lawyer, he may have meant by it something different from its meaning
when used by a lawyer as a term of art.”111

3-037
Internal consistency. A legal draftsman is presumed to aim at uniformity. The same
words will be presumed to have the same meaning throughout the document and
different words to refer to a different thing or concept.112

3-038
Valid meaning. “Where a clause is ambiguous a construction which will make it
 valid is to be preferred to one which will make it void.”113 This principle is sometimes
expressed by the maxim verba ita sunt intelligenda ut res magis valeat quam pereat,
which has particular reference to documents prepared by businessmen who “often
record the most important agreements in crude and summary fashion”.114

3-039
Clerical errors corrected. Where there is a manifest error in a document, the court
will put a sensible meaning on it by correcting or reading the error as corrected.115

3-040
Contract read as a whole. “The contract must be construed as a whole, effect being
given, so far as practicable, to each of its provisions.”116 Construing a contract may
involve two stages: first, the court may have to determine which documents are
contractual117; secondly, having decided which documents form part of the contract, it
must give effect to all the terms and endeavour to reconcile inconsistencies by the rules
of construction. In doing this it will be assisted if the parties have expressly118 or
impliedly119 indicated that certain clauses or documents are to prevail in the event of
an inconsistency.

3-041
Written words prevail. Where there is a contract contained in a printed form with
clauses inserted or filled in which are inconsistent with printed words:

“…the written words are entitled to have a greater effect attributed to them than the
printed words, inasmuch as the written words were the immediate language and terms
selected by the parties themselves for the expression of their meaning.”120

If printed words by an express clause state that the printed form is to prevail over
written words a difficult question of construction arises,121 but it seems that if the
clause is sufficiently clear the printed form will prevail.122 Provisions in a written
document generally prevail over those in a document that the written document
incorporates.123

3-042
Ejusdem generis rule. This rule is that where there are words of a particular class
followed by general words, the general words are treated as referring to matters of the
same class. Thus a ship was exempted from liability for non-delivery of a cargo if the
port was unsafe “in consequence of war, disturbance or any other cause”. It was held
that danger from ice was not within the meaning of “any other cause” which must be
limited to causes similar to war or disturbance.124 In a clause permitting an extension
of time to be granted to the contractor, if the works were:

“…delayed by reason of any alteration or addition … or in case of combination of

workmen, or strikes, or by default of the subcontractors … or other causes beyond the
contractor’s control”,

the “other causes” were limited to those ejusdem generis with the causes
particularised, and did not therefore include the employer’s own default in failing to
give possession of the site.125 Where the words “et cetera” were inserted between
words describing a particular class and general words it was held that their meaning
was too vague to prevent the operation of the rule.126 For the rule to operate, it is
necessary to construe a class from the particular words.127 This will not normally be
possible unless there are at least two particular things which precede the general
words.128
3-043
 The ejusdem generis rule, does not apply if the parties show that they intended its
exclusion.129 Where the word “whatsoever” follows a class with general words, it is
often intended to prevent the application of the ejusdem generis rule.130 Where a
clause contained the phrase “of what kind soever”, the rule did not apply and these
words were to be given their ordinary unrestricted meaning.131 It has been suggested
that the rule, ordinarily applied to deeds, wills and statutes, is of less force with a
contract and still less force with a commercial contract.132

3-044
Contra proferentem rule. This expression means “against the profferer”, i.e. against
the person who drafted or tendered the document. If there is an ambiguity in a
document which all the other methods of construction have failed to resolve so that
there are two alternative meanings to certain words, the court may construe the words
against the party who put forward the document and give effect to the meaning more
favourable to the other party.133 The contra proferentem rule is only to be invoked as a
last resort if the meaning of the words is finely balanced.134
3-045
Where there was a clause enabling the architect to extend the time for completion
and the employer sought to rely on the clause to enable them to claim liquidated
damages,135 it was held for various reasons that the employer could not rely on it. It
was said that in case those reasons were wrong, then in any event the employer could
not rely on the clause for it was ambiguous and would therefore be given the
construction favourable to the contractor.136 Of a form of contract devised by the
employer, it was said “the liquidated damages and extension of time clauses in printed
forms of contract must be construed strictly contra proferentem”.137
3-046
In principle, the contra proferentem rule should not be applied to standard forms of
contract drafted, not by the parties, but by representative bodies such as the Joint
Contracts Tribunal or professional associations or institutions.138 The expression is
also sometimes used to refer to a strict construction of certain kinds of clause, e.g.
exclusion clauses139 or liquidated damages clauses,140 against the person seeking to
rely on them.141 For such cases, a strict construction applies from the nature of the
clause, not because one party drafted or tendered the document.142 There may be
doubt whether this rule is properly described as contra proferentem and problems
may arise where the party who drafted or tendered the contract is not the party
seeking to rely on the contract to limit or exclude its liability.143

3-047
Recitals. A recital is an introductory part of a document, usually beginning with the
word “Whereas…”, which indicates what the parties want to effect by their contract.
Recitals often intentionally or in effect contain definitions or descriptions of the subject
matter of the succeeding contract.

“If there is any doubt about the construction of that document the recital may be looked
at in order to determine what is the true construction; but if there is no doubt about the
construction the rights of the parties are governed entirely by the operative part of the
writing or deed.”144

3-048
Irreconcilable clauses. The court always endeavours to resolve an apparent
inconsistency,145 but if two clauses cannot be reconciled it will give effect to that which
states the intention of the parties. Finally, if it is unable otherwise to ascertain which
clause should prevail, it will give effect to the earlier clause and reject the later.146
3-049
Impact of Human Rights Act 1998.147 Under s.6 of the Human Rights Act 1998, it is
unlawful for a public body to act in a way which is incompatible with a Convention
right.148 A public body for these purposes includes a court.149 This therefore affects the
construction of contracts and the courts, applying the Common Law when construing a
contract, would be obliged under s.6 of the Act to adopt a construction which is
compatible with Convention rights.150

3. ALTERATIONS
3-050
Alterations made before a contract is signed are binding.151 It is presumed that
alterations apparent on a document were made before execution.152 Alterations or
erasures made after execution by one party without the consent of the other are of no
effect.153 If both parties alter a document after execution by agreement this is a
variation of the contract.

4. IMPLIED TERMS
3-051
There is a distinction between construction, which is determining the meaning of
words which are in the contract to discern the express terms and implication which is
supplying terms which are not in the contract. It has been said that there are different
senses in which the expression “implied term” is used.154 In one sense it is a term
which does not depend on the actual intention of the parties but on a rule of law such
as the implied terms in a construction contract155 or a contract for the sale of goods.156
These are discussed under “Statutory implication” below. In a second sense a term is
sought to be implied based on an intention imputed to the parties from their actual
circumstances. This sense is discussed under implication at Common Law below.

(a) Statutory implication

3-052
Housing Grants, Construction and Regeneration Act 1996. Part II of this Act applies
to construction contracts.157 Briefly, the Act provides that those contracts shall contain
provisions giving a party the right to refer disputes to adjudication158; providing an
entitlement to stage payments159; providing a mechanism for payment, including the
date of payment and notice of the amount of payment160; limiting the right to withhold
payment161; giving a right to suspend performance for non-payment;162 and
prohibiting certain conditional payment provisions, except in certain
circumstances. 163 If the contracts do not contain provisions which comply with certain
requirements then the relevant provisions of the Scheme for Construction Contracts164
apply by default.165 In those circumstances, the provisions of the Scheme have effect as
implied terms of the relevant contract.166 There are also non-statutory implied
terms.167

3-053
Supply of Goods and Services Act 1982. Part II of this Act applies to contracts “for
the supply of a service”,168 and a construction contract is such a contract. In general
the effect of the Act is to put into statutory form minimum terms which the law
ordinarily implies in a contract for services.
3-054
 In a contract for the supply of a service where the supplier is acting in the course of
a business, there is an implied term that they will carry out the service with reasonable
care and skill (s.13). Subject to time being fixed in a manner agreed by the contract or
determined by the course of dealing between the parties, there is an implied term that
the supplier will carry out the service within a reasonable time (s.14). Subject to
equivalent qualifications, there is an implied term to pay the supplier a reasonable
charge (s.15). The implied terms may be negatived or varied by express agreement or
by the course of dealing between the parties or by a binding usage, but an express term
does not negative a term implied by the Act unless it is inconsistent with it (s.16). The
Act does not prejudice any rule of law that imposes a duty stricter than that imposed by
ss.13 and 14 (s.16).

(b) Implication at common law

3-055
There are different ways in which the courts will imply terms in seeking to establish
the imputed or presumed intention of the parties.169 Categories of implication have
been referred to as shades of a “continuous spectrum”.170 Within the spectrum, two
broad areas or categories may be discerned.171 The first appears where the parties
have drawn up a detailed contract but it is necessary to insert a term to make it work.
This is sometimes termed “The Moorcock172 approach”. The second is where in all
contracts of a certain type, such as construction contracts, the law implies certain usual
terms unless the parties have shown an intention to exclude or modify them.173 It
seems that in the first category it is for the party putting forward the term to establish
its existence, and in the second for the party denying the term to establish its absence.

(i) Implication to make contract work

3-056
The court does not make or improve contracts.

“An unexpressed term can be implied if and only if the court finds that the parties must
have intended that term to form part of their contract; it is not enough for the court to
find that such a term would have been adopted by the parties as reasonable even if it
had been suggested to them; it must have been a term that went without saying, a term
necessary to give business efficacy to the contract, a term which, though tacit, formed
part of the contract which the parties made for themselves.”174

A term sought to be implied under this heading has to be what the parties must have
intended and therefore is not implied if it provides only one of several possible
solutions to the matter in question unless it can also be shown which of the possible
solutions would have been preferred.175
3-057
Historically, the test of implication is necessity: “such obligation should be read into
the contract as the nature of the contract itself implicitly requires, no more, no less”.
The term sought to be implied must be one without which the whole transaction would
become “inefficacious, futile and absurd”.176 The implication may be necessary
because “language is imperfect and there may be, as it were, obvious interstices in
what is expressed which have to be filled up”.177 If so persuaded, the court will insert,
often in a very detailed contract, “a term which the parties have not expressed”.178
3-058
In BP Refinery (Westernport) v Shire of Hastings, Lord Simon summarised the
following conditions which must be satisfied for a term to be implied179:

“(1) it must be reasonable and equitable; (2) it must be necessary to give business
 efficacy to the contract, so that no term will be implied if the contract is effective without
it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear
expression; (5) it must not contradict any express term of the contract.”

3-059
However, in Att Gen of Belize v Belize Telecom Ltd, Lord Hoffmann stated that the
list was:

“…best regarded not as a series of independent tests which must each be surmounted
but rather as a collection of different way in which judges have tried to express the
central idea that the proposed implied term must spell out what the contract actually
means.”180

3-060
In Att Gen of Belize v Belize Telecom Ltd,181 Lord Hoffmann warned against setting
the threshold of necessity too high:

“The danger lies, however, in detaching the phrase ‘necessary to give business efficacy’
from the basic process of construction of the instrument. It is frequently the case that a
contract may work perfectly well in the sense that both parties can perform their
express obligations, but the consequences would contradict what a reasonable person
would understand the contract to mean.”182

He referred to Lord Steyn’s formulation183 that an implication was necessary “to give
effect to the reasonable expectations of the parties”.
3-061
The Privy Council in Att. Gen. of Belize v Belize Telecom Ltd184 stated that the
question for the court when considering whether a term ought to be implied into an
instrument is simply “what the instrument, read as a whole against the relevant
background, would reasonably be understood to mean?”185 This formulation is very
similar to that expressed by Lord Hoffmann in Chartbrook Ltd v Persimmon Homes
Ltd186 and treats the implication of terms as part of the process of interpreting the
contract.187 It also appears to lower the threshold test compared to some older
cases.188

(ii) Implication of “usual” terms—employer

3-062
Where there is a comprehensive written contract, such as the Standard Form of
Building Contract, there may be very little room for the implication of any terms, for if
the parties have dealt expressly with a matter in the contract, no term dealing with the
same matter can be implied.189 But where there is no express contract, or its terms do
not deal with the matters about to be mentioned, certain terms are usually implied.
Such terms are sometimes referred to as “implied warranties”.

3-063
Co-operation. The employer impliedly agrees to do all that is necessary on their part
to bring about completion of the contract.190

“Generally speaking, where B is employed by A to do a piece of work which requires A’s

co-operation … it is implied that the necessary co-operation will be forthcoming.”191

For example, the employer must give possession of the site within a reasonable
time.192 The employer may be obliged to obtain planning permission or building
regulation consent in sufficient time to enable the contractor to proceed without
 delay.193 If an architect is to supervise the work, the employer must appoint an
architect194 and, if the architect named in a contract ceases to act, to the employer
must then co-operate in the appointment of a replacement.195

3-064
Role of certifier. Where a certifier is failing to apply the terms of a contract properly
to the detriment of the contractor it is ordinarily an implied term on the part of the
employer that they will require the certifier to perform its duties properly.196 The
negative aspect of the same principle is that the employer should not interfere with the
proper performance by the certifier of the duties under the contract.197 If to the
employer’s knowledge the architect persists in applying the contract wrongly in regard
to those matters where the architect must act fairly between the parties, the employer
must dismiss the architect and appoint another.198
3-065
If, however, the contract contains a wide arbitration clause, there may not be any
need or scope for the positive implications referred to in the previous paragraph. In
Lubenham v South Pembrokeshire DC,199 such terms were held not to be implied where
the arbitration clause expressly permitted arbitration upon interim certificates during
the currency of the contract and before practical completion.200 There was one simple
remedy201 available to the contractor needing no implied term, namely to go to
arbitration and have the certificates corrected. It is submitted that the mere presence
of a wide arbitration clause, adjudication provision or jurisdiction of the court may not
be decisive. In addition, consideration may be given to the precise state of the
employer’s knowledge. In the Lubenham case, it was said on the facts that the employer
was doubtless content to be guided by the architects as experts and that such
acquiescence did not expose them to liability to pay sums higher than had been
certified. If it were established that an employer knew perfectly well that its architect
was failing to certify in accordance with the contract, it is thought that the employer
would not be allowed to rely on an ability to resolve the dispute.
3-066
The implied term of co-operation extends to those things which the architect must
do to enable the contractor to carry out the work and the employer is liable for any
breach of this duty by the architect.202 If instructions, nominations, information, plans
or details are required, they must be supplied at reasonable times.203 This may include
a duty to give instructions to a nominated sub-contractor and may extend to
instructions relating to the sub-contractor’s bad design.204 What is reasonable depends
upon the express terms of the contract in question and all the circumstances.205
However, the particular terms should always be carefully considered.
3-067
In Neodox v Swinton and Pendlebury BC,206 it was said that what was reasonable did
not depend solely upon the convenience and financial interests of the contractor. It
depended also on the point of view of the engineer and its staff and the employer. The
contract there provided for the works, including the order of the works, to be carried
out on the direction of the engineer. It is thought that it may not be appropriate to
consider reasonableness from the point of view of the architect or engineer or
employer where the order of the works is a matter solely for the contractor. The prime
consideration is, it is suggested, that instructions should be given at such times and in
such manner as not to hinder or prevent the contractor from performing its duties
under the contract.207 Since the principal relevant contractor’s duty is to complete
within the stipulated time, the obligation of the architect or engineer to furnish
drawings and instructions “could validly be performed within a reasonable time of the
conclusion of the contract”.208
3-068
Where a contract is running late so that, unless the contractor increases the rate of
 progress, it will not be completed to time, it is sometimes said that it is reasonable to
supply instructions at such a rate as will enable the contractor to continue with the
works at the existing rate of progress. Expressed thus the proposition is, it is submitted,
too wide. The actual rate of progress is, ordinarily, a factor to be considered. But there
may well be other factors, such as the contractor’s expressed intention to increase the
rate of progress and its ability to achieve that intention. Further, it is sometimes said209
that the prime consideration is the contractor’s own stated requirements of the time
when it is to be supplied with instructions. Again, it is thought that this is too wide. The
contractor’s stated requirements are a factor but not decisive. The contractor cannot
unilaterally determine what is a reasonable time and a contractor does not prove a
claim based on late instructions merely by establishing noncompliance with requests
for instructions or a schedule of dates for instructions which it has sent to the architect.
Agreement by the architect with such a schedule, or even acquiescence, may, it is
submitted, be relevant evidence on the question what is reasonable. In most cases, the
critical question will be to determine on all the facts when the contractor really needs
the instructions.
3-069
Sometimes contractors, at the commencement of or early in the course of a contract,
prepare and submit to the architect a programme of works showing completion at a
date materially before the contract date. The architect may approve such programme
or accept it without comment. It is then argued that the contractor has a claim for
damages for failure by the architect to issue instructions at times necessary to comply
with the programme. Every case must depend upon the particular express terms and
circumstances. In Glenlion Construction v The Guinness Trust,210 it was held, under the
1963 JCT Standard Form of Contract, first that the contractor was entitled to
programme to complete before the contractual completion date and to complete on the
earlier date, but secondly that there was no implied term that the employer should so
perform the agreement as to enable the contractor to complete by the earlier date. The
contractor was not obliged to complete by the earlier date and the unilateral
imposition of an earlier completion date would result in the whole balance of the
contract being lost.211

3-070
Not to prevent completion. The employer impliedly agrees not to hinder or prevent
the contractor from carrying out its obligations in accordance with the terms of the
contract.212 This term arises because, in general:

“…a term is necessarily implied in any contract, the other terms of which do not repel
the implication, that neither party shall prevent the other from performing it.”213

A term of this nature cannot be implied if it is illegal214 or contrary to an express term

of the contract.215 The employer does not impliedly warrant the fitness of the site,216
nor, it seems, that there will be no wrongful interference by third parties.217 The
employer is not, in the absence of fraud or collusion, responsible for delay caused by a
sub-contractor, even though under the terms of the contract the sub-contractor was
nominated by the employer or its architect without consultation with the contractor.218
The employer is liable for delay caused by its servants and agents.219 This liability
usually extends to delay on the part of the architect or the engineer under a typical
construction or engineering contract.220 There is, it is submitted, an implied term that
the employer will not so act as to disqualify the architect.221 Unjustified interference
by the employer in the supply of goods necessary for the contract is a breach of the
implied term, notwithstanding that the supplier has no contract direct with the
contractor.222

(iii) Implication of “usual” terms—contractor

3-071
Workmanship. The contractor must do the work with all proper skill and care.223
This duty is often expressed as one to do the work in a good and workmanlike manner.
It is suggested that this is a continuing duty during construction and not only upon
completion.224 In deciding what degree of skill is required the court will, it is
submitted, consider all the circumstances of the contract including the degree of skill
expressly or impliedly professed by the contractor.225 Breach of the duty includes the
use of materials containing patent defects, even though the source of such materials
has been chosen by the employer.226 It may also include relying uncritically and
without due precautions on an incorrect plan supplied by the employer where an
ordinarily competent builder should have had grave doubts about the plan’s
correctness.227

3-072
Materials. If the contractor is to supply materials there is an implied term that the
materials it will use are: (1) reasonably fit for the purpose for which they will be used,
and (2) of good quality, unless the express terms of the contract and any admissible
surrounding circumstances show that the parties intended to exclude either or both
warranties.228 The two warranties correspond substantially with the warranties
implied by s.14 of the Sale of Goods Act 1979229 upon a contract for the sale of goods,230
so that where there is no limitation upon the contractor’s right of recourse against its
supplier it will in the case of defective materials231 or goods have its remedy over
against its supplier who in turn will have its remedy over and so on down the chain of
contracts until the manufacturer or other author of the defect is reached.232
3-073
The effect of the second warranty is, in the ordinary case, to make the contractor
liable for latent defects even though the employer may have chosen the materials or
nominated the supplier and there has been no lack of care and skill on the part of the
contractor.233 Thus in Young & Marten v McManus Childs,234 the agent of the
employer,235 a highly skilled and experienced person, relied on their own skill and
judgment in the choice of “Somerset 13” tiles to be fixed by the contractor. After fixing
and exposure to weather, defects appeared which required the replacement of the
tiles. It was held that although the warranty of fitness for purpose was excluded the
warranty of quality was not, and the contractor was liable. Lord Pearce stated by way
of illustration of the general principle:

“It is frequent for builders to fit baths, sanitary equipment, central heating and the like,
encouraging their clients to choose from the wholesaler’s display rooms which they
prefer. It would, I think, surprise the average householder if it were suggested that
simply by exercising a choice he had lost all right of recourse in respect of the quality of
the fittings against the builder who normally has a better knowledge of these
matters.”236

3-074
Whether the materials comply with the warranty of quality depends on whether
they are commercially saleable.237 No warranty of quality can be implied where the
quality of the thing supplied cannot be assessed in the abstract. For example, where a
system is supplied, its quality can only be assessed by reference to its intended or
actual application, because “what may be a good system for one application may not be
a good system for another application”.238

3-075
Exclusion of warranties. Reference is sometimes made to the practical convenience
of having a chain of contractual liability from employer to main contractor to sub-
contractor or supplier.239 But the chain can be broken.240 Exclusion of usual
 contractor or supplier. But the chain can be broken. Exclusion of usual
warranties depends upon the contract and surrounding circumstances.241 So far as it is
a question of surrounding circumstances, it is a question of fact and degree,242 but
some principles can be stated.
3-076
The warranty of fitness for purpose is excluded if in the selection of the materials in
question the employer placed no reliance on the contractor’s skill and judgment.243
The facts of Young & Marten v McManus Childs244 illustrate the point. The warranty is
excluded where the employer fails to disclose some relevant abnormal circumstance or
idiosyncrasy relating to the use of the material and thus does not make known to the
contractor the particular purpose for which the materials are required, even if the
employer does not know of the abnormal circumstance or idiosyncrasy.245 The
warranty is excluded if it is inconsistent with express terms246 or if the contractor
contracts on the basis of a disclaimer of responsibility.247
3-077
There will not often be circumstances where the warranty of quality is excluded as
in Young & Marten v McManus Childs.248 The court will, however, infer an intention to
exclude the warranty of quality if the employer chooses materials which it and the
contractor know can only be obtained from a supplier upon terms which remove or
substantially limit the contractor’s right of recourse against its supplier for defects of
quality in such materials.249 In Gloucestershire CC v Richardson,250 the contractor was
directed to enter into a contract for the supply of concrete columns at a price and upon
terms which had been fixed by the employer. One of the terms limited liability for
defective goods to free replacement and excluded liability for consequential loss. It was
held that this showed an intention that the contractor should not be liable for latent
defects due to bad manufacture. Other circumstances which influenced the House
were that the design, materials, specification, quality and price of the columns were
fixed without reference to the contractor, and that under the form of contract used
there was no right to object to the nomination or to insist on an indemnity.251 As to
repairing contracts it has been said:

“…less cogent circumstances may be sufficient to exclude an implied warranty of quality

where the use of spare parts is only incidental to what is in essence a repairing
operation where the customer’s main reliance is on the skill of the tradesman, than in a
case where the main element is the supply of an article, the installation being merely
incidental.”252

3-078
Fitness for purpose of completed works. Where the employer makes known to the
contractor the particular purpose for which the work is to be done and the work is of a
kind which the contractor holds itself out as performing, and the circumstances show
that the employer relied on the contractor’s skill and judgment in the matter, there is
an implied warranty that the work as completed will be reasonably fit for the
particular purpose.253 The contractor’s duty includes, it is submitted, the performance
of any works of design necessary to complete the work to the requisite standard.254
The warranty may apply only to a part or parts of the works.255 The warranty is
excluded in the same circumstances as those set out above relating to materials
alone.256 It follows that, in a construction contract where the contractor is bound to
complete according to detailed plans and specification or bills of quantities for which it
was not responsible, the room for the operation of such an implied warranty is
small.257 Where there is an express obligation on a design and build contractor to
carry out design work with reasonable skill and care, this may also negate any fitness
for purpose obligation.258 However, where a contractor had expressly warranted the
fitness of the works, it was held that such warranty overrode the duty to comply with
the detailed specification.259
3-079
Duty to warn. Contractors may, depending upon the nature of the contract and
surrounding circumstances, have an obligation to warn of design defects which it
believes exist,260 or whose existence it ought as ordinarily competent contractors to
suspect.261 Any such duty only applies to obvious defects and the duty does not apply
to defects which could only have been discovered by way of additional inspections or
investigations which the contractor was under no pre-existing duty to carry out.262
Where a contractor undertook to build a house in accordance with plans supplied by
the employer’s architect but there was no supervision by the architect and the
employer relied upon the experience, judgment and skill of the contractor to supervise
the construction, it was held that the contractor was liable to the employer for failing to
warn it of obvious defects in the plans which resulted in defects.263

3-080
Design and build. Where a contractor agrees in the course of its business both to
design and construct works, a term of fitness for purpose of the completed works may
be implied unless excluded by or inconsistent with the express terms of the contract or
other particular circumstances.264 The implication of fitness more readily arises where
a contractor is employed because of a specialist skill it professes.265 An express term
that the design of the works need only be carried out to some lesser standard, such as
due care, is inconsistent with the implication of any such term.266 Where the package
is to design and construct dwellings for a local authority, there may be an implied term
that the dwellings will on completion be fit for habitation.267 In IBA v EMI and BICC,268
a main contractor was held liable for negligent design on the part of a nominated sub-
contractor upon the express terms of the main contract, but the view was expressed
that it might well have been liable upon an implied term as to fitness for purpose.269

3-081
Sale of buildings. Where there is a contract for the sale of a house to be erected, or in
the course of erection, there is, subject to the express terms of the contract:

“…a threefold implication: that the builder will do his work in a good and workmanlike
manner; that he will supply good and proper materials; and that it will be reasonably fit
for human habitation.”270

The implication extends to the whole house including the parts, if any, built before the
contract of sale was made,271 but it does not arise if the contractor merely sells a house
which it has already completed.272
3-082
The contractor may become liable for breach of statutory duty in respect of
dwellings provided to the order of a person to that person and to others who acquire
an interest in the dwelling.273 It has a statutory duty to visitors under the Occupiers’
Liability Act 1957,274 and to persons other than visitors, e.g. trespassers, under the
Occupiers’ Liability Act 1984. It may also be liable in tort to persons who suffer physical
injury to their person or property as a result of its negligence.275

3-083
Effect of express terms. If a builder carries out work badly, and defects afterwards
appear, it is not to be excused from liability except by clear words.276 Where a house
was sold and defects appeared it was held that a clause providing for the making good
of defects discovered within six months did not deprive the purchaser of damages for
defects discovered after six months.277 But in Lynch v Thorne278 a builder agreed to
sell a house to be completed according to a detailed specification which provided for
nine-inch solid brick walls with no rendering. One of the walls when completed
 permitted the entry of driving rain which made a room uninhabitable. It was held that
there was no implied warranty of fitness with regard to the wall because it had been
constructed exactly in accordance with the specification and to have built it with
cavities or with rendering so as to make it waterproof would not have been in
compliance with the contract. Accordingly the purchaser failed in his claim against the
builder in respect of the wall.279 It would now be necessary to consider both the
Defective Premises Act 1972280 and whether the purchaser had a claim for breach of
the building regulations.281

3-084
Effect of price. The standard of work to be carried out depends upon the express or
implied terms of the contract. The question whether the price is high or low in relation
to the work is, it is submitted, irrelevant in considering what standard of work is
required,282 unless the parties have expressly or impliedly agreed that the amount of
the price is to affect the standard of the work.

(iv) Implication of “usual” terms—long-term contracts

3-085
Good faith. As a general rule, where commercial parties wish to impose a duty of
good faith upon one another in the performance of a contract, they must do so
expressly.283 However, in some commercial contracts there may be an implied term of
good faith or a requirement that the parties exercise a degree of communication and
co-operation which is equivalent to an obligation of good faith. Such contracts have
been described by the courts as “relational contracts”.284 While the precise scope of
this type of contract is uncertain, it is thought that long-term contracts which involve a
high degree of interaction between the parties are those likely to come within that
description, such as joint venture agreements, franchise agreements and long-term
distributorship agreements.285
3-086
Although they are long-term contracts requiring close co-operation between the
parties, a general duty of good faith will not ordinarily be implied into PFI (Public
Finance Initiative) contracts,286 although such contracts will often contain express
terms requiring good faith either generally or in relation to the exercise of specific
obligations. However, where such a contract provides for the exercise of a discretion
by one of the parties, there will be an implied term that it must not exercise its
discretion in an arbitrary, capricious or irrational manner.287
3-087
Where there is an obligation of good faith, the scope and effect of that provision will
be a matter for the construction of the particular agreement. An agreement to act in
“utmost good faith” in a sale and purchase transaction which formed part of a joint
venture agreement for a property development was held to give rise to obligations:

“…to adhere to the spirit of the contract, which was to seek to obtain planning consent
for the maximum Developable Area in the shortest possible time, and to observe
reasonable commercial standards of fair dealing, and to be faithful to the agreed
common purpose, and to act consistently with the justified expectations of the
parties.”288

In a long-term agreement for the supply of hospital services, an agreement to “co-

operate with each other in good faith” was held to give rise to an obligation to work
together honestly endeavouring to achieve the stated purposes.289

5. CONSTRUCTION OF DEEDS
3-088
Deeds290 are construed in the same way as other documents save that where one
party wishes to deny the truth of a statement in the deed it may be estopped (i.e.
prevented) from doing so by the application of a further rule known as estoppel by
deed. This is a rule of evidence founded on the principle that a solemn and
unambiguous statement or engagement in a deed must be taken as binding between
parties and privies and therefore as not admitting any contradictory proof.291
Statements of fact in recitals are subject to the rule.292 Statements in the deed may
bind all or only one or some of the parties according to the construction of the deed.293
The estoppel does not operate where the deed was fraudulent or, in general, where it
was illegal,294 nor where there was a common mistake of fact giving rise to a right to
rectification,295 nor where the party seeking to set up the estoppel caused the
misstatement of fact to appear in the deed.296

6. THE VALUE OF PREVIOUS DECISIONS

3-089
Common form contracts. The court is very reluctant to depart from a previous long-
standing decision upon the meaning of a common form of contract in constant use
because the parties are taken thereafter to have contracted upon the basis of that
meaning.297 But one version of a Standard Form of Building Contract should not, it is
submitted, be construed with reference to a later version,298 although the court
sometimes comments on such later versions.299

3-090
Similar contracts. Different shades of caution have been expressed.

“To some extent decisions on one contract may help by way of analogy or illustration in
the decision of another contract. But however similar the contracts may appear the
decision as to each must depend on the consideration of the language of the particular
contract read in the light of the material circumstances of the parties in view of which
the contract is made.”300

By contrast, “comparison of one contract with another can seldom be a useful aid to
construction and may be … positively misleading”.301 There are, however, many
instances in which one construction contract has been used to assist in the construction
of another.302

B. RISK, INDEMNITY AND EXCLUSION CLAUSES

3-091
These three types of clauses are dealt with together because their subject matter
overlaps and common problems of construction arise. In particular, a consideration of
loss caused by negligence is potentially relevant to all three types of clause.

3-092
Loss caused by negligence. There are statutory limitations on the extent to which a
person can exclude or limit their liability for loss or damage resulting from
negligence.303 Even where these limitations do not apply, it is inherently improbable
that one party to a contract should intend to absolve the other party from the
consequences of the latter’s negligence,304 and even more inherently improbable that
one party should agree to discharge by indemnity the liability of the other party for
acts for which the other is responsible.305 To achieve either of these improbabilities,
 very clear words must be used. Equally, a person is not exempted from liability for the
negligence of their servants unless adequate words are used.306
3-093
If a clause contains language which expressly307 exempts the person in whose
favour it is made from the consequences of that person’s own negligence, effect is
given to that provision. If there is no express reference to negligence, the court
considers whether the words used are wide enough, in their ordinary meaning, to
cover the person’s negligence. If a doubt arises here, it is resolved against the person
relying on the clause. If the words used are wide enough, the court considers whether
the exempted head of damage may be based on some other possible ground than
negligence. If there is such another ground which is not too fanciful or remote, the
clause is construed as not exempting from negligence.
3-094
The principles stated above should not be applied mechanistically and ought to be
regarded as no more than guidelines. They do not provide an automatic solution to any
particular case. The court’s function is always to interpret the particular contract in the
context in which it was made.308 But if there is no such other ground, the clause is
construed as applying to losses caused by negligence.309 A clause limiting a vendor’s
liability to its liability under an NHBC agreement was considered to prevent any
liability in negligence even though the clause made no reference to that term.310
3-095
This approach to construction is applied, in the light of other provisions of the
contract, both to exclusion clauses and to indemnity clauses.311 The Unfair Contract
Terms Act 1977 limits the extent to which a person can rely on an unreasonable
indemnity clause in a consumer contract.312 The approach has also been applied to
payment clauses where the benefit for which the payment is stipulated may cease
because of the payee’s negligence.313
3-096
By contrast, limitation clauses, although they are read contra proferentem314 and
must be clearly expressed, are not judged by the specially exacting standards which
are applied to exclusion and indemnity clauses.315 This is because it is quite likely that
one party would agree to limit the other’s liability, especially where the potential
liability may be very great in proportion to the sums which could reasonably be
charged for the services to be provided by that party.316 In this context it appears that a
limitation clause is one which limits liability without purporting to exclude it
altogether. It follows that negligence on the part of a person in breach of contract does
not prevent them from relying upon a limitation clause.317 Further, it would appear
that the clause can be relied upon by them to limit a claim in tort.318
3-097
By further contrast, where a party expressly assumes the sole risk of classes of
events causing damage (e.g. fire) against which it is obliged to insure, the contract is
likely to be construed as imposing on that party the whole risk of such damage
including that caused by the negligence of the other party.319 Clauses relevant to the
negligent operation of plant have been similarly construed.320

1. RISK CLAUSES
3-098
In the absence of express provisions dealing with the risk of damage to the works,
the contractor’s liability depends upon what it has undertaken to perform, but it seems
that where it has to complete the works it must, as an incident of the duty to complete,
make good any damage to the works occurring before completion,321 unless the
damage is so great and the circumstances such that the contract is frustrated322 or the
 damage was caused by the employer’s default.323 In practice, written contracts
frequently contain a clause stating upon whom rests the risk of damage to the
works.324 It may be coupled with a clause providing for insurance against the risk.325
It seems that if the contractor is required to effect insurance its duty is to insure itself
and does not extend to insuring the employer unless express words are used.326

2. INDEMNITY CLAUSES
3-099
An indemnity clause is a clause where one party agrees to make good a loss suffered
by another. One of the parties may indemnify the other against certain losses by
promising to make good any loss suffered by the other party in respect of damage or
claims arising out of various matters such as injury to persons or property.327 An
indemnity can be expressed to apply to liabilities occurring before, as well as after, the
date on which the indemnity itself is given.328 It is no defence to an employer sued by a
third person that it is indemnified by the contractor.329
3-100
Where the contractor gives the employer an indemnity against claims by third
parties and there is an exception to the indemnity the courts tend to construe the
exception so that it does not operate to deprive the indemnity of effect.330 But where
an indemnity was construed as extending to loss caused by breach of statutory duty
but not to loss caused by their negligence, it was held that, since on the facts negligence
was a cause, although not the only cause, of liability, the indemnity did not cover the
loss.331

3-101
Subrogation. An indemnifier who makes good a loss suffered by another party is
entitled to be subrogated to the rights of the person indemnified against third parties.
But these rights can only be pursued in the name of the person indemnified even if the
indemnifier has an independent direct claim of its own.332

3-102
Limitation period. Where there is an obligation to indemnify against loss, the cause
of action does not arise until the loss has been established,333 so that the limitation
period runs from the date when the liability or loss indemnified against is established
or incurred.334 This may be after the expiry of the ordinary limitation period. Such
clauses are therefore potentially very important.

3-103
Insurance. Where a loss is caused by two causes, one within the general words
describing the risk insured and one within the exception to those words, the insurer is
not liable.335 Where, however, there were two effective causes of loss, one within the
insurance and the other not, it was held that the insured could recover under the
policy.336

3. EXCLUSION CLAUSES

3-104
This term is intended to refer to clauses variously termed exclusion, exception,
exemption or limitation clauses.337 It is a convenient description of clauses relied on
by a party who would otherwise be under a liability in contract to exclude or limit that
liability. These clauses include provisions which seek to limit the sum recoverable in
respect of any liability, such as by excluding “consequential” loss or damage.338 These
clauses must be distinguished from those which define the parties’ rights and duties,
 clauses must be distinguished from those which define the parties’ rights and duties,
such as agreed damages clauses339 or defects clauses which confer additional rights,340
and which are construed like any other clauses in the contract whereas exclusion
clauses are construed against the party seeking to rely on them.341
3-105
In Photo Production v Securicor Transport342 Lord Diplock said:

“Parties are free to agree to whatever exclusion or modification of all types of

obligations as they please within the limits that the agreement must retain the legal
characteristics of a contract; and must not offend against the equitable rule against
penalties … Since the presumption is that the parties by entering into the contract
intended to accept the implied obligations exclusion clauses are to be construed strictly
and the degree of strictness appropriate to be applied to their construction may properly
depend upon the extent to which they involve departure from the implied
obligations.343
In commercial contracts between businessmen capable of looking after their own
interests and of deciding how risks inherent in the performance of various kinds of
contract can be most economically borne (generally by insurance), it is, in my view,
wrong to place a strained construction upon words in an exclusion clause which are
clear and fairly susceptible of one meaning only even after due allowance has been
made for the presumption in favour of the implied primary and secondary
obligations.”344

3-106
Third parties. At common law third parties to a contract cannot rely upon an
exclusion clause in the contract,345 unless it was made as agent for the third party and
certain other conditions are fulfilled.346 Thus sub-contractors did not have the benefit
of contractual protection resulting from main contract taking-over certificates, since
they were not parties to the main contract which the main contractor had not entered
into as agent for the sub-contractors.347 That general position is now qualified. Under
the Contracts (Rights of Third Parties) Act 1999 a third party to a contract may under
certain circumstances enforce a term of a contract.348 The ability to enforce a term
includes the right for the third party to avail itself of a term of the contract which
“excludes or limits liability in relation to any matter”.349 In addition, notices of
disclaimer are capable in principle, subject to the Unfair Contract Terms Act 1977, of
negativing a duty of care in tort,350 and a contractual exclusion clause in a contract
between A and B is sometimes relevant to the existence of a duty of care between B
and C.351
3-107
Where two or more parties are liable in respect of the same damage they can seek a
contribution under the Civil Liability (Contribution) Act 1978. If, however, one party
has the benefit of an exclusion clause but the other does not, then the parties will not
be jointly liable and one party will be unable to obtain a contribution.352
3-108
Where one party to a contract stipulates that its liability to another party, in the
event that it breaches its obligations under that contract, is to be limited or excluded by
the operation of an exclusion clause, that is a factor likely to support the grant of an
injunction to prohibit any breach in the first place.353 That the clause in question was
agreed will not be sufficient to defeat the innocent party’s application.354

4. LEGISLATION AFFECTING EXCLUSION AND LIMITATION CLAUSES

3-109
In general, English law has maintained a basic principle “that parties to a contract
are free to determine for themselves what primary obligations they will accept”355 and
 this also applies to uphold an exemption clause.356 Legislation has made limited
inroads into this principle. The Unfair Contract Terms Act 1977 imposes limits on the
ability of a party to rely on notices or contract terms to exclude or limit liability. It
applies to consumer and non-consumer contracts. Consumer contracts are subject to
the Unfair Terms in Consumer Contracts Regulations 1999. There are differences in
approach between the 1977 Act and the 1999 Regulations. The 1977 Act requires an
exclusion or limitation to satisfy the “requirement of reasonableness”. The 1999
Regulations impose two requirements: that the terms should be “fair” and that terms in
writing should be written in “plain, intelligible language”. They also give certain
powers to the Director General of Fair Trading and other bodies to bring proceedings.
In principle, both provisions can apply to construction contracts.357

5. UNFAIR CONTRACT TERMS ACT 1977

3-110
This Act358 imposes limits on the extent to which civil liability for breach of
contract, or for negligence or other breach of duty, can be avoided by means of contract
terms or otherwise.359 Apart from its effect upon notices or contract terms purporting
to exclude or limit liability for negligence,360 the application of the Act to substantial
construction contracts may be limited to cases where large contractors contract on
their own standard forms.361 But the Act may more frequently apply to private house
building.362 So far as is likely to be relevant to construction contracts, it applies only to
“business liability” as defined in s.1(3) of the Act. It does not apply to contracts where
goods are sold or supplied and which are made between parties whose places of
business are in the territories of different states.363 The material provisions of the Act
do not apply where English law is the proper law of the contract only by choice of the
parties. But conversely the Act can apply where a choice of law clause applies the law
of some country outside the United Kingdom wholly or mainly for the purpose of
evading the operation of the Act.364

3-111
Negligence liability. For the purposes of the Act, “negligence” means the breach of a
contractual obligation to take reasonable care or to exercise reasonable skill or breach
of an equivalent common law duty.365 A person cannot by reference to any contract
term or to a notice given generally or to particular persons exclude or restrict their
liability for death or personal injury resulting from negligence.366 In the case of other
loss or damage, a person cannot so exclude or restrict their liability for negligence
except in so far as the term or notice satisfies the requirement of reasonableness.367
3-112
The requirement of reasonableness in relation to a contract term is stated in s.11(1)
of the Act as:

“…that the term shall have been a fair and reasonable one to be included having regard
to the circumstances which were, or ought reasonably to have been, known to or in the
contemplation of the parties when the contract was made.”368

The test is to be judged as between the parties to the particular contract at the time the
contract is made. The relevant circumstances are those which were then known to or
in the contemplation of both parties.369
3-113
In relation to a non-contractual notice, the requirement of reasonableness is:

“…that it should be fair and reasonable to allow reliance on it, having regard to all the
circumstances obtaining when the liability arose or (but for the notice) would have
 arisen.”370

It is for those claiming that a contract term or notice satisfies the requirement of
reasonableness to show that it does.371 Where reliance upon a relevant contract term
has to satisfy the requirement of reasonableness, it may be found to do so and have
effect notwithstanding that the contract has been terminated by breach or by the
acceptance of a repudiation.372 In considering whether the requirement of
reasonableness is satisfied, appellate courts treat original decisions with the utmost
respect and refrain from interfering with them unless satisfied that they proceeded
upon some erroneous principle or were plainly and obviously wrong.373
3-114
A disclaimer by a building society on its own behalf and on behalf of a surveyor
carrying out a valuation of a modest dwelling-house for mortgage purposes which
purports to exclude liability for negligence is a notice within the Act which, to be
effective, has to satisfy the requirement of reasonableness. It was further held that on
the facts of that case the requirement of reasonableness was not satisfied.374 The
decision applies generally to valuations in broadly similar circumstances. But it is not
necessarily unreasonable for professional people in all circumstances to seek to
exclude or limit their liability for negligence and the decision might not apply to
valuations of industrial property, large blocks of flats or very expensive houses.375
3-115
Section 2(1) of the Act is concerned with protecting victims of negligence and not
with arrangements between wrongdoers and other persons for the sharing or bearing
of the burden of compensating victims.376 A clause in a plant-hire agreement, making
the plant owner’s driver the servant or agent of the hirer, was held not to satisfy the
requirement of reasonableness in s.2(2) of the Act when the owner tried to rely on the
clause to avoid liability to the hirer for the driver’s negligence.377 But a similar clause
was not affected by the Act where a third party was killed as a result of the plant
driver’s negligence, since there the clause was not relied on to exclude or restrict
liability to the third party’s widow.378

3-116
Liability arising in contract. Where one contracting party deals as a consumer379 or
on the other’s written standard terms of business, that other party cannot by reference
to any contract term exclude or restrict any liability of it for breach of contract except
in so far as the contract term satisfies the requirement of reasonableness.380
3-117
The Act may also prevent making a liability or its enforcement subject to restrictive
or onerous conditions, excluding or restricting any right or remedy in respect of that
liability, or subjecting a person to any prejudice in consequence of their pursuing any
such right or remedy, and excluding or restricting rules of evidence or procedure.381
Thus a clause in written standard terms of business seeking to exclude rights of set-off
in wide terms may fail to satisfy the requirement of reasonableness and be held to be
ineffective.382
3-118
A house purchaser and an individual contracting for the construction of a dwelling-
house will both, it seems, normally deal as consumers. A company entering into a
transaction which is merely incidental to the carrying on of a business deals as a
consumer unless a degree of regularity is established so as to make the transaction an
integral part of the business.383 It may be, therefore, that a business company that
makes a single construction contract with a contractor to build a headquarters office
building and for that purpose engages an architect deals in each instance as a
consumer. But it has been held that the owners of a luxury hotel who engaged
management contractors to do work to the hotel did not deal as consumers, since
 systematic rebuilding and refurbishment was an essential part of their business.384
3-119
It may sometimes be difficult to determine whether a particular form of
construction contract constitutes the contractor’s written standard terms of business. It
has been held that:

“…what is required for terms to be standard is that they should be regarded by the party
which advances them as its standard terms and that it should habitually contract on
those terms.”385

It is suggested that important considerations should include:

(a) whether the contract was drafted by or on behalf of the contractor; and
(b) whether it is proffered by the contractor as its preferred standard terms for
the kind of contract in question.

3-120
The fact that the contractor may historically have contracted on other terms for
different kinds of contract or because it could not persuade employers to accept its
preferred terms may be seen as incidental. It might even be that a form of contract
which the contractor had never previously succeeded in using is nevertheless its
standard terms of business. It is thought that a contract made on a standard form of
contract drafted, not by the contractor, but by a representative body, association or
institution would not be a contract on the contractor’s written standard terms of
business, even if it was a form of contract which the contractor frequently entered
into.386 A bond provided by an insurance company to an employer has been held to be
a contract between two parties, with the bond being the insurance company’s standard
terms of business.387

3-121
Unreasonable indemnity clauses. A person dealing as a consumer cannot by
reference to any contract term be made to indemnify another person (whether a party
to the contract or not) in respect of liability that may be incurred by the other for
negligence or breach of contract, except in so far as the contract terms satisfies the
requirement of reasonableness.388

FOOTNOTES
1For a full exposition, see K. Lewison, Interpretation of Contracts, 6th edn (London: Sweet
& Maxwell, 2015) and Chitty on Contracts, edited by H. Beale, 32nd edn (London: Sweet &
Maxwell, 2015), para.13-041, et seq.

2Lord Diplock in Pioneer Shipping v B.T.P. Tioxide [1982] A.C. 724 at 736, HL.

3Arnold v Britton [2015] UKSC 36; [2015] 2 W.L.R. 1593, [14]. See Prenn v Simmonds [1971]
1 W.L.R. 1381; Schuler AG v Wickman Machine Tool Sales Ltd [1974] A.C. 235; Reardon
Smith Line v Hansen-Tangen [1976] 1 W.L.R. 989; Antaios Compania Naviera SA v Salen
Rederierna AB [1985] A.C. 191; Mannai Investment Co Ltd v Eagle Star Life Assurance Co
Ltd [1997] A.C. 749; Investors Compensation Scheme Ltd v West Bromwich Building Society
[1998] 1 W.L.R. 896; BCCI v Ali [2002] 1 A.C. 251; Sirius International Insurance Co v FAI
General Insurance Company [2004] 1 W.L.R. 3251; Chartbrook Ltd v Persimmon Homes Ltd
[2009] UKHL 38; [2009] 1 A.C. 1101; Rainy Sky S.A. v Kookmin Bank [2011] UKSC 50; [2011]
1 W.L.R. 2900.

4Inland Revenue Commissioners v Raphael [1935] A.C. 96 at 142, HL; Schuler AG v

Wickman Machine Tool Sales Ltd [1974] A.C. 235, HL.

5Inland Revenue Commissioners v Raphael [1935] A.C. 96 at 143, HL; Schuler AG v

Wickman Machine Tool Sales Ltd [1974] A.C. 235 at 256, HL.

6Sirius International Insurance Co v FAI General Insurance Company [2004] 1 W.L.R. 3251
at 3257–8, HL; Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 A.C.
1101; Rainy Sky S.A. v Kookmin Bank [2011] UKSC 50; [2011] 1 W.L.R. 2900, [14] and [21];
Berrisford (FC) v Mexfield Housing Co-operative Ltd [2011] UKSC 52; [2012] A.C. 955, [17]
and [107]; Lloyds TSB Foundation for Scotland v Lloyds Banking Group plc (Scotland)
[2013] UKSC 3; [2013] 1 W.L.R. 366, [43].

7See Stone v Fleet Mobile Tyres Ltd [2006] EWCA Civ 1209 (CA).

8But note that in certain circumstances equity will rectify a contract mistakenly
expressed. See para.12-016.

9Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 W.L.R.
896 at 913, HL; BCCI v Ali [2002] 1 A.C. 251 at [8] and [78].

10New Hampshire Insurance Co v M.G.N. Ltd, The Times, 25 July 1995, CA.

11Inland Revenue Commissioners v Raphael [1935] A.C. 96 at 142, HL; see also, London CC
v Henry Boot & Sons Ltd [1959] 1 W.L.R. 1069 at 1077, HL.

12Bank of Australasia v Palmer [1897] A.C. 540 at 545, PC; National Westminster Bank v
Halesowen Presswork [1972] A.C. 785 at 818, HL; O’Connor v Hume [1954] 1 W.L.R. 824 at
830, CA; Rabin v Gerson Berger [1986] 1 W.L.R. 526, CA.

13In the Goods of De Rosaz (1877) 2 P.D. 66 at 69. For an exceptional case where, under
s.11 of the Employment Protection (Consolidation) Act 1978, gaps in a contract of
employment were filled, see Mears v Safecar Security [1983] 1 Q.B. 54 at 80.

14Kemp v Rose (1858) 1 Giff. 258. Temloc v Errill Properties (1987) 22 B.L.R. 30, CA, the
expression “£ nil” in a liquidated damages clause was construed not to be equivalent to a
blank.
15Westvilla Properties Ltd v Dow Properties Ltd [2010] 2 P. & C.R. 19; [2010] EWHC 30
(Ch).

16See “Factual background” at para.3-015.

17Prenn v Simmonds [1971] 1 W.L.R. 1381, HL; Investors Compensation Scheme Ltd v West
Bromwich Building Society [1998] 1 W.L.R. 896 at 913; Chartbrook Ltd v Persimmon
Homes Ltd [2009] UKHL 38; [2009] 1 A.C. 1101. In Aqua Design v Kier Regional Ltd [2003]
B.L.R. 111, CA at [12] it was held that it was not legitimate to look at the language used by
the parties in pre-contractual negotiations as an aid to proper construction of the
contract. See also, Lord Nicholls, “My Kingdom for A Horse” (2005) 121 L.Q.R. 577 as to
the relevance of prior negotiations as background to the construction of a contract and
contrast “Parties’ own dictionary” at para.3-022 and “Agreed factual assumption” at
para.3-023.

18Davis Contractors Ltd v Fareham UDC [1956] A.C. 696, HL.

19Lord Reid in Whitworth Street Estates (Manchester) Ltd v James Miller & Partners Ltd
[1970] A.C. 583 at 603, HL. See also, Wates Ltd v GLC (1983) 25 B.L.R. 1 at 29; AB v British
Coal Corporation [2007] EWHC 1407; [2007] All E.R. (D) 366. By contrast, in Wholesale
Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37, the Supreme Court of New
Zealand considered that evidence of subsequent conduct could be admitted in
appropriate cases.

20Schuler AG v Wickman Machine Tool Sales Ltd [1974] A.C. 235 at 252, 265, HL,
expressing doubt as to Watcham v Att Gen of East African Protectorate [1919] A.C. 533,
PC, which dealt with an ambiguous title to land; but see Liaquat Ali v Robert Lane [2006]
EWCA Civ 1532; [2006] All E.R. 271, CA holding that Watcham remained good law within
the narrow limits of what it decided: that in the context of a conveyance of land, where
the information contained in the conveyance is unclear or ambiguous, it is permissible
to have regard to extraneous evidence, including evidence of subsequent conduct,
subject always to that evidence being of probative value in determining what the parties
intended.

21Bushwall Properties Ltd v Vortex Properties Ltd [1976] 1 W.L.R. 591 at 603, CA. For an
exceptional case where, under the Employment Protection (Consolidation) Act 1978 s.11,
evidence of subsequent conduct was held to be admissible, see Mears v Safecar Security
[1983] 1 Q.B. 54 at 80.

22See Brian Maggs v Guy Marsh [2006] EWCA 1058; [2006] B.L.R. 395.

23Inglis v Buttery (1878) 3 App. Cas. 552, HL; Ambatielos v Jurgens [1923] A.C. 175 at 185,
HL; M.A. Sassoon & Sons v International Banking Corp [1927] A.C. 711 at 712, PC; see also,
City & Westminster Properties (1934) Ltd v Mudd [1959] Ch. 129; Prenn v Simmonds [1971]
1 W.L.R. 1381, HL.

24Compania Naviera Termar v Tradax Export [1965] 1 Lloyd’s Rep. 198 at 204; Ben
Shipping v An-Board Bainne [1986] 2 Lloyd’s Rep. 285 at 291; Wates Construction v
Franthom Property (1991) 53 B.L.R. 23, CA.

25Lord Cross, stating the majority view in Mottram Consultants Ltd v Bernard Sunley &
Sons [1975] 2 Lloyd’s Rep. 197 at 209, HL. For earlier cases consistent with Mottram, see
Chitty on Contracts, edited by H. Beale, 32nd edn (London: Sweet & Maxwell, 2015),
para.13-071. For discussion relating to the Standard Form, see para.20-153.

26Diplock J in Louis Dreyfus v Parnaso Cia. Naviera [1959] 1 Q.B. 498 at 513. This
approach has received support in Mopani Copper Mines Plc v Millennium Underwriting
Ltd [2008] EWHC 1331 (Comm) and has been recently applied in Bovis Lend Lease Ltd v
Cofely Engineering Services [2009] EWHC 1120 (TCC).

27Lloyd J in Mineralimportexport v Eastern Mediterranean Maritime [1980] 2 Lloyd’s Rep.

572 at 575. See also Lord Reid in Timber Shipping Co v London & Overseas Freighters
[1972] A.C. 1 at 15, HL; Slade LJ in Jefco Mechanical Services Ltd v Lambeth (1983) 24
B.L.R. 1 at 8, CA; Team Services v Kier Management (1993) 63 B.L.R. 76, CA; Rhodri Chirax
Ltd v Laker Vent Engineering Ltd [2004] B.L.R. 75 at [34], obiter per Auld LJ.

28Mineralimportexport v Eastern Mediterranean Maritime [1980] 2 Lloyd’s Rep. 572 at

575; cf. Wates Construction v Franthom Property (1991) 53 B.L.R. 23 at 36, CA. In relation
to the care required as to the inferences that can be drawn from deletions and the
difficulties involved see Berkeley Community Villages Ltd v Pullen [2007] EWHC 1330
(Ch).

29Punjab National Bank v de Boinville [1992] 1 W.L.R. 1138, CA.

30B.H.P. Petroleum Ltd v British Steel Plc [2002] 2 Lloyd’s Rep. 277, CA.

31Team Services v Kier Management (1993) 63 B.L.R. 76, CA.

32The equivalent section in the 8th edition of Keating was cited with approval in Mopani
Copper Mines Plc v Millennium Underwriting Ltd [2008] EWHC 1331 (Comm).

33T.F.W. Printers Ltd v Interserve Project Services Ltd [2006] EWCA Civ 875; [2006] B.L.R.
299, CA at [24].

34Matthew Hall Ortech v Tarmac Roadstone (1997) 87 B.L.R. 96 at [31].

35Reardon Smith Line v Hansen-Tangen [1976] 1 W.L.R. 989 at 995, HL; cf. A. Bell & Son v
C.B.F. Residential Care and Housing (1989) 46 B.L.R. 102 at 107.

36Prenn v Simmonds [1971] 1 W.L.R. 1381 at 1385, HL. See Volta Developments Ltd v
Waltham Forest Friendly Society Ltd [2008] All E.R. (D) 306 for an illustration of the facts
regarded by the court as background knowledge which was reasonably available.

37Reardon Smith Line v Hansen-Tangen [1976] 1 W.L.R. 989 at 997, HL.

38Prenn v Simmonds [1971] 1 W.L.R. 1381 at 1384, HL.

39Prenn v Simmonds [1971] 1 W.L.R. 1381 at 1384, HL.

40Shore v Wilson (1842) 9 Cl. & F. 355, HL.

41Matthew Hall Ortech v Tarmac Roadstone (1997) 87 B.L.R. 96 at [31].

42H.I.H. Casualty and General Insurance Ltd v New Hampshire Insurance Co [2001] 2
Lloyd’s Rep. 161 at [81]–[84]. The principle extends to prior oral contracts, Gideo van der
Garde BV v Force India Formula One Team Ltd [2010] EWHC 2373 (QB) at [163] although
on the facts of that case the principle was not applied because the prior agreement was a
non-binding gentleman’s agreement.

43Ladbroke Group plc v Bristol CC [1988] 1 E.G.L.R. 126 at 128M to 129A; KPMG LLP v
Network Rail [2007] EWCA Civ 363 at [43].

44The principle applies to all written instruments—Shore v Wilson (1842) 9 Cl. & F. 355,
HL.

45Lord Esher MR in Roe v Siddons (1888) 22 Q.B.D. 224 at 233, CA. For a case, upon rather
special facts, discussing the duty of an arbitrator to decide whether there is an ambiguity
which requires the admission of extrinsic evidence, see F.G. Whitley & Sons v Clwyd CC
(1982) 22 B.L.R. 48, CA. See also, Wates Construction v Bredero Fleet (1993) 63 B.L.R. 128.

46See British Movietonews Ltd v London and District Cinemas Ltd [1952] A.C. 166 at 183,
HL.

47Prenn v Simmonds [1971] 1 W.L.R. 1381 at 1384, HL; Scottish Widows Fund and Life
Assurance Society v BGC International (formerly Cantor Fitzgerald International) [2012]
EWCA Civ 607, [34]–[35].
48[1998] 1 W.L.R. 896, HL, at 912–913. But, see Lord Hoffmann’s call for restraint in the
interpretation of his judgment in ICS v West Bromwich in BCCI v Ali [2002] 1 A.C. 251 at
[39].

49The principles were derived from the speeches of Lord Wilberforce in Prenn v
Simmonds [1971] 1 W.L.R. 1381 and 1384–1386 and Reardon Smith Line v Hansen-Tangen
[1976] 1 W.L.R. 989. He characterised the situation in these terms “Almost all the old
intellectual baggage of legal interpretation has been discarded”, at 912. See also, BCCI v
Ali [2002] 1 A.C. 251 affirming these principles at [8] and [78].

50For the limits to this principle, see Youell v Bland Welch [1992] 2 Lloyd’s Rep. 127 at 133;
Scottish Power v Britoil [1997] EWCA Civ 2752.

51Shore v Wilson (1842) 9 Cl. & F. 355, HL; R. v Patents Appeal Tribunal, ex p. Baldwin &
Francis Ltd [1959] 1 Q.B. 105, CA; affirmed sub nom. Baldwin & Francis Ltd v Patents
Appeal Tribunal [1959] A.C. 663, HL.

52Baldwin & Francis Ltd v Patents Appeal Tribunal [1959] A.C. 663 at 679, 691, HL.

53See Symonds v Lloyd (1859) 6 C.B. (N.S.) 691 (“reduced brickwork” means brickwork
nine inches thick); cf. Crowshaw v Pritchard (1899) H.B.C., 4th edn (1914), Vol.2, p.274
also (1899) 16 T.L.R. 45. See para.2-013.

54Nelson v Dahl (1879) 12 Ch D. 568 at 575, CA; Brown v Inland Revenue Commissioners
[1965] A.C. 244 at 258, 262 and 266, HL; General Reinsurance v Fennia [1983] Q.B. 856 at
872, CA.

55London Export Corp Ltd v Jubilee Coffee Roasting Co Ltd [1958] 1 W.L.R. 661 at 675 and
677, CA.

56Crowshaw v Pritchard (1899) H.B.C., 4th edn (1914), Vol.2, p.274 also (1899) 16 T.L.R. 45;
Three Rivers Trading Co v Gwinear and District Farmers (1967) 111 S.J. 831, CA, sale of
“400 tons (approx.)” of barley; custom that seller could deliver 10 per cent less than
figure stated held to be unreasonable; Tony Cox (Dismantlers) v Jim 5 (1997) 13 Const. L.J.
209, custom in the construction industry that prices quoted were exclusive of VAT, cf.
Lancaster v Bird [1998] EWCA Civ 1973 no implied term that prices generally are
exclusive of VAT.

57Crema v Cenkos Securities plc [2011] 1 W.L.R. 2066; [2010] EWCA Civ 1444.

58Hamid (t/a Hamid Properties) v Francis Bradshaw Partnership [2013] EWCA Civ 470;
[2013] B.L.R. 447 at [57].
59The Karen Oltmann [1976] 2 Lloyd’s Rep. 708 at 712 but limited by the House of Lords
in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 A.C. 1101; see also
Proforce Recruit Ltd v The Rugby Group Ltd [2007] EWHC 1621 (QB); [2008] 1 All E.R.
(Comm) 569.

60Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 A.C. 1101, per Lord
Hoffman at [45].

61[2009] UKHL 38; [2009] 1 A.C. 1101, per Lord Hoffman at [45]–[47] where he queries the
application of the private dictionary exception in The Karen Oltmann [1976] 2 Lloyd’s
Rep. 708.

62[2006] EWHC 3151 (Ch).

63See “Estoppel by convention” at para.12-003.

64Pym v Campbell (1856) 6 E. & B. 370 at 374.

65Chitty on Contracts, edited by H. Beale, 32nd edn (London: Sweet & Maxwell, 2015),
para.8-069 and following.

66Schuler v Wickman [1974] A.C. 235 at 261, HL. For variation, see para.2-045 and
para.12-012, and for estoppel, see para.12-001.

67Berry v Berry [1929] 2 K.B. 316.

68Morris v Baron [1918] A.C. 1, HL.

69For rectification, see para.12-015.

70For meaning, see para.6-037.

71De Lassalle v Guildford [1901] 2 K.B. 215, CA.

72Heilbut Symons & Co v Buckleton [1913] A.C. 30 at 47, HL; Routledge v McKay [1954] 1
W.L.R. 615, CA; Dick Bentley Ltd v Harold Smith (Motors) Ltd [1965] 1 W.L.R. 623, CA;
Quickmaid Rental Services Ltd v Reece (1970) 114 S.J. 372, CA.

73Heilbut Symons & Co v Buckleton [1913] A.C. 30, HL; Howard Marine v A. Ogden & Sons
[1978] Q.B. 574, CA; IBA v EMI and BICC (1980) 14 B.L.R. 1 at 22, HL.
74Evans & Sons v Andrea Merzario [1976] 1 W.L.R. 1078 at 1081, CA; Thinc Group v
Armstrong [2012] EWCA Civ 1227, [85]–[87].

75See, e.g. IBA v EMI and BICC (1980) 14 B.L.R. 1, HL.

76Inntrepreneur Pub Co Ltd v East Crown Ltd [2000] 2 Lloyd’s Rep. 611, at [7].

77AXA Sun Life Services Plc v Campbell Martin Ltd [2011] EWCA Civ 133; [2011] 2 Lloyd’s
Rep. 1; BSkyB v H.P. Enterprises [2010] EWHC 86 (TCC); [2010] B.L.R. 267, at [372]–[389].

78Pao On v Lau Yiu Long [1980] A.C. 614 at 631, PC.

79Evans & Sons v Andrea Merzario [1976] 1 W.L.R. 1078 at 1081, CA. The majority of the
Court of Appeal did not seem to agree wholly with the approach of Lord Denning and dealt
with the case as a contract partly in writing, partly oral and partly by conduct.

80Evans & Sons v Andrea Merzario [1976] 1 W.L.R. 1078 at 1081, CA.

81Sometimes termed “canons of construction”.

82Re Coward (1887) 57 L.T. 285 at 291, CA.

83Or a strong case that “something must have gone wrong with the language”:
Chartbrook Ltd v Persimmon Homes Limited [2009] UKHL 38; [2009] 1 A.C. 1101 at [14].
But note Lord Hoffmann’s observation at [15] that: “It is, I am afraid, not unusual that an
interpretation which does not strike one person as sufficiently irrational to justify a
conclusion that there has been a linguistic mistake will seem commercially absurd to
another …”

84Leader v Duffey (1888) 13 App. Cas. 294 at 301, HL; James Archdale & Co v Comservices
[1954] 1 W.L.R. 459 at 463, CA.

85Parker LJ in Sabah Flour v Comfez [1988] 2 Lloyd’s Rep. 18 at 20, CA.

86See Beaufort Developments v Gilbert-Ash [1999] A.C. 266 at 269, per Lord Lloyd. Cf.
National Coal Board v William Neill & Son [1985] Q.B. 300.

87[1998] 1 W.L.R. 896 at 913.

88[1998] 1 W.L.R. 896.

89Lord Hoffmann cited Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd
[1997] A.C. 749 in support of this principle. For an application of the principles in Mannai
to a contractual termination clause, see Ellis Tylin v C.R.S. Ltd (2000) 68 Con. L.R. 137 at
[77]–[85].

90Lord Hoffmann referred to the point being made more vigorously by Lord Diplock in
Antaios Compania Naviera SA v Salen Rederierna AB [1985] A.C. 191 at 201; International
Fina Services AG v Katrina Shipping Limited [1995] 2 Lloyd’s Rep. 344 at 350; Demolition
Services Ltd v Castle Vale Housing Action Trust (2002) 79 Con. L.R. 55 at [34]–[50]; Gan
Insurance Co Ltd v Tai Ping Insurance Co Ltd (No.2) [2001] 2 All E.R. (Comm.) 299;
Breadner v Granville-Grossman [2001] Ch. 523 at [36]–[41].

91Scottish Widows Fund and Life Assurance Society v BGC International (formerly Cantor
Fitzgerald International) [2012] EWCA Civ 607 at [24] and [69]–[70].

92Pink Floyd Music Limited v EMI Records Limited [2010] EWCA Civ 1429 at [18].

93Commonwealth Smelting v GRE [1986] 1 Lloyd’s Rep. 121 at 126, CA and Fitzroy House
Epworth Street (No.1) Ltd v Financial Times Ltd [2006] EWCA Civ 329; [2006] 1 W.L.R.
2207, both considering Brutus v Cozens [1973] A.C. 854, HL; Giles v Tarry [2012] EWCA Civ
837, [60]–[61].

94Harbinger UK Ltd v G.E. Information Services Ltd [2001] 1 All E.R. (Comm) 166; [2000] 2
T.C.L.R. 463, CA.

95Produce Brokers Co Ltd v Olympia Oil & Cake Co Ltd [1916] 1 A.C. 314 at 324, HL; cf.
Reardon Smith Line v Hansen-Tangen [1976] 1 W.L.R. 989 at 996, HL, and see also “Custom
and usage” at para.3-020 and “Parties’ own dictionary” at para.3-022.

96Antaios Compania Naviera SA v Salen Rederierna AB [1985] A.C. 191 at 201.

97Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] A.C. 749, 771.

98Sirius International Insurance Co v FAI Insurance Co [2004] 1 W.L.R. 3251 at [19].

99[2015] UKSC 36; [2015] 2 W.L.R. 1593.

100Arnold v Britton [2015] UKSC 36; [2015] 2 W.L.R. 1593 at [17].

101Arnold v Britton [2015] UKSC 36; [2015] 2 W.L.R. 1593 at [19].

102Arnold v Britton [2015] UKSC 36; [2015] 2 W.L.R. 1593 at [20].

103Chartbrook Ltd v Persimmon Homes Limited [2009] UKHL 38; [2009] 1 A.C. 1101 at
[21].

104Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 W.L.R.
896 at 913; Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 A.C. 1101.

105Arnold v Britton [2015] UKSC 36; [2015] 2 W.L.R. 1593 at [18].

106Chartbrook Ltd v Persimmon Homes Limited [2009] UKHL 38; [2009] 1 A.C. 1101 at
[14].

107Chartbrook Ltd v Persimmon Homes Limited [2009] UKHL 38; [2009] 1 A.C. 1101 per
Lord Hoffmann at [20].

108East v Pantiles (Plant Hire) Ltd (1981) 263 E.G. 61 per Brightman LJ.

109Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 A.C. 1101 at [23].

110e.g. Jones v St John’s College, Oxford (1870) L.R. 6 Q.B. 115, distinguished in Dodd v
Churton [1897] 1 Q.B. 562, CA; Adamastos Shipping v Anglo Saxon Petroleum [1959] A.C.
133 at 177, HL.

111Diplock LJ in Sydall v Castings Ltd [1967] 1 Q.B. 302 at 314, CA. In London CC v Henry
Boot & Sons Ltd [1959] 1 W.L.R. 1069 at 1075, HL it was said that, in construing a
contract, no help could be got from the then Working Rule Agreement, which was “not
an artistically drawn document”.

112John Jarvis v Rockdale Housing Association (1986) 36 B.L.R. 48 at 61, CA applying

Prestcold (Central) Ltd v Minister of Labour [1969] 1 W.L.R. 89 at 97.

113Kay LJ in Mills v Dunham [1891] 1 Ch. 576 at 590, CA.

114Lord Wright in Hillas v Arcos (1932) 147 L.T. 503 at 514, HL; Adamastos Shipping Co
Ltd v Anglo-Saxon Petroleum Co Ltd [1959] A.C. 133 at 161, HL; Nea Agrex SA v Baltic
Shipping Co Ltd [1976] 2 W.L.R. 925 at 934, CA; for a construction contract case, see Gold v
Patman & Fotheringham Ltd [1958] 1 W.L.R. 697 at 702, CA; cf. Esmil v Fairclough (1981)
19 B.L.R. 129. See also “Certainty of terms” at para.2-031.

115Burchell v Clark (1876) 2 C.P.D. 88 at 97. For an example, see Townsend (Builders) Ltd v
Cinema News, etc., Ltd [1959] 1 W.L.R. 119 at 122, more fully reported at (1958) 20 B.L.R.
118, CA. For a consideration of the meaning of “clerical error”, in the context of a will,
see Marley v Rawlings [2014] 2 W.L.R. 213; [2014] UKSC 2.

116Lord Atkinson in Brodie v Cardiff Corp [1919] A.C. 337 at 355, HL; National Coal Board
v William Neill & Son [1985] Q.B. 300 at 319; It is necessary to look at the terms of the
contract as a whole and not to focus on the meaning of a particular word: Aqua Design v
Kier Regional Ltd [2003] B.L.R. 111, CA. See also, “Ordinary meaning” at para.3-030.

117e.g. whether quantities are part of the contract—see para.4-048. See also, as to offer
and acceptance, para.2-002 and following.

118e.g. Brodie v Cardiff Corp [1919] A.C. 337 at 344, HL; and see Cl.1.3 of the Standard
Form of Building Contract: para.20-044. Engineering contracts frequently have a clause
specifying the order of priority of a number of incorporated documents.

119As where there are written and printed parts of the contract—see para.3-041.

120Lord Ellenborough in Robertson v French (1803) 4 East 130; Glynn v Margetson [1893]
A.C. 351, HL; Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1959] A.C. 133,
HL; Renton (G.H.) & Co Ltd v Palymyra Trading Corp [1957] A.C. 149, HL; The Brabant
[1967] 1 Q.B. 588; A. Davies & Co (Shopfitters) v William Old (1969) 113 S.J. 262, CA;
Neuchatel Asphalte Co Ltd v Barnett [1957] 1 W.L.R. 356, CA; Homburg Houtimport v
Agrostin Private [2004] 1 A.C. 715 at [11] and [183]. Where terms incorporated by
reference are inconsistent with terms which have been expressly agreed, the express
terms prevail: B.C.T. Software Solutions Ltd v Arnold Laver & Co Ltd (2002) All E.R.
(Comm) 85 at [42]–[45].

121English Industrial Estates v Wimpey [1973] 1 Lloyd’s Rep. 118, CA; Henry Boot v Central
Lancashire New Town DC (1980) 15 B.L.R. 1 at 19; see further para.20-048.

122Gold v Patman & Fotheringham Ltd [1958] 1 W.L.R. 697 at 701, CA; N.W. Metropolitan
Regional Hospital Board v T.A. Bickerton & Son Ltd [1970] 1 W.L.R. 607 at 617, HL; English
Industrial Estates v Wimpey [1973] 1 Lloyd’s Rep. 118, CA; Fenice Investments Inc v Jerram
Falkus Construction Ltd [2009] EWHC 3272 (TCC); (2009) 129 Con. L.R. 124.

123Adamastos Shipping v Anglo-Saxon Petroleum [1959] A.C. 133, HL; Sabah Flour v
Comfez [1988] 2 Lloyd’s Rep. 18 at 20, CA.

124S.S. Knutsford Ltd v Tillmans & Co [1908] A.C. 406.

125Wells v Army & Navy Co-op Society (1902) H.B.C., 4th edn (1914), Vol.2, p.353 at 357,
CA. See further para.10-034.
126Herman v Morris (1919) 35 T.L.R. 574, CA.

127Henry Boot v Central Lancashire New Town DC (1980) 15 B.L.R. 1 at 15.

128Re Elwood [1927] 1 Ch. 455 at 461.

129Jersey (Earl of) v Guardians of Neath (1889) 22 Q.B.D. 555, CA.

130Fry LJ in Jersey (Earl of) v Guardians of Neath (1889) 22 Q.B.D. 555 at 566, CA; cf.
Gillespie Brothers v Roy Bowles [1973] Q.B. 400, CA and contrast Sonat v Amerada Hess
[1988] 1 Lloyd’s Rep. 145, CA.

131Larsen v Sylvester [1908] A.C. 295, HL.

132Henry Boot v Central Lancashire New Town DC (1980) 15 B.L.R. 1, where HH Judge Fay
QC declined to apply the rule to Cl.23(h) of the 1963 JCT Standard Form of Building
Contract.

133John Lee & Son v Railway Executive [1949] 2 All E.R. 581 at 583, CA; Billyack v Leyland
Construction Co Ltd [1968] 1 W.L.R. 471 at 477. See also Adams v Richardson & Starling
Ltd [1969] 1 W.L.R. 1645, CA, discussed in para.11-035. The contra proferentem rule only
applies where clause is ambiguous: Aqua Design v Kier Regional Ltd [2003] B.L.R. 111 at
[15]–[16] and [20], CA.

134Mira Oil Resources of Tortola v Bocimar (“The Over Venture”) [1999] 2 Lloyd’s Rep. 101;
Waterfront Shipping Co Ltd v Trafigura AG [2007] EWHC 2482. “A court should be wary of
starting its analysis by finding an ambiguity by reference to the words in question looked
at on their own. And it should not, in any event, on such a finding, move straight to the
contra proferentem rule without first looking at the context and, where permissible, aids
to identifying the purpose of the commercial document of which the words form part”:
Direct Travel Insurance v McGeown [2004] 1 All E.R. (Comm) 609; [2003] EWCA Civ 1606,
per Auld LJ, at [13].

135See para.10-033 and following.

136Miller v LCC (1934) 50 T.L.R. 479 at 482, discussed further in para.10-035.

137Salmon LJ in Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1

B.L.R. 111 at 121; also at (1971) 69 L.G.R. 1 at 11, CA; cf. Bramall & Ogden v Sheffield CC
(1983) 29 B.L.R. 73.
138Tersons Ltd v Stevenage Development Corporation [1963] 2 Lloyd’s Rep. 333 at 368, CA;
cf. R.W. Green Ltd v Cade Bros Farms [1978] 1 Lloyd’s Rep. 602 at 607; and consider the
approach to demurrage clauses—Suisse Atlantique v N.V. Rotterdamsche, etc. [1967] A.C.
361, HL. The rationale of the contra proferens rule is that it protects the weaker party:
Association of British Travel Agents v British Airways [2000] 2 Lloyd’s Rep. 209 at [75]–
[76], CA. See Chs 20, 21 and 22 for consideration of standard forms of contract of the kind
referred to in the text.

139Also referred to as exception, exemption or limitation clauses, see para.3-104 and

following.

140See Miller v LCC (1934) 50 T.L.R. 479; Peak Construction (Liverpool) Ltd v McKinney
Foundations Ltd (1970) 1 B.L.R. 111; Gaymark Investments Pty Ltd v Walter Constructon
Group Ltd (2005) 21 Const. L.J. 71 (Northern Territories SC); cf. Beckhaus v Brewarrina
No.2 [2004] N.S.W.S.C. 1160 at [36] (New South Wales SC) and the approach of the US
Court of Federal Claims in R.P. Wallace Inc v United States (2005) 21 Const. L.J. 378 at 389;
see also para.10-035.

141See Pera Shipping v Petroship [1984] 2 Lloyd’s Rep. 363 at 365; Youell v Bland Welch
[1992] 2 Lloyd’s Rep. 127 at 134. For a case where the contra proferentem rule applied to
an indemnity clause drafted by the proferens, see Stent Foundations v M.J. Gleeson Group
Plc [2001] B.L.R. 134 at [15].

142Cf. IBA v EMI and BICC (1978) 11 B.L.R. 29 at 55, CA, where a true contra proferentem
argument would have yielded in the face of a strict construction of an exception clause.
The case went to the House of Lords (reported at (1980) 14 B.L.R. 1) where the point was
not disapproved.

143Youell v Bland Welch [1992] 2 Lloyd’s Rep. 127 at 134.

144Brett LJ in Leggott v Barrett (1880) 15 Ch D. 306 at 311, CA. For misstatement of facts
in recitals in deeds, see para.3-047.

145Bush v Watkins (1851) 14 Beav. 425 at 432.

146Forbes v Git [1922] 1 A.C. 256, 259, PC referred to in Westcoast (Holdings) Ltd v Wharf
Land Subsidiary (No.1) Ltd [2012] EWCA Civ 1003, [61]. See also, “Meaningless words” at
para.2-034.

147The Act came into force on 2 October 2000.

148Human Rights Act 1998 s.6(1).

149Human Rights Act 1998 s.6(3).

150R v Lambert [2001] UKHL 37; [2002] 2 A.C. 545.

151For the effect of deletions in a printed form, see para.3-010.

152Doe d. Tatum v Catomore (1851) 16 Q.B. 745.

153See Pattinson v Luckley (1875) L.R. 10 Ex. 330.

154Lord Wright in Luxor (Eastbourne) Ltd v Cooper [1941] A.C. 108 at 137, HL; cf. Sterling
Engineering Co Ltd v Patchett [1955] A.C. 534 at 547, HL. See also Tsakiroglou & Co Ltd v
Noblee Thorl GmbH [1962] A.C. 93 at 122, HL; Young & Marten v McManus Childs [1969] 1
A.C. 454 at 465, HL; Gloucestershire CC v Richardson [1969] 1 A.C. 480 at 503, HL.

155See the Housing Grants, Construction and Regeneration Act 1996.

156See the Sale of Goods Act 1979 ss.12–15 and the Supply of Goods and Services Act 1982
ss.13–15 discussed below. A construction contract is a contract for the supply of services
but is not a contract for the sale of goods, but see “Implication of ‘usual’ terms” at paras
3-062 and 3-071.

157This topic is covered in detail in Ch.18.

158Housing Grants, Construction and Regeneration Act 1996 s.108.

159Housing Grants, Construction and Regeneration Act 1996 s.109.

160Housing Grants, Construction and Regeneration Act 1996 s.110.

161Housing Grants, Construction and Regeneration Act 1996 s.111.

162Housing Grants, Construction and Regeneration Act 1996 s.112.

163Housing Grants, Construction and Regeneration Act 1996 s.113.

164The Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI
1998/649): see the Housing Grants, Construction and Regeneration Act 1996 ss.108(6), 114
and 146(1) and (2). In Scotland the equivalent Scheme is SI 1998/687. The Scheme for
Construction Contracts was amended from 1 October 2011, among other things to deal
with the amendments in Pt 8 of the Local Democracy, Economic Development and
Construction Act 2009: see para.18-007.

165See the Housing Grants, Construction and Regeneration Act 1996 s.108(5) in relation
to adjudication; s.109(3) as to stage payments; ss.110(3) and 111(3) as to mechanism for
payment and 113(6) as to conditional payment provisions.

166Housing Grants, Construction and Regeneration Act 1996 s.114(4).

167See, for example, Aspect Contracts (Asbestos) Ltd v Higgins Construction plc [2015]
UKSC 38; [2015] 1 W.L.R. 2961.

168Supply of Goods and Services Act 1982 s.12.

169Liverpool CC v Irwin [1977] A.C. 239 at 253, HL. In Ultraframe (UK) Ltd v Tailored
Roofing Systems Ltd [2004] B.L.R. 341 at [15], CA, four bases were identified for implying
terms: (1) The Moorcock (1889) 14 P.D. 64 “if it is necessary, in a business sense, to give
efficacy to the contract”; (2) Southern Foundries (1926) Ltd v Shirlaw [1939] 2 K.B. 206
“the officious bystander”; (3) Liverpool CC v Irwin [1977] A.C. 239 terms necessary to
complete the bargain; and (4) Stirling v Maitland (1864) 5 B&S 840, a term necessary to
prevent one party altering the assumed state of affairs so as to prevent a party having
the benefit of a contract. The basis in Stirling v Maitland has no application to
circumstances where one party prevents a condition precedent to the other party’s
performance being fulfilled (i.e. where an alteration of the assumed state of affairs has
been prevented): Swallowfalls Ltd v Monaco Yachting and Technologies SAM [2014] 2 All
E.R. (Comm) 185; [2014] EWCA Civ 186, [34].

170Liverpool CC v Irwin [1977] A.C. 239 per Lord Wilberforce at 254. For a useful
discussion relating to a construction contract, see London Borough of Merton v Leach
(1985) 32 B.L.R. 51 at 73 and following.

171Liverpool CC v Irwin [1977] A.C. 239 at 255, 257, HL; National Bank of Greece v Pinios
Co No.1 [1990] A.C. 637 at 644, CA unaffected by the decision in the House of Lords,
[1990] A.C. 637, at 666, HL; cf. also Greaves & Co Ltd v Baynham Meikle [1975] 1 W.L.R.
1095 at 1099, 1103, CA; George Hawkins v Chrysler (1986) 38 B.L.R. 36 at 47, CA.

172(1889) 14 P.D. 64, CA.

173[2009] UKPC 10, [2009] 1 W.L.R. 1988.

174Lord Pearson in Trollope & Colls Ltd v N.W. Metropolitan Regional Hospital Board
[1973] 1 W.L.R. 601 at 609, HL; see also, The Moorcock (1889) 14 P.D. 64, CA; Reigate v
Union Manufacturing Co Ltd [1918] 1 K.B. 592 at 605, CA. See Shirlaw v Southern
Foundries (1926) Ltd [1939] 2 K.B. 206 at 227, CA for the test of what answer the parties
would give to the “officious bystander”.

175Trollope & Colls Ltd v N.W. Metropolitan Regional Hospital Board [1973] 1 W.L.R. 601
at 610, 614, HL; see also, Brown & Davis Ltd v Galbraith [1972] 1 W.L.R. 997, CA; El Awadi
v Bank of Credit SA [1990] Q.B. 606 at 623; Mediterranean Salvage & Towage Ltd v Seamar
Trading & Commerce Inc (The “Reborn”) [2009] EWCA Civ 531; [2009] 2 Lloyd’s Rep. 639 at
[18].

176Tai Hing v Liu Chong Hing Bank [1986] A.C. 80 at 104, PC, citing Liverpool CC v Irwin
[1977] A.C. 239 at 254 and 262, HL.

177Luxor (Eastbourne) Ltd v Cooper [1941] A.C. 108 at 137, HL.

178Lord Cross in Liverpool CC v Irwin [1977] A.C. 239 at 258, HL; cf. Duke of Westminster v
Guild [1985] 1 Q.B. 688 at 697 and following, CA; Wettern Electric v Welsh Development
Agency [1983] Q.B. 796.

179[1978] 52 A.L.J.R. 20 at 26, PC.

180[2009] UKPC 10; [2009] 1 W.L.R. 1988 at [21]. The approach of the Privy Council has
subsequently been affirmed by the Court of Appeal in Mediterranean Salvage & Towage
Ltd v Seamar Trading & Commerce Inc (The “Reborn”) [2009] EWCA Civ 531; [2009] 2
Lloyd’s Rep. 639.

181[2009] UKPC 10; [2009] 1 W.L.R. 1988.

182[2009] UKPC 10; [2009] 1 W.L.R. 1988 at [23].

183Equitable Life Assurance Society v Hyman [2002] 1 A.C. 408 at 459.

184[2009] UKPC 10; [2009] 1 W.L.R. 1988.

185[2009] UKPC 10; [2009] 1 W.L.R. 1988 at [21]. The approach of the Privy Council has
subsequently been affirmed by the Court of Appeal in Mediterranean Salvage & Towage
Ltd v Seamar Trading & Commerce Inc (The “Reborn”) [2009] EWCA Civ 531; [2009] 2
Lloyd’s Rep 639.

186[2009] UKHL 38; [2009] 1 A.C. 1101.

187Eastleigh BC v Town Quay Developments Ltd [2009] EWCA Civ 1391; [2010] 2 P.&C.R. 2,
CA at [31].
188Liverpool CC v Irwin [1977] A.C. 239 at 254 and 262, HL; Tai Hing v Liu Chong Hing
Bank [1986] A.C. 80 at 104, PC.

189See, e.g. Lynch v Thorne [1956] 1 W.L.R. 303, CA; Jones v St John’s College, Oxford (1870)
L.R. 6 Q.B. 115 at 126; cf. Euro-Diam Ltd v Bathurst [1990] Q.B. 1 at 40, CA.

190Mackay v Dick (1881) 6 App. Cas. 251 at 263, HL; London Borough of Merton v Leach
(1985) 32 B.L.R. 51 at 81, adopting the sentence in the text. Cf. Hamlyn v Wood [1891] 2
Q.B. 488, CA; Holland Hannen & Cubitts v WHTSO (1982) 18 B.L.R. 80 at 117; Lorne-
Stewart v William Sindall (1986) 35 B.L.R. 109 at 127 and following.

191Lord Simon in Luxor (Eastbourne) Ltd v Cooper [1941] A.C. 108 at 118, HL.

192Freeman v Hensler (1900) H.B.C. (4th edn), Vol.2, p.292, CA; R. v Walter Cabott Ltd
(1975) 21 B.L.R. 46 (Canadian Federal Court of Appeals); Canterbury Pipe Lines v
Christchurch Drainage (1979) 16 B.L.R. 76 at 90 (New Zealand CA); Hounslow LBC v
Twickenham Garden Developments [1971] Ch. 233 at 247: implied negative obligation not
to revoke the contractor’s licence to occupy the site otherwise than in accordance with
the contract; cf. LRE Engineering v Otto Simon Carves (1981) 24 B.L.R. 127; Surrey Heath
BC v Lovell Construction (1988) 42 B.L.R. 25 at 51.

193This will depend on the facts and the express terms of the contract, but see Ellis-Don v
Parking Authority of Toronto (1978) 28 B.L.R. 98 at 110; cf. Townsend v Cinema News &
Property Management (1958) 20 B.L.R. 118 at 142.

194Hunt v Bishop (1853) 8 Ex. 675.

195Al-Waddan Hotel Ltd v Man Enterprise SAL (Offshore) [2014] EWHC 4796 (TCC) at [63].

196Panamena v Leyland (1943) 76 Lloyd’s Rep. 113, CA; Perini Corp v Commonwealth of
Australia (1969) 12 B.L.R. 82; Canterbury Pipe Lines Ltd v Christchurch Drainage Board
(1979) 16 B.L.R. 76; Swallowfalls Ltd v Monaco Yachting and Technologies SAM [2014] 2
All E.R. (Comm) 185; [2014] EWCA Civ 186 at [32].

197Perini Corp v Commonwealth of Australia (1969) 12 B.L.R. 82; Devlin J in Minster Trust
Ltd v Traps Tractors Ltd [1954] 1 W.L.R. 963 at 975; Panamena v Leyland [1947] A.C. 428,
HL; Sutcliffe v Thackrah [1974] 2 A.C. 727.

198Panamena v Leyland [1947] A.C. 428 at 436, HL, discussed in para.5-030. See also
Croudace v London Borough of Lambeth (1986) 33 B.L.R. 20 at 34, CA; Allen Wilson
Shopfitters v Buckingham 102 Con. L.R. 154 at [36].
199(1986) 33 B.L.R. 39 at 58, CA.

200For the arbitration clause in the current Standard Form of Building Contract, see
paras 20-034 and 20-533 and following.

201In practice, the remedy may not be at all simple.

202London Borough of Merton v Leach (1985) 32 B.L.R. 51 at 81; Neodox v Swinton and
Pendlebury BC (1958) 5 B.L.R. 38 at 41.

203Roberts v Bury Commissioners (1870) L.R. 5 C.P. 310 at 325; McAlpine v Lanarkshire,
etc., Railway (1889) 17 R. 113; Wells v Army & Navy Co-op Society (1902) H.B.C. (4th edn),
Vol.2, pp.346 and 352, CA; Neodox v Swinton and Pendlebury BC (1958) 5 B.L.R. 38. See
also, McAlpine & Son v Transvaal Provincial Administration [1974] 3 S.A.L.R. 506,
particularly the minority judgments of Corbett AJA and Jansen JA; cf. Fischbach & Moore
of Canada v Noranda Mines (1978) 84 D.L.R. (3d) 465. For claims for damages by the
contractor arising out of breach of these duties, see para.8-068.

204Holland, Hannen and Cubitts Ltd v WHTSO (1981) 18 B.L.R. 80.

205Guidance can be obtained from Wells v Army & Navy Co-op Society (1902) H.B.C. (4th
edn), Vol.2, p.346 at 352, CA; Neodox v Swinton and Pendlebury BC (1958) 5 B.L.R. 38.

206(1958) 5 B.L.R. 38; Consarc Design Ltd v Hutch Investments Ltd (2002) 84 Con. L.R. 36 at
[50]–[51].

207This passage (in the terms of the First Supplement to the 4th edition (1982) on p.6)
quoted with apparent approval in Glenlion Construction v The Guinness Trust (1987) 39
B.L.R. 89 at 103. See also Jardine Engineering v Shimizu (1992) 63 B.L.R. 96 (Hong Kong
HC); J. & J. Fee Ltd v Express Lift Co (1993) 34 Con. L.R. 147.

208Corbett AJA in McAlpine & Son v Transvaal Provincial Administration [1974] 3 S.A.L.R.
506 at 535; cf. Glenlion Construction v The Guinness Trust (1987) 39 B.L.R. 89.

209Relying upon the dictum of Wright J in the Wells v Army & Navy Co-op Society (1902)
H.B.C. (4th edn), Vol.2, pp.346 at 352, CA.

210(1987) 39 B.L.R. 89.

211(1987) 39 B.L.R. 89 at 105, quoting with apparent approval a passage from the
Supplement to the 4th edition of this book (1982) (on p.6), substantially reproduced in
this and the preceding paragraph.
212Barque Quilpué Ltd v Brown [1904] 2 K.B. 261 at 274; London Borough of Merton v
Leach (1985) 32 B.L.R. 51 at 79.

213Lord Asquith in William Cory & Son Ltd v City of London Corp [1951] 2 K.B. 476 at 484,
CA; see Lawson v Wallasey Local Board (1883) 48 L.T. 507, CA; Bywaters v Curnick (1906)
H.B.C. (4th edn), Vol.2, p.393, CA; London Borough of Merton v Leach (1985) 32 B.L.R. 51
at 79; Jardine Engineering v Shimizu (1992) 63 B.L.R. 96 (Hong Kong HC).

214William Cory & Son Ltd v City of London Corp [1951] 2 K.B. 476, CA.

215Farr v The Admiralty [1953] 1 W.L.R. 965; Martin Grant v Sir Lindsay Parkinson (1984)
29 B.L.R. 31.

216Appleby v Myers (1867) L.R. 2 C.P. 651, and see paras 4-046 and 6-059. Nor does the
employer warrant that the site complies with health and safety requirements: Allridge v
Grand Actual (1996) 55 Con. L.R. 91 at 122.

217Porter v Tottenham UDC [1915] 1 K.B. 776, CA; L.R.E. Engineering v Otto Simon Carves
(1981) 24 B.L.R. 127.

218Leslie & Co Ltd v The Managers of the Metropolitan Asylums District (1901) 68 J.P. 86,
CA; Kirk & Kirk v Croydon Corp [1956] J.P.L. 585. Cf. Thomas Bates & Son Ltd v Thurrock
BC, The Times, 23 October 1975, CA where the employer was held liable for a nominated
sub-contractor’s default upon the special wording of the contract.

219Russell v Sa da Bandeira (1862) 13 C.B.(N.S.) 149.

220See Sutcliffe v Thackrah [1974] 2 A.C. 727, HL. The case of Re de Morgan Snell & Co
(1891) H.B.C. (4th edn), Vol.2, p.185, CA, so far as it is to contrary effect, should no longer
be considered as of general application.

221See Sutcliffe v Thackrah [1974] 2 A.C. 727, HL. For the meaning of disqualification of a
certifier, see para.5-030. For whether acts by an employer in breach of the implied term
can be treated as repudiation, see para.6-132.

222Acrow (Automation) Ltd v Rex Chainbelt Inc [1971] 1 W.L.R. 1676 at 1680, CA.

223Young & Marten v McManus Childs [1969] 1 A.C. 454 at 465, HL; Charnock v Liverpool
Corp [1968] 1 W.L.R. 1498, CA; Duncan v Blundell (1820) 3 Stark. 6; Pearce v Tucker (1862)
3 F. & F. 136. For compliance with building regulations, see para.6-067 and para.16-046
and following.
224See Surrey Heath BC v Lovell Construction (1988) 42 B.L.R. 25 at 34 considering Lord
Diplock (dissenting) in P. & M. Kaye v Hosier & Dickinson [1972] 1 W.L.R. 146 at 165, HL
and unaffected by the decision in the Court of Appeal at (1990) 48 B.L.R. 108, CA; Lintest
Builders Ltd v Roberts (1978) 10 B.L.R. 120; (1980) 13 B.L.R. 38, CA; William Tomkinson v
Parochial Church Council of St Michael (1990) 6 Const. L.J. 319; Guinness v C.M.D.
Property Developments (1995) 76 B.L.R. 40. At least, the employer acquires a right to
require the contractor to remedy the bad work at the time it is done—see Lintest 13
B.L.R. 43.

225Duncan v Blundell (1820) 3 Stark. 6 at 7; Harmer v Cornelius (1858) 5 C.B. (N.S.) 236;
Young & Marten v McManus Childs [1969] 1 A.C. 454 at 468 and 472, HL. For
considerations which affect the content of the implied term of reasonable care and skill
and the duty to warn, see Plant Construction v Clive Adams (No.2) [2000] B.L.R. 137 at
147, CA; Aurum Investments v Avonforce [2001] 2 All E.R. 385.

226Young & Marten v McManus Childs [1969] 1 A.C. 454 at 469 and 470, HL.

227Lindenberg v Canning (1992) 62 B.L.R. 147, where the plan incorrectly showed
obviously load-bearing walls as non-load-bearing.

228Young & Marten v McManus Childs [1969] 1 A.C. 454, HL; Gloucestershire CC v
Richardson [1969] A.C. 480, HL; Myers v Brent Cross Service Co [1934] 1 K.B. 46, DC,
explained in Young & Marten [1969] 1 A.C. 454, HL’s Case at 467, 471, 474 and 478;
Samuels v Davies [1943] 1 K.B. 526, CA; Stewart v Reavell’s Garage [1952] 2 Q.B. 545;
Ingham v Emes [1955] 2 Q.B. 366, CA; Rotherham MBC v Frank Haslam Milan (1996) 78
B.L.R. 1, CA; cf. IBA v EMI and BICC (1980) 14 B.L.R. 1 at 48.

229For cases which consider this section, see, e.g. Aswan Engineering Co v Lupdine [1987]
1 W.L.R. 1, CA; Rogers v Parish Ltd [1987] 2 W.L.R. 353, CA and note that s.14(6) has a
statutory definition of “merchantable quality” in terms introduced by the now repealed
s.7(2) of the Supply of Goods (Implied Terms) Act 1973.

230Young & Marten v McManus Childs [1969] 1 A.C. 454, HL, noting that Lord Upjohn’s
view, at 475, was that the obligation upon the contractor in respect of materials was
higher than that upon the seller of goods.

231Materials are “goods” for the purposes of the Sale of Goods Act 1979.

232Young & Marten v McManus Childs [1969] 1 A.C. 454 at 466, HL; Gloucestershire CC v
Richardson [1969] 480, HL.

233It makes it “… an insurer in respect of the defects which he could not prevent and of
which he did not know”: Lord Wilberforce in Young & Marten v McManus Childs [1969] 1
A.C. 454 at 479, HL.

234[1969] 1 A.C. 454, HL.

235In fact the main contractor contracting with its sub-contractor, but the principle is the
same as in the case of employer and contractor, and for convenience the usual
terminology is used.

236[1969] 1 A.C. 454 at 470, HL.

237Hardwick Game Farm v Suffolk Agricultural and Poultry Producers [1969] 2 A.C. 31 at
77, HL; B.S. Brown v Craiks [1970] 1 W.L.R. 725 at 754, HL; Aswan Engineering v Lupdine
[1987] 1 W.L.R. 1 at 12; Rotherham MBC v Frank Haslam Milan (1996) 78 B.L.R. 1 at 28–29,
40–41, CA.

238Trebor Bassett Holdings Ltd v ADT Fire & Security Plc (2012) 144 Con. L.R. 1; [2012]
EWCA Civ 1158, per Tomlinson LJ, at [46].

239e.g. Lord Fraser in IBA v EMI and BICC (1980) 14 B.L.R. 1 at 44, HL with reference to
Young & Marten v McManus Childs [1969] 1 A.C. 454, HL; University of Warwick v Sir
Robert McAlpine (1988) 42 B.L.R. 1 at 11.

240As, e.g. in the Irish case of Norta v John Sisk Ltd (1977) 14 B.L.R. 49, referred to with
apparent approval by Lord Fraser in IBA v EMI and BICC (1980) 14 B.L.R. 1, HL;
University of Warwick v Sir Robert McAlpine (1988) 42 B.L.R. 1.

241See para.3-016.

242Young & Marten v McManus Childs [1969] 1 A.C. 454 at 471, HL.

243See para.3-072; Cammell Laird & Co Ltd v Manganese Bronze and Brass Co Ltd [1934]
A.C. 402, HL, a case on the Sale of Goods Act 1893, but the principle is the same; Young &
Marten v McManus Childs [1969] 1 A.C. 454 at 472 and 479, HL; Comyn Ching v Oriental
Tube (1979) 17 B.L.R. 47 at 81; Norta v John Sisk (1977) 14 B.L.R. 49 cited in IBA v EMI and
BICC (1980) 14 B.L.R. 1 at 25 and 45; University of Warwick v Sir Robert McAlpine (1988)
42 B.L.R. 1.

244[1969] 1 A.C. 454.

245Slater v Finning Ltd [1997] A.C. 473 at 483, 486, HL; Griffiths v Peter Conway Ltd [1939]
1 All E.R. 685 at 691, CA; Ingham v Emes [1955] 2 Q.B. 366, CA.
246Young & Marten v McManus Childs [1969] 1 A.C. 454 at 471, HL; Gloucestershire CC v
Richardson [1969] A.C. 480 at 495, HL; see also, Lynch v Thorne [1956] 1 W.L.R. 303, CA.

247Young & Marten v McManus Childs [1969] 1 A.C. 454 at 471, HL; cf. Wormell v R.H.M.
Agriculture [1987] 3 All E.R. 75.

248See above and see also Rumbelows v AMK (1980) 19 B.L.R. 25 at 42.

249Young & Marten v McManus Childs [1969] 1 A.C. 454 at 466, 471, HL; Gloucestershire
CC v Richardson [1969] A.C. 480 at 497, 503, 504 and 507, HL.

250[1969] A.C. 480, HL.

251[1969] A.C. 454, HL 480 at 495, 507.

252Lord Reid in Young & Marten v McManus Childs [1969] 1 A.C. 454 at 468, HL,
commenting on dicta of du Parcq J in Myers v Brent Cross [1934] 1 K.B. 46 at 55, DC. See
also Lord Wilberforce in Young & Marten’s case at 476.

253Greaves & Co Ltd v Baynham Meikle [1975] 1 W.L.R. 1095 at 1098, CA; cf. National Coal
Board v Neill [1985] Q.B. 300 at 317; John Lelliott v Byrne Bros (1992) 31 Con. L.R. 88 at 92;
see also cases cited in paras 3-072 and 3-073; Smith & Snipes Hall Farm Ltd v River
Douglas Catchment Board [1949] 2 K.B. 500; CA and Cable (1956) Ltd v Hutcherson Ltd
(1969) 43 A.L.J.R. 321, discussed in para.1-040.

254See cases cited at para.3-080.

255Cammell Laird & Co Ltd v Manganese Bronze & Brass Co Ltd [1934] A.C. 402, HL.

256See cases cited at para.3-072.

257See Lynch v Thorne [1956] 1 W.L.R. 303 at 311, CA. Note comment on the application of
this principle to this case in para.3-083.

258MT Højgaard A/S v E.ON Climate v Renewables UK Robin Rigg East Ltd [2015] EWCA
Civ 407; [2015] B.L.R. 431.

259Steel Co of Canada Ltd v Willand Management Ltd [1966] S.C.R. 746 (Canada SC);
Greater Vancouver Water District v North American Pipe & Steel Ltd (2012) BCCA 337
(British Columbia CA) reversing the decision at (2011) BSCS 30.
260Plant Construction Plc v Clive Adams Associates [2000] 2 T.C.L.R. 513, CA reconciling
the decisions in Equitable Debenture v William Moss (1984) 1 Const. L.J. 131 at 134;
University of Manchester v Hugh Wilson & Lewis Womersley (A Firm) (1984) 1 Const. L.J.
162; University of Glasgow v William Whitfield (1988) 42 B.L.R. 66; Oxford University Press
v John Stedman Group (1990) 34 Con. L.R. 1 at 68. See generally H. Nicholls, “Contractors’
Duty to Warn” (1989) 5 Const. L.J. 175. For the duty of professionals, see para.14-087.

261Lindenberg v Canning (1992) 62 B.L.R. 147.

262Stagecoach South Western Trains Ltd v Hind and Steel [2014] EWHC 1891 at [102].

263Brunswick Construction v Nowlan (1974) 49 D.L.R. (3d) and 21 B.L.R. 27 (Canada SC).
This case was followed in Lindenberg v Canning (1992) 62 B.L.R. 147 where Lynch v
Thorne [1956] 1 W.L.R. 303, CA was referred to but not followed.

264Viking Grain v T.H. White (1985) 33 B.L.R. 103; cf. Bacal Construction v Northampton
DC (1975) 8 B.L.R. 88; George Hawkins v Chrysler (1986) 38 B.L.R. 36, CA.

265Adams v Richardson and Starling Ltd [1969] 1 W.L.R. 1645, CA.

266MT Højgaard A/S v E.ON Climate v Renewables UK Robin Rigg East Ltd [2015] EWCA
Civ 407; [2015] B.L.R. 431.

267Test Valley BC v GLC (1979) 13 B.L.R. 63, CA; Basildon DC v J.E. Lesser [1985] 1 All E.R.
20. See also, “Sale of buildings” at para.3-081.

268(1980) 14 B.L.R. 1, HL.

269(1980) 14 B.L.R. 1 at 26, 44, and 47; the Irish case of Norta v John Sisk (1977) 14 B.L.R.
49; George Hawkins v Chrysler (1986) 38 B.L.R. 36 at 55.

270Hancock v B.W. Brazier (Anerley) Ltd [1966] 1 W.L.R. 1317 at 1332, CA. See also, Miller
v Cannon Hill Estates [1931] 2 K.B. 113; Perry v Sharon Development Co [1937] 4 All E.R.
390, CA; Jennings v Tavener [1955] 1 W.L.R. 932; Lynch v Thorne [1956] 1 W.L.R. 303, CA;
Greaves & Co v Baynham Meikle [1975] 1 W.L.R. 1095 at 1098; IBA v EMI and BICC (1978)
11 B.L.R. 29 at 51, CA; Test Valley BC v Greater London Council (1979) 13 B.L.R. 63, CA;
Harrison v Shepherd Homes Ltd (2011) 27 Const. L.J. 709; [2011] EWHC 1811 (TCC).

271Hancock v B.W. Brazier (Anerley) Ltd [1966] 1 W.L.R. 1317, CA.

272Hoskins v Woodham [1938] 1 All E.R. 692; Minster Trust Ltd v Traps Tractors Ltd
[1954] 1 W.L.R. 963 at 975.
273Defective Premises Act 1972; see para.16-001.

274As amended by the Defective Premises Act 1972.

275See para.7-005 and following and in particular “Personal injury” at para.7-007.

276Hancock v B.W. Brazier (Anerley) Ltd [1966] 1 W.L.R. 1317 at 1334, CA; see also Billyack
v Leyland Construction Co Ltd [1968] 1 W.L.R. 471.

277Hancock v B.W. Brazier (Anerley) Ltd [1966] 1 W.L.R. 1317 at 1334, CA.

278[1956] 1 W.L.R. 303, CA; cf. Test Valley BC v GLC (1979) 13 B.L.R. 63 at 80, CA, where it
is said that the building owner in Lynch v Thorne [1956] 1 W.L.R. 303, CA “insisted on
providing a specification which formed part of the contract”. It is not clear that
insistence can be derived from Lynch v Thorne.

279Note that for a claim relating to a window it was conceded that the purchaser could
succeed for breach of implied warranty because the specification did not so precisely
identify the nature of the work; [1956] 1 W.L.R. 303 at 309. See also Lord Parker CJ at 311.

280See para.16-001.

281See para.16-046 and following.

282Cf. Cotton v Wallis [1955] 1 W.L.R. 1168, CA, but note that this case, discussed in
para.20-078, was a dispute between architect and employer and is not, it is submitted, an
authority on disputes between employer and contractor.

283Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (Trading
as Medirest) [2013] EWCA Civ 200; [2013] B.L.R. 265 at [105]; Chelsfield Advisers LLP v
Qatari Diar Real Estate Investment Co [2015] EWHC 1322 (Ch) at [80].

284Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB); [2013]
1 C.L.C. 662 at [142].

285Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB); [2013]
1 C.L.C. 662 at [142].

286Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (Trading
as Medirest) [2013] EWCA Civ 200; [2013] B.L.R. 265.
287Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (Trading
as Medirest) [2013] EWCA Civ 200; [2013] B.L.R. 265 at [83]; Portsmouth CC v Ensign
Highways Ltd [2015] EWHC 1969 (TCC).

288Chelsfield Advisers LLP v Qatari Diar Real Estate Investment Co [2015] EWHC 1322 (Ch)
at [246].

289Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (Trading
as Medirest) [2013] EWCA Civ 200; [2013] B.L.R. 265 at [112].

290For the formal requirements of deeds, see para.2-063. For a summary of the principles
of construction applicable to deeds, see O.T.V. Birwelco Ltd v Technical and General
Insurance Co Ltd (2002) 84 Con. L.R. 117.

291Lord Maugham in Greer v Kettle [1938] A.C. 156 at 171, HL.

292Greer v Kettle [1938] A.C. 156 at 171.

293Greer v Kettle [1938] A.C. 156, 171; Prime Sight Ltd v Lavarello [2014] A.C. 436; [2013]
UKPC 22, and the cases cited therein; see also generally Halsbury’s Laws of England,
edited by Lord MacKay of Clashfern, 5th edn (London: LexisNexis, 2014), Vol.32,
para.257.

294Lord Maugham in Greer v Kettle [1938] A.C. 156 at 171, HL.

295Wilson v Wilson [1969] 1 W.L.R. 1470 and for rectification, see para.12-015.

296Greer v Kettle [1938] A.C. 156, HL.

297Dunlop & Sons v Balfour Williamson & Co [1892] 1 Q.B. 507 at 518, CA; The Annefield
[1971] P. 169, 183 and 185, CA. For the importance of certainty in the construction of
contracts in standard terms, see Pioneer Shipping v B.T.P. Tioxide (“The Nema”) [1982]
A.C. 724 at 743, HL; cf. Ashville Investments v Elmer Contractors [1989] Q.B. 488 at 495,
CA; Computer & Systems Engineering v John Lelliott (1990) 54 B.L.R. 1 at 8, CA.

298H.W. Nevill v William Press & Son (1981) 20 B.L.R. 78 at 91.

299See, e.g. F.G. Minter v WHTSO (1980) 13 B.L.R. 1 at 20, CA.

300Lord Wright in Luxor v Cooper [1941] A.C. 108 at 130, HL.

301Lord Bridge in Mitsui v Att Gen of Hong Kong (1986) 33 B.L.R. 1 at 18, PC.

302Re Ford & Bemrose (1902) H.B.C. (4th edn), Vol.2, p.324, CA; also (1902) 18 T.L.R. 443;
Chiemgauer Membran v New Millenium Experience [2001] C.I.L.L. 1741 where the court
used similar clauses in other contracts as an aid to interpretation.

303See Unfair Contract Terms Act s.2 discussed in para.3-110 and following.

304Gillespie Bros & Co v Roy Bowles Transport [1973] Q.B. 400 at 419, CA; Greenwich
Millennium Village Ltd v Essex Services Group Plc (formerly Essex Electrical Group Ltd)
[2014] EWCA Civ 960 at [92].

305Smith v South Wales Switchgear [1978] 1 W.L.R. 165 at 168, HL.

306Rutter v Palmer [1922] 2 K.B. 87 at 92, CA; cf. Canada Steamship Lines v R. [1952] A.C.
192, PC; Lamport & Holt Lines v Coubro & Scrutton [1982] 2 Lloyd’s Rep. 42, CA; Copthorne
Hotel v Arup Associates (1997) 85 B.L.R. 22 at 58, per Staughton LJ.

307Use of the word “negligence” or a synonym is necessary. An indemnity against “all

claims or demands whatsoever” or “any liability, loss, claim or proceedings whatsoever”
was not an express reference to negligence—Smith v South Wales Switchgear [1978] 1
W.L.R. 165 at 169, 173, HL. Accordingly, Farr v The Admiralty [1953] 1 W.L.R. 965, cited in
the 4th edition of this book, might not be followed today.

308HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6, [11],
[61]–[63], [95] and [116]; Mir Steel UK Ltd v Christopher Morris [2012] EWCA Civ 1397,
[31]–[35]; Greenwich Millennium Village Ltd v Essex Services Group Plc (formerly Essex
Electrical Group Ltd) [2014] EWCA Civ 960 at [94].

309Canada Steamship Lines v R. [1952] A.C. 192 at 208, PC considering Alderslade v

Hendon Laundry [1945] K.B. 189, CA; Smith v South Wales Switchgear [1978] 1 W.L.R. 165,
HL; Lamport & Holt Lines v Coubro & Scrutton [1982] 2 Lloyd’s Rep. 42, CA; Dorset CC v
Southern Felt Roofing (1989) 48 B.L.R. 96, CA; E.E. Caledonia Ltd v Orbit Valve Co [1994] 1
W.L.R. 1515, CA; cf. Rutter v Palmer [1922] 2 K.B. 87 at 92, CA; Comyn Ching v Oriental
Tube (1979) 17 B.L.R. 47 at 88, CA; Industrie Chimiche v Nea Ninemia Shipping [1983] 1
Lloyd’s Rep. 310 at 312; Stent Foundations Ltd v M.J. Gleeson Group [2001] B.L.R. 134;
Casson v Ostley P.J. Ltd [2003] B.L.R. 147; Scottish & Newcastle Plc v G.D. Construction (St
Albans) Ltd [2003] B.L.R. 131; Tyco Fire v Rolls Royce Motor Cars [2008] EWCA Civ 286;
[2008] B.L.R. 85, CA.

310Robinson v P.E. Jones [2011] EWCA Civ 9; [2011] B.L.R. 206, CA at [85].

311AMF International v Magnet Bowling [1968] 1 W.L.R. 1028 following Walters v

Whessoe (1960) 6 B.L.R. 23, CA; City of Manchester v Fram Gerrard (1974) 6 B.L.R. 70 at
89; Smith v South Wales Switchgear [1978] 1 W.L.R. 165, HL; cf. Hollier v Rambler Motors
(AMC) Ltd [1972] 2 Q.B. 71, CA.

312See paras 3-116 and 3-121.

313Sonat Offshore v Amerada Hess Development (1987) 39 B.L.R. 1, CA.

314See para.3-044.

315B.H.P. Petroleum Ltd v British Steel Plc (2001) 74 Con. L.R. 63 at [46], [47]: limitation
clauses may attract a less stringent approach than exclusion clauses but the more
extreme the effects of a limitation clause the more stringent will be the approach.

316Ailsa Craig Fishing v Malvern Fishing [1983] 1 W.L.R. 964 at 970, HL; Bovis
Construction v Whatlings Construction (1995) 75 B.L.R. 1 at 10, HL; George Mitchell v
Finney Lock Seeds [1983] 2 A.C. 803 at 814, HL.

317George Mitchell v Finney Lock Seeds [1983] 2 A.C. 803 at 814, HL.

318William Hill Organisation v Sunley & Sons (1982) 22 B.L.R. 1 at 29, CA.

319Scottish Special Housing Association v Wimpey [1986] 1 W.L.R. 995, HL, approving
James Archdale & Co v Comservices [1954] 1 W.L.R. 459, CA; cf. Coleman Street Properties
v Denco Miller (1982) 31 B.L.R. 32; Mark Rowlands v Berni Inns [1986] Q.B. 211, CA;
Norwich CC v Harvey [1989] 1 W.L.R. 828, CA; Ossory Road v Balfour Beatty (1993) C.I.L.L.
882; National Trust v Haden Young (1994) 72 B.L.R. 1, CA; Kruger Tissue v Frank Gallyers
(1998) 57 Con. L.R. 1; Barking & Dagenham LBC v Stamford Asphalt Co Ltd (1997) 82
B.L.R. 25; British Telecommunications v James Thomson [1999] 1 W.L.R. 9, HL; C.R.S. v
Taylor Young [2002] B.L.R. 272. See now Cll.6.2 to 6.7 of the Standard Form of Building
Contract discussed in para.20-407 and following.

320See Arthur White (Contractors) v Tarmac Civil Engineering [1967] 1 W.L.R. 1508, HL;
Thompson v T. Lohan (Plant Hire) [1987] 1 W.L.R. 649, CA; cf. McConkey v Amec (1990) 27
Con. L.R. 88, CA; Baldwins Industrial Services v Cementation Construction (1992) 37 Con.
L.R. 20; cf Tyco Fire & Integrated Solutions (UK) Ltd v Rolls Royce Motor Cars [2008] EWCA
Civ 286; [2008] B.L.R. 285, CA.

321Gold v Patman & Fotheringham Ltd [1958] 1 W.L.R. 697 at 703, CA; Charon (Finchley) v
Singer Sewing Machine Co (1968) 112 S.J. 536.

322For frustration, see para.6-051.

323See cases cited above under “Loss caused by negligence” at para.3-092.

324e.g. Kellett v York Corp (1894) 10 T.L.R. 662; Scottish Special Housing Association v
Wimpey Construction [1986] 1 W.L.R. 995, HL; and see Cl.6.2 of the Standard Form of
Building Contract at para.20-407 and Cl.8.2 of the Infrastructure Conditions of Contract at
para.21-072.

325e.g. James Archdale & Co Ltd v Comservices Ltd [1954] 1 W.L.R. 459, CA; Cl.6.2 of the
Standard Form of Building Contract; Cll.8.2 and 17.2 of the Infrastructure Conditions of
Contract at paras 21-072 and 21-195; cf. Swiss Bank Corp v Brink’s-Mat [1986] 2 Lloyd’s
Rep. 79 at 95.

326Gold v Patman & Fotheringham Ltd [1958] 1 W.L.R. 697, CA.

327See, e.g. Cl.6 of the Standard Form of Building Contract discussed in para.20-407 and
Cl.17.3 of the Infrastructure Conditions of Contract at para.21-196. See also, Kirby v
Chessum & Sons Ltd (1914) 79 J.P. 81, CA, where despite a clause in the employer’s favour
the contractor was entitled to an indemnity from the employer where the adjoining
owner recovered damages from the contractor for trespass committed by it while it was
obeying the architect’s orders. For cases on the indemnity clause in the ICE conditions
(1955 edn), see C.J. Pearce & Co v Hereford Corp (1968) 66 L.G.R. 647; Richardson v
Buckinghamshire CC [1971] Lloyd’s Rep. 533.

328See Basildon DC v J.E. Lesser (Properties) (1984) 8 Con. L.R. 89 at 101.

329Dalton v Angus (1881) 6 App. Cas. 740 at 829, HL.

330See Hosking v De Havilland Ltd [1949] 1 All E.R. 540; Murfin v United Steel Companies
Ltd [1957] 1 W.L.R. 104, CA; Callaghan & Welton v Hewgate (1995) 75 B.L.R. 11.

331E.E. Caledonia Ltd v Orbit Valve Co [1994] 1 W.L.R. 1515, CA.

332Esso Petroleum v Hall Russell [1989] A.C. 643, HL applying Simpson & Co v Thomson
(1877) 3 App. Cas. 279, HL and Castellain v Preston (1883) 11 Q.B.D. 380, CA; Caledonia
North Sea Ltd v British Telecommunications Plc [2002] B.L.R. 139.

333Collinge v Hayward (1839) 9 Ad. & El. 633 and other cases cited in Halsbury’s Laws of
England, edited by Lord MacKay of Clashfern, 5th edn (London: LexisNexis, 2014), Vol.68,
para.967; County & District Properties v C. Jenner & Son Ltd [1976] 2 Lloyd’s Rep. 728.

334R.& H. Green & Silley Weir v British Railways Board (1980) 17 B.L.R. 94; Telfair Shipping
Corp v Inersea Carriers [1985] 1 W.L.R. 553; Mayor of London v Reeve & Co [2000] B.L.R.
211 at [25]–[35].

335Wayne Tank & Pump Co Ltd v Employers Liability Ltd [1974] 1 Q.B. 57, CA; cf. E.E.
Caledonia Ltd v Orbit Valve Co [1994] 1 W.L.R. 1515, CA.

336J.J. Lloyd Instruments v Northern Star Insurance [1987] 1 Lloyd’s Rep. 32, CA. See also,
“Concurrent causes” at para.8-025 and following.

337For a classification, see Kenyon, Son & Craven v Baxter Hoare & Co [1971] 1 W.L.R. 519.

338For the meaning of the exclusion of “consequential” loss or damage in a contract, see
Millar’s Machinery v David Way (1935) 40 Com. Cas. 204, CA; Wraight v P.H. & T.
(Holdings) (1968) 13 B.L.R. 26, CA; Croudace Construction v Cawoods Concrete Products
[1978] 2 Lloyd’s Rep. 55, CA; British Sugar v N.E.I. Power Projects (1997) 87 B.L.R. 42, CA;
Deepak Fertilisers v Davy McKee [1999] B.L.R. 41 at 56.

339Suisse Atlantique, etc. v N.V. Rotterdamsche Kolen Centrale [1967] A.C. 361, HL; Arthur
White (Contractors) Ltd v Tarmac Civil Engineering Ltd [1967] 1 W.L.R. 1508 at 1520, HL.

340See para.11-033.

341Adam v Richardson & Starling Ltd [1969] 1 W.L.R. 1645 at 1653, CA.

342[1980] A.C. 827, HL; cf. George Mitchell (Chesterhall) v Finney Lock Seeds [1983] 2 A.C.
803 at 812, HL.

343Photo Production v Securicor Transport [1980] A.C. 827 at 850.

344Photo Production v Securicor Transport [1980] A.C. 827 at 851; cf. Spriggs v Sotheby
Parke Bernet & Co [1986] 1 Lloyd’s Rep. 487 at 495, CA.

345Scruttons Ltd v Midland Silicones Ltd [1962] A.C. 446, HL; Owners of the Borvigilant v
Owners of the Romina G (2003) 2 Lloyd’s Rep. 520.

346New Zealand Shipping Co Ltd v Satterthwaite Ltd [1975] A.C. 154 (PC—majority 3:2);
Port Jackson Stevedoring v Salmond and Spraggon [1981] 1 W.L.R. 138, PC; The Pioneer
Container [1994] 2 A.C. 324; cf. The Mahkutai [1996] A.C. 650: exclusive jurisdiction clause
not within the rule.

347Southern Water Authority v Carey [1985] 2 All E.R. 1077: see para.7-040 and following.
348The contract must either expressly provide that the third party may enforce a term or
the term must purport to confer a benefit on the third party: Contracts (Rights of Third
Parties) Act 1999 s.1(1)(a) and (b). The latter does not apply if on a proper construction of
the contract it appears that the parties did not intend the term to be enforceable by the
third party: s.1(2). The third party must be expressly identified by name, as a member of
a class or as answering a particular description, but need not be in existence when the
contract was entered into: s.1(3).

349Contracts (Rights of Third Parties) Act 1999 s.1(6). In any proceedings brought against
it, a third party may only enforce a term if it could have done so had it been a party to
the contract: s.3(6). The Unfair Contract Terms Act 1977 s.2(2) does not apply where a
third party seeks to enforce (under the 1999 Act s.1) an action in negligence which
consists of the breach of an obligation arising from a term of a contract: the 1999 Act
s.7(2) and para.3-110.

350See Hedley Byrne v Heller & Partners [1964] A.C. 465, HL and Galliford Try
Infrastructure Ltd v Mott MacDonald Ltd [2008] EWHC 1570 (TCC) at [190(h)].

351See para.7-040 and following and Henderson v Merrett Syndicates [1995] 2 A.C. 145 at
196, HL; Pacific Associates v Baxter [1990] Q.B. 993, CA; MAN Nutzfahrzeuge AG v
Freightliner Ltd [2005] EWHC 2347 (Comm) at [406]–[411]; cf. Smith v Eric S. Bush [1990]
A.C. 831 at 858, HL where the disclaimer was held not to satisfy the test of
reasonableness under the Unfair Contract Terms Act 1977; Southern Water Authority v
Carey [1985] 2 All E.R. 1077 at 1085–1086; Norwich CC v Harvey [1989] 1 W.L.R. 828, CA;
Plant Construction v Clive Adam (1997) 86 B.L.R. 119.

352See Farstad Supply AS v Enviroco Ltd [2010] 2 Lloyd’s Rep. 387; [2010] UKSC 18, per
Lord Mance, at [54].

353AB v CD [2014] 3 All E.R. 667; [2014] EWCA Civ 229.

354See AB v CD [2014] 3 All E.R. 667; [2014] EWCA Civ 229, per Underhill LJ, at [30].

355Photo Production v Securicor Transport [1980] A.C. 827 at 848 per Lord Diplock.

356See Lord Reid in Suisse Atlantique v NV Rotterdamsche Kolen Centrale [1967] 1 A.C. 361
at 399: fundamental breach did not strike down an exemption clause.

357The detailed provisions of the 1999 Regulations are beyond the scope of this book,
which concentrates on the 1977 Act. For a general review of the provisions of those
regulations and their effect, see Chitty on Contracts, edited by H. Beale, 32nd edn
(London: Sweet & Maxwell, 2015), Vol.2, para.38-201 and following. For a commentary in
the construction context, see “Adjudication and the residential occupier” (2005) 21 Const.
L.J. 521 and P. Britton “The Architect, the Banker, his Wife and the Adjudicator:
Construction and the Changing Law of Unfair Terms” (2006) 22 Const. L.J. 23.

358See generally, J. Adams and R. Brownsword, “The Unfair Contract Terms Act: A Decade
of Discretion” (1988) 104 L.Q.R. 94.

359Evasion of the provisions of the Unfair Contract Terms Act 1977 by means of a
secondary contract is ineffective. See s.10 of the Act, which applies however to clauses
modifying prospective liability and not to compromises of retrospective claims—see
Tudor Grange Holdings v Citibank [1992] Ch. 53. See also s.13 of the Act.

360See “Negligence liability” at para.3-111.

361For cases where these provisions have been applied in a construction or commercial
context, see Pegler v Wang (No.1) [2000] B.L.R. 218; Moores v Yakeley Associates Ltd
(1999) 62 Con. L.R. 76, affirmed CA [2000] C.L.Y. 810; Watford Electronics v Sanderson CFL
Ltd [2001] B.L.R. 143, CA; Britvic Soft Drinks v Messer UK Ltd [2002] 1 Lloyd’s Rep. 20;
Bacardi-Martini Beverages v Thomas Hardy Packaging Ltd (2002) All E.R. (Comm) 379;
Shepherd Homes Ltd v Encia Remediation Ltd [2007] B.L.R. 135 (TCC); Balmoral Group Ltd
v Borealis [2006] EWHC 1900 (Comm); Kingspan Environmental Ltd v Borealis [2012]
EWHC 1147 (Comm), [569]–[587]. See also “Liability arising in contract” at para.3-116.

362Unfair Contract Terms Act 1977 ss.2–4 do not apply to various types of contract,
including contracts relating to the creation or transfer of an interest in land: Sch.1 to the
Act and see Unchained Growth v Granby Village [2000] 1 W.L.R. 739, CA.

363Unfair Contract Terms Act 1977 s.26.

364Unfair Contract Terms Act 1977 s.27.

365Unfair Contract Terms Act 1977 s.1(1).

366Unfair Contract Terms Act 1977 s.2(1).

367Unfair Contract Terms Act 1977 s.2(2); cf. Misrepresentation Act 1967 s.3 as amended,
discussed in para.6-019. Under the Contracts (Rights of Third Parties) Act 1999 s.7(2),
s.2(2) does not apply where the negligence consists of a breach of an obligation.

368For the purposes of Unfair Contract Terms Act 1977 s.2, the court or arbitrator is not,
it seems, specifically required to have regard to the matters specified in Sch.2 to the 1977
Act but in practice will do so: see Stewart Gill Ltd v Horatio Meyer & Co Ltd [1992] Q.B.
600, CA. There would be such a requirement if ss.6 or 7 of the 1977 Act also applied to
relevant transaction—see s.11(2) and cf. Rees Hough v Redland Reinforced Plastics (1984)
27 B.L.R. 136 at 151. See also s.11(4).

369Edmund Murray v B.S.P. International Foundations (1992) 33 Con. L.R. 1 at 14, CA.

370See also Unfair Contract Terms Act 1977 s.11(4).

371Unfair Contract Terms Act 1977 s.11(5).

372s.9. For repudiation, see para.6-086 and in particular “Acceptance of repudiation” at

para.6-103.

373George Mitchell (Chesterhall) v Finney Lock Seeds [1983] 2 A.C. 803 at 816, HL, where
reliance on the term was not fair and reasonable because of a practice of waiving it in
genuine cases thus demonstrating a recognition that it was unreasonable.

374Smith v Eric S. Bush [1990] A.C. 831, HL.

375See Lord Griffiths in Smith v Eric S. Bush [1990] A.C. 831 at 858 and 859, and see his
list of considerations at 858. For instance, an estate agent might reasonably exclude
liability for sale particulars: McCullagh v Lane Fox, The Times, 22 December 1995.

376Thompson v T. Lohan (Plant Hire) [1987] 1 W.L.R. 649, CA.

377Philips Products v Hyland [1987] 1 W.L.R. 659, CA.

378Thompson v T. Lohan (Plant Hire) [1987] 1 W.L.R. 649 at 656, CA.

379See the Unfair Contract Terms Act 1977 s.12. See also s.5 of the Act for “guarantees” of
consumer goods, and s.6 of the Act for other provisions where possession or ownership
of goods passes.

380Unfair Contracts Terms Act 1977 s.3. For the requirement of reasonableness, see
“Negligence liability” at para.3-111. For construction contract cases where reliance on
standard conditions of sale did not satisfy the requirement of reasonableness, see Rees
Hough v Redland Reinforced Plastics (1984) 27 B.L.R. 136; Edmund Murray v B.S.P.
International Foundations (1992) 33 Con. L.R. 1, CA; cf. Stag Line v Tyne Ship Repair Group
[1984] 2 Lloyd’s Rep. 211 at 222. For cases where the requirement of reasonableness was
satisfied, see Chester Grosvenor v Alfred McAlpine (1991) 56 B.L.R. 115; and West v Ian
Finlay and Associates (2014) 153 Con. L.R. 1; [2014] EWCA Civ 316.

381See the Unfair Contract Terms Act 1977 s.13.

382Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] Q.B. 600, CA; cf. Electricity Supply
Nominees v IAF Group Plc [1993] 1 W.L.R. 1059; Unchained Growth v Granby Village
[2000] 1 W.L.R. 739, CA. For a case where the right of set-off was held to be reasonable,
see Schenkers Ltd v Overland Shoes Ltd [1998] 1 Lloyd’s Rep. 498, CA and F.G. Wilson
(Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2012] EWHC 2477 (Comm), [93]–[109].

383R. & B. Customs Brokers v United Dominions Trust [1988] 1 W.L.R. 321, CA.

384Chester Grosvenor v Alfred McAlpine (1991) 56 B.L.R. 115.

385Chester Grosvenor v Alfred McAlpine (1991) 56 B.L.R. 115 at 133; Oval (717) Ltd v Aegon
Insurance Company (1997) 85 B.L.R. 97 at 136.

386See Tersons Ltd v Stevenage Dev. Corp. [1963] 2 Lloyd’s Rep. 333 at 368, CA; cf. R.W.
Green Ltd v Cade Bros Farms [1978] 1 Lloyd’s Rep. 602 at 607.

387Oval (717) Ltd v Aegon Insurance Company (1997) 85 B.L.R. 97 at 107, 136.

388Unfair Contract Terms Act 1977 s.4. For the requirement of reasonableness, see
“Negligence liability” at para.3-111.
18 JAN 2021 PAGE 83
Keating on Construction Contracts 10th Edition
Chapter 4: The Right to Payment and Varied Work

CHAPTER 4

THE RIGHT TO PAYMENT AND VARIED WORK

CONTENTS
A. The Right to Payment 4-001
1. Lump-sum Contracts 4-002
(a) Entire contracts 4-004
(b) Substantial performance 4-016
(c) Non-completion 4-020
2. Contracts other than for a Lump Sum 4-027
3. Quantum Meruit 4-031
B. Varied Work 4-043
1. What is Extra Work? 4-044
(a) Lump-sum contract with work widely defined 4-045
(b) Lump-sum contract with work exactly defined 4-048
(c) Measurement and value contracts 4-052
(d) Other common features 4-055
2. Agent’s Authority 4-061
3. Payment for Extra Work 4-065
4. Rate of Payment 4-084
5. Appropriation of Payments 4-088

A. THE RIGHT TO PAYMENT

4-001
The contractor’s right to payment depends upon the wording of the contract, subject
to limited statutory intervention.1 Within the limits of legality parties can make what
arrangements they please, but there are three broad heads under which the right can
arise, namely: (a) a lump-sum contract, (b) an express contract other than for a lump
sum, and (c) a claim for a reasonable sum frequently called a quantum meruit.

1. LUMP-SUM CONTRACTS
4-002
A lump-sum contract is a contract to complete a whole2 work for a lump sum, e.g. to
build a house for £60,000. If the house is completed in every detail required by the
contract3 the contractor is entitled to £60,000,4 and if extra work was carried out it may
 be able to recover further payment.5 If it does not complete the house, detailed clauses
may provide what amount, if any, it is to receive.6 But parties entering into a contract
do not always contemplate its breach, and in the absence of such clauses, and even to
some extent when they are present, a difficult problem may arise. This has two aspects.
The first is what payment, if any, the contractor can recover. The second is what claim,
if any, the employer has for damages. This chapter is concerned with the first aspect;
Ch.9 with the second.
4-003
If a contractor agrees to do a whole work according to a specification which consists
of 40 items for a lump sum of £5,000 and fails to carry out 20 of the items, it is obvious
that it is not entitled to recover the whole of the £5,000 and that the employer may
have an action against the contractor for damages. But is the contractor entitled to
recover any of the £5,000? Can the employer say to the contractor, “You agreed to
complete the whole and to be paid when the whole was completed?7 The work is
incomplete, therefore you are entitled to nothing”? And can the employer rely on the
same argument where only two out of the 40 items are omitted? These problems,
which have greatly exercised the courts,8 require discussion of entire contracts and
substantial performance.

(a) Entire contracts

4-004
An entire contract is one where entire performance by one party is a condition
precedent to the liability of the other party9 and where therefore the contractor’s right
to payment depends on entire performance on its part:

“An entire contract is an indivisible contract, one where the entire fulfilment of the
promise by either party is a condition precedent to the right to call for the fulfilment of
any part of the promise by the other.”10

4-005
Whether a contract is an entire one is a matter of construction.11 Clear words are
needed to bring an entire contract into existence.12 In modern construction of
contracts and contracts of retainer for professional services, it is relatively unusual for
the client to have no obligation to make any payment unless and until the contractor or
the professional firm has performed every single one of the obligations undertaken.13
The type of contract which may be entire is that where the contractor undertakes some
simple clear obligation such as to put some broken article or part of a house in working
order and completely fails to do so. In such a case it may be entitled to nothing
although it has expended much work and labour, for the main purpose of the contract
is that the article or part of the house shall work and there is no scope in the contract
for terms collateral to the main purpose.14 In Sumpter v Hedges15 the builder
contracted to construct buildings on the employer’s land for a lump sum. After
completing part of the work it abandoned the contract and claimed a right to be paid in
respect of the partially completed work on a quantum meruit basis. Its claim was
rejected in the absence of any inference of a fresh contract to pay for it.16 However, the
builder is entitled to recover payment for materials left on site and used by the
employer17 but not where they have been worked upon and the employer has no real
option of returning them.18

4-006
Lump-sum contracts. It is perhaps academically debatable whether or not a lump-
sum contract is by definition an entire contract.19 It is submitted that, subject to
provisions for instalments, (i) most lump-sum contracts are entire contracts in the
sense that:
 “…the builder can recover nothing on the contract if he stops work before the work is
completed in the ordinary sense—in other words abandons the contract…”20

but (ii) most lump-sum contracts are not entire contracts in the sense that they are
construed as excluding the principle of substantial performance.21

4-007
Instalments. A contract which gives the contractor an enforceable right to
instalments cannot to that extent be an entire contract because the contractor has the
right to call for fulfilment of part of the employer’s promise before it has entirely
completed its own promise.22 However, entire contract considerations may still apply
to incompletely earned instalments. If under an entire contract a lump sum was
payable by instalments under a contract then each instalment had to be fully earned
before payment fell due. Accordingly an instalment which fell due after termination
was not payable.23 The right to instalments may arise expressly or by implication. The
nature of the right under an express provision is a matter of construction of the words.
4-008
Under s.109 of the Housing Grants, Construction and Regeneration Act 1996 there is
a statutory entitlement to payment by instalments, stage payments or other periodic
payments in certain construction contracts.24 The section does not apply if it is
specified in the contract that the duration of the work is less than 45 days or if it is
agreed between the parties that the duration of the work is estimated to be less than 45
days.25 Where the section applies, if the parties have not agreed the amounts of the
payments and the intervals at which, or the circumstances in which, they become due,
paras 2–4 of Pt II of the Scheme for Construction Contracts provides for the amount of
the payments and the dates for payment.26 The amount of payment is calculated either
by reference to the provisions of the contract or, where there are no such provisions,
by reference to the “value of work”.27 That value is defined as:

“…the cost of any work performed in accordance with the contract together with an
amount equal to any overhead or profit included in the contract price.”28

The date for payment is the later of “the expiry of 7 days following the relevant period”
or the making of a claim by the payee.29
4-009
If the statutory scheme does not apply, the inference of an implied right is governed
by the usual rules,30 but it has been said that:

“…a man who contracts to do a long costly piece of work does not contract, unless he
expressly says so that he will do all the work, standing out of pocket until he is paid at
the end. He is entitled to say, ‘… there is an understanding all along that you are to give
me from time to time, at the reasonable times, payments for work done.”31

4-010
It was held that a shipwright who had undertaken to put a ship into thorough repair
—apparently no price was agreed—was entitled to demand payment for part of the
work they had carried out.32 It seems to be implied in the absence of clear words that a
person carrying out repairing work to another’s property is entitled to payment from
time to time before completion.33

4-011
Retention money. The contract may provide for progress payments to be made as the
work proceeds, but for retention money to be held until completion. In that case:

“…entire performance is usually a condition precedent to payment of the retention

 money but not, of course, to the progress payments. The contractor is entitled to
payment pro rata as the work proceeds, less a deduction for retention money. But he is
not entitled to the retention money until the work is entirely finished, without defects or
omissions.”34

4-012
This, however, again depends on the words of the contract, as for example whether
the expression “practical completion”, giving the contractor a right to release of part of
the retention money, means “apparent perfect completion” or “completion in the
ordinary sense” or something else.35 Where the right to retain retention money is
discretionary, a claim for the retention money may be made but may fail if the right is
exercised.36 In a subcontract which provided for retention but specified no time for its
release it was held that such retention would become payable following completion of
the works and ought to be paid within a reasonable time of such completion. That is
not necessarily the time when the final account process has been completed.37 Where
a condition precedent to release of the retention money will never be met and the
contract provides no mechanism for what is to be done in those circumstances,
retention may be released, subject to any set-off as a result of the contractor’s breach of
contract, given that the purpose of retention being to provide the employer with
security against the possibility that the contractor might fail to perform its
obligations.38

4-013
Value added tax. Whether a price for a construction contract is inclusive or
exclusive of VAT must depend on the terms of the particular contract.39 There is no
implied term that prices generally are exclusive of VAT.40 Where both parties to a
contract operate within the construction industry it has been held that there is a
custom that prices quoted are exclusive of VAT.41 In a contract between a builder and a
private individual, the prices were deemed to be inclusive of VAT.42

4-014
Recovery of money paid. If the employer pays money under a contract which the
contractor fails to complete, the employer can recover that money in an action for
money had and received if there has been a total failure of consideration arising out of
the contractual duties in respect of which the payment is due.43 If the employer has
received any of the benefit bargained for from performance by the contractor, there
has not been a total failure of consideration44 and any payment is not normally
recoverable even though it was made in advance of performance.45 In such
circumstances the employer can claim damages for breach of contract.46 In its claim it
has to give credit for the value of work performed by the contractor.47 But in one case,
where a contractor who had repudiated the contract had been paid on account more
than the value of the work it had carried out and exceptionally the cost of completion
was less than the contract price, the employer was held to be entitled to repayment of
the difference in addition to nominal damages.48 The legal basis was expressed to be
restitution of money for which there had been no consideration.49
4-015
The combined effect of the rules relating to recovery of money paid and damages
for breach of contract can operate somewhat capriciously to favour employer or
contractor according to whether the contract price was high or low, and the value of
the partial performance by the contractor in relation to the amount of money, if any,
paid to the contractor by way of instalments or advance upon the contract price.50

(b) Substantial performance

4-016
In the ordinary lump-sum contract51 the employer cannot refuse to pay the
contractor merely because there are a few defects and omissions. If there is substantial
completion it must pay the contract price52 subject to a deduction by way of set-off or
counterclaim for the defects.53 No deduction may be made from the price in respect of
omitted work unless the omission was a breach of contract by the contractor.54 Where
work has been carried out in substantial compliance with the contract, the contractor
is entitled to be paid the contract price less the cost of remedying any defects. The
principle to be applied is usually traced back to Lord Mansfield CJ, who said:

“Where mutual covenants go to the whole of the consideration on both sides, they are
mutual conditions, the one precedent to the other. But where they go only to a part,
where a breach may be paid for in damages, there the defendant has a remedy on his
covenant and shall not plead it as a condition precedent.”55

4-017
The principle is illustrated by the law relating to sale of goods, which makes a
distinction between conditions, breach of which gives a right to reject the goods and
warranties, breach of which gives no right to reject the goods but leaves the buyer to its
claim for damages.56
4-018
In applying the principle to construction contracts, although the question is one of
construction:

“…when a contract provides for a specific sum to be paid on completion of specified

work, the courts lean against a construction which would deprive the contractor of any
payment at all simply because there are some defects or omissions.”57

It is thought that words at least as strong as “complete in every particular” relating

to the payment provisions would be needed to exclude the principle.

4-019
Substantial completion. In determining whether there has been substantial or
practical completion one test, in the absence of a contractual definition, is whether the
work was “finished” or “done” in the ordinary sense, even though part of it is
defective.58 It is relevant to take into account both the nature of the defects and the
proportion between the cost of rectifying them and the contract price.59 Thus it is not
sufficient to consider the cost of rectification alone. In one case where the contract
price was £520 and the cost of remedying the defects was £200, the Court of Appeal
upheld a finding that there had been substantial completion.60 But in Bolton v
Mahadeva61 where the cost of remedying defects was £174 against a contract price of
£560 the Court of Appeal allowed an appeal against a finding that there had been
substantial completion. The contract was to provide central heating and the defects
were such that the system did not heat the house adequately and fumes were given out
so as to make living rooms uncomfortable. The work was ineffective for its primary
purpose.62

(c) Non-completion
4-020
This may occur by express or implied agreement, because the employer prevents
completion, because the contractor in breach of contract fails to complete or because
the contract is frustrated. If the contractor fails to complete in breach of contract, its
breach will normally amount to repudiation. Prevention by the employer may amount
to repudiation.63
4-021
When entire completion64 is a condition precedent to payment, the contractor
cannot recover anything either under the contract or on a quantum meruit if it has
failed to complete in every detail.65 For an ordinary lump-sum contract, the contractor
cannot recover anything either under the contract or on a quantum meruit unless it
shows substantial completion.66 These propositions are subject to exceptions discussed
below. The rule that a contractor who has not substantially completed cannot recover
payment has been said not to cause hardship because the contractor has only to
remedy the defects before seeking to resort to litigation to recover the lump sum.67 It
seems to follow that ordinarily there is an implied duty upon an employer to give a
willing contractor an opportunity to remedy defects, breach of which duty prevents the
employer from relying on the lack of substantial completion as a defence to the
contractor’s claim for payment of the lump sum. Such duty does not, it is submitted,
arise if the defects are so grave as to show that the contractor is unable to perform the
contract.68

4-022
Express agreement or implied promise to pay. If there is an express agreement, its
terms will govern the contractor’s right to payment. In obvious cases where agreement
is clearly reached, there will be little problem. In less obvious cases, the court may
nevertheless spell out an agreement by conduct,69 and an implied promise to pay a
reasonable sum for the work done can arise from acceptance or waiver.

4-023
Acceptance. If the contractor can prove a fresh contract to pay for the work done it
can recover on that contract.70 Such a contract may be inferred from the acceptance by
the employer of the work done with the full knowledge of the failure to complete,71 but
it is difficult to prove acceptance from mere occupation and use of the works.72 Thus in
Sumpter v Hedges,73 S contracted to build a house for H for £565. S did work to the
value of £333, received part payment and then abandoned the contract. H completed
the house, incorporating the work carried out by S. S sued for the difference between
the money it had received and the value of it work, but did not recover.74 It was said
that:

“…there are cases in which though the plaintiff has abandoned the performance of a
contract, it is possible for him to raise the inference of a new contract to pay but in order
that that may be done the circumstances must be such as to give an option to the
defendant to take or not to take the benefit of the work done … The mere fact that a
defendant is in possession of what he cannot help keeping or even has done work upon
it affords no ground for such an inference. He is not bound to keep unfinished a building
which in an incomplete state would be a nuisance on his land.”75

4-024
Waiver. “It is always open to a party to waive a condition which is inserted for his
benefit.”76 On the facts in Hoenig v Isaacs,77 the court held that, even if entire
performance was a condition precedent, the employer by entering into occupation and
using the furniture had waived the condition and could no longer rely on it. This is not
inconsistent with Sumpter v Hedges78 because the contract included a number of
chattels which the employer could have avoided using, but did in fact use and
therefore put himself:

“…in the same position as a buyer of goods who by accepting them elects to treat a
breach of condition as a breach of warranty.”79

4-025
 Unpaid instalments. The cancellation or rescission of a contract (other than for sale
of land or goods) in consequence of repudiation does not affect accrued rights to the
payment of instalments of the contract price, unless the contract so provides.80
Accordingly, unless there is some provision to the contrary not amounting to a
penalty,81 or unless there has been a total failure of consideration,82 the employer
cannot, subject to set-off, refuse to pay unpaid instalments which have become payable
to the contractor under the express or implied83 terms of the contract.84 Following
contractual termination, the question of whether unpaid instalments are due is
dependent on the terms of the contract.85 For an entire contract a party who
repudiates the contract cannot recover an instalment which was not payable at the
date of termination.86 A party who exercises a contractual right to terminate and
recover a first payment instalment is not thereby prevented from treating the contract
as repudiated so as to recover damages at common law.87

4-026
Impossibility or frustration. If the failure to complete is due to impossibility of
performance or frustration and the employer has obtained a valuable benefit from the
work done, the contractor can recover from the employer such sum as the court
considers just.88

2. CONTRACTS OTHER THAN FOR A LUMP SUM

4-027
Generally. The manner of payment can be arranged in a variety of ways and it is
impossible to attempt any exhaustive classification. A contract to do a whole work in
consideration of the payment of different sums for different parts of the work is prima
facie subject to the same rules about completion as an ordinary lump-sum contract.89 A
contract to do a whole work with a provision for payment of each completed part of
the whole may be a divisible contract in the sense that if the whole is not completed
through the default of the contractor, it may be entitled to payment under the contract
for those parts it has completed subject to the employer’s right to counterclaim for non-
completion of the whole.90

4-028
Measurement and value contracts. A contract where the amount of work when
completed is to be measured and valued according to a schedule,91 or formula, or at
cost plus a fixed fee92 or percentage of the cost, or at a reasonable price, is usually
described as a measurement and value contract and is contrasted with a lump-sum
contract.93 A schedule of rates contract may be used where the nature of the work is
certain but the extent of the work is not.94 If the agreement is to do a whole work to be
measured and valued and paid for on completion, entire completion may be a
condition precedent to payment.95 However, it is submitted that normally the rule of
substantial completion will apply, so that if the work is substantially performed, the
contractor will be entitled to have it measured and valued and to be paid at the
contract rate for the work done, subject to the employer’s counterclaim for damages
for defects and omissions.96 It seems that in a repairing or jobbing contract the
contractor is prima facie entitled to be paid for the work it has carried out,97 though it
may if it chooses the contract not to be paid until completion.98

4-029
Cost plus percentage contracts. Such contracts sometimes contain an elaborate
description of the method of calculating the cost. Where they do not and there is a
simple agreement to pay the cost of labour and materials, plus an additional
percentage, “cost” means, it is submitted, the actual cost honestly and properly
 percentage, “cost” means, it is submitted, the actual cost honestly and properly
expended in carrying out the works. The contractor is not, it is submitted, disentitled
from such cost merely because it exceeds what was anticipated. But it is thought that
there would normally be an implied term that the contractor would carry out the
works with reasonable economy so that expenditure in excess of what was reasonable
would be irrecoverable. It would be a question of fact and degree in each case. A
formally drafted cost plus contract will usually have a clause intended to protect an
employer against waste or extravagance on the part of the contractor.99

4-030
Cash discount. The construction industry is familiar with two types of discount,
namely: discounts for prompt payment and trade discounts which are granted to
specific purchasers by virtue of their commercial standing with the seller. The first is
contingent on prompt payment: the second is allowable in any event. The expression
“cash discount” may refer to one or the other depending on the proper construction of
the contract. It is submitted that the expression “cash discount” used in a neutral
context will generally refer to a discount for prompt payment.100 The phrase “cash
discount” in a sub-contract drafted by omitting the phrase “if payment is made within
14 days” from a standard form was not to be construed as a prompt-payment
discount.101

3. QUANTUM MERUIT
4-031
The expression quantum meruit means “the amount he deserves” or “what the job
is worth”, and in most instances denotes a claim for a reasonable sum. It is used to
refer to various circumstances where the amount of a money payment is not
determined by a contract. In some instances, the basis for the payment also is less than
contractual.

“A quantum meruit claim (like the old actions for money had and received and for
money paid) straddles the boundaries of what we now call contract and restitution; so
the mere framing of a claim as a quantum meruit claim, or a claim for a reasonable sum,
does not assist in classifying the claim as contractual or quasi-contractual.”102

However, more recently the term quantum meruit has been defined as “a
restitutionary claim which can be made when there is no contract” rather than an
agreement to pay a reasonable sum.103 A claim on a quantum meruit cannot arise if
there is an existing contract between the parties to pay an agreed sum.104
4-032
The Supreme Court recently stated that there are two types of quantum meruit,105
one where there is no valid and subsisting contract between the parties and the other
where there is no contract between the parties. Where there is no contract, the correct
approach to the amount to be paid by way of a quantum meruit is to ask whether the
defendant has been unjustly enriched and, if so, to what extent. In such a case four
questions have to be considered.:

(1) Has the defendant been enriched?

(2) Was the enrichment at the claimant’s expense?
(3) Was the enrichment unjust?
(4) Are there any defences available to the defendant?106

If there is a contract between the parties but the amount of payment is not spelled out,
the law will normally imply a term into the agreement that the remuneration will be
reasonable in all the circumstances, sometimes referred to as a claim for a quantum
meruit. In such a case, while it is relevant to have regard to the benefit to the
defendant, the focus is not on the benefit to the defendant as where there is no such
 contract.107
4-033
There may be an entitlement to a reasonable sum if there is an express agreement.
Otherwise a quantum meruit will arise in the context of construction contracts:

(a) no price is fixed: If the contractor does work under a contract express or
implied and no price is fixed by the contract, it is entitled to be paid a
reasonable sum for its labour and the materials supplied pursuant to an
implied term.108 If such a contract is for a whole work, completion may be
made a condition precedent to payment, subject to any statutory entitlement
to payments.109 In any event, at common law it seems that in the absence of
clear words the contractor is entitled from time to time to demand payment
on account of the value of the work it has done110;
(b) a quasi-contract111: This may occur where, for instance, there are failed
negotiations. If work is carried out while negotiations as to the terms of the
contract are proceeding but agreement is never reached upon essential
terms, the contractor is entitled to be paid a reasonable sum for the work
carried out.112 Where both parties confidently expect a contract to
eventuate but to expedite performance under that anticipated contract, one
requests the other to commence the contract work, and the other complies
with that request, if, contrary to their expectation, no contract is entered
into, then:

“…the performance of the work is not referable to any contract of which the
terms can be ascertained, and the law simply imposes an obligation on the
party who made the request to pay a reasonable sum for such work as has
been done pursuant to that request, such an obligation sounding in quasi-
contract or, as we now say, in restitution.”113

4-034
Whilst an obligation to pay a reasonable sum has been held to apply in a number of
cases, it does not apply to all cases of failed contracts.114 In Regalian Properties v
London Docklands Development Corporation,115 the following matters were held to
show that there was no such obligation: that the negotiations were entered into on
express terms that each party was free to withdraw from negotiations at any time and
were “subject to contract” and that the costs which were sought to be recovered had
been incurred, not by way of accelerated performance of an anticipated contract at the
other party’s request, but for the purpose of putting that party in a position to obtain
and perform the contract and the other party had received no benefit. Whilst the
failure to conclude a contract in that case had been due to inability to agree the price
rather than any unilateral decision of the other party to abandon the project, that did
not form a proper basis of distinction in English law.116 In Stephen Donald Architects
Ltd v Christopher King117 a claim in quantum meruit for architect’s fees was rejected
on the grounds that the architect had taken on a risk of the project not proving
profitable and it was not unjust to visit upon it the consequences of that risk. The
venture had been a joint effort in which the client made the property and finances
available and the architect provided design services and assistance in raising finances
such that both could share in the profits of the redeveloped property. The scheme did
not proceed when finances were insufficient to resource the design prepared by the
architect. There is no presumption of entitlement to payment arising from a mere
request for a supply of materials.118 In D&K Drost Consult GmbH v Foremost Leisure
(Holdings) Ltd119 a developer was ordered to make a payment to architects and a
project managers company in respect of preliminary work on a development project,
in anticipation that a binding contract would be reached. Under an agreement made
when their relationship broke down, they were entitled to be rewarded for work which
 they had already undertaken.

4-035
Work outside a contract. Where there is a contract for specified work extra work of
the kind contemplated by the contract will be paid for as provided by the contract.
Payment will be at contract rates or, in the absence of such rates, a reasonable sum.120
In the absence of either any contractual provision for the execution of work outside its
original scope or any separate agreement, the right to payment of a reasonable sum is
purely restitutionary.121 Where a contractor agreed to carry out varied work but on its
true construction the varied contract only gave the employer authority to order work
to the value of £5,000,000, it was held that the work that had been executed by the
contractor included more than was covered, the cost of the uncovenanted addition had
to be paid for by a quantum meruit122 and the contractor recovered more than the
total fixed profit.123 This does not support claims, which are sometimes advanced, that
whole contract works should be revalued on a quantum meruit on the ground that the
conditions under which the works were carried out were fundamentally different from
those contemplated at the time of the contract.124 Invalid variations under a sub-
contract are capable of being treated as being outside the sub-contract and can, in
principle, give rise to recovery of a quantum meruit.125 Restitutionary entitlement will
depend both on the circumstances giving rise to the request for additional work and
also the circumstances of the execution of additional work.

4-036
Work under a void or unenforceable contract. The entitlement is based on
restitutionary principles. If a contractor carries out work or renders services under a
contract subsequently found to be void or unenforceable, they may be entitled to a
quantum meruit for the work or services.126 This principle does not apply to an illegal
contract.127

4-037
Assessment of a reasonable sum. The courts have laid down no rules limiting the
way in which a reasonable sum is to be assessed. Different considerations can arise
depending on whether the claim is for a quantum meruit in the absence of a contract
or a reasonable price payable within a contractual framework.128 Where a quantum
meruit is recoverable for work done outside an existing contract, the work cannot
generally be regarded as though it had been performed to any extent under the
contract. A restitutionary award made on the basis of unjust enrichment should be
calculated as the value of the benefit received by the defendant at the expense of the
claimant. The enrichment should be valued at the time it was received and, where the
benefit was in the form of services, the starting point was normally the objective
market value of the services, tested by the price which a reasonable person in the
defendant’s position would have had to pay for them and taking into account
conditions which increased or decreased their objective value to any reasonable
person in that position.129 The principle of subjective revaluation whereby the amount
paid to the claimant might be increased on the basis that the specific defendant had
valued the services at a higher than market price was not to be recognised, save
perhaps in exceptional circumstances.
4-038
In relation to construction contracts, the starting point should be that the contractor
should be paid at a fair commercial rate for the work done130 but taking account of any
applicable conditions as described above. Where a quantum meruit is recoverable for
work done pursuant to a void contract, it is wrong in principle to apply the provisions
of the void contract to the assessment of the quantum meruit.131 Where a quantum
meruit is recoverable for work done under an unenforceable contract, an allowance
might be made for the extent to which unsolicited work exceeded the enhanced value
 of the property and for any detriment sustained by the conduct which led to the
contract being unenforceable.132
4-039
Where there was a contractual quantum meruit under a letter of intent, the
appropriate measure of the sum due was reasonable remuneration for executing the
work not the value of the work to the other party.133 Although the parties had agreed a
price there was no subsequent contract because other essential terms had not been
agreed. In those circumstances, the price was relevant evidence but was not a starting
point to be adjusted for variations. Its most likely use would be as a check to decide
whether the total value arrived at by other means was so surprising, in all the
circumstances, as to cast doubt on the route by which it had been reached. However, it
is unclear whether, in determining a reasonable sum, it is permissible or relevant to
consider the claimant’s conduct in performing the work and whether by reason of such
conduct the defendant has suffered any unnecessary additional costs.134
4-040
The site conditions and other circumstances in which the work was carried out,
including the conduct of the other party, are relevant to the assessment of reasonable
remuneration.135 The conduct of the party carrying out the work may be relevant.
Additions may be appropriate for prolongation of the work and deductions may be
made for defective work or design or for inefficient working.136 Useful evidence in any
particular case may include abortive negotiations as to price,137 prices in a related
contract,138 a calculation based on the net cost of labour and materials used plus a sum
for overheads and profit,139 measurements of work done and materials supplied, and
the opinion of quantity surveyors, experienced builders or other experts as to a
reasonable sum.140 Although expert evidence is often desirable there is no rule of law
that it must be given and in its absence the court normally does the best it can on the
materials before it to assess a reasonable sum.141 Particularly in the case of a contract
for the provision of professional services where an implied reasonable fee is payable, a
combination of reliable evidence as to the time spent and a reasonable hourly rate for
that work would enable the determination of a reasonable fee.142 Where, in a
contractual context, work is done in addition to that provided for within the fixed
price, the fixed price may be powerful evidence which assists in the identification of a
reasonable fee for the additional work, at least in the case of the provision of
professional services.143

4-041
Interest. In a claim for quantum meruit, statutory interest is a matter for the exercise
of the court’s discretion and may not run from the generally applicable date of the
accrual of the cause of action.144 In a commercial setting, it would be proper to take
account of the manner and the time at which persons acting honestly and reasonably
would pay.145 Therefore, interest may run from the date when the sum due was
ascertainable which was when the contractor had furnished its final account and the
Employer had been given a reasonable opportunity to consider it.146

4-042
Duties under a quantum meruit. A company working on the basis of an agreement
that it be paid reasonable remuneration cannot wholly ignore the desirability of co-
operation with others at work on a complex construction site. Where such an
agreement applies there exists at least a duty not to unreasonably interfere with the
carrying out of other works and an obligation to be aware of other trades’ progress
and, so far as consistent with the company’s own legitimate commercial interests, to co-
operate in efficient working practices.147

B. VARIED WORK
4-043
Introduction. A contractor frequently carries out, or is asked to carry out, work for
which it considers it is entitled to payment in excess of the original contract sum. To
recover such payment it must be shown that:

(1) it is extra work not included in the work for which the contract sum is
payable;
(2) there is an express or implied promise to pay for the work;
(3) any agent who ordered the work was authorised to do so; and
(4) any condition precedent to payment imposed by the contract has been
fulfilled.

If these requirements cannot be established, a contractor may not be able to recover

payment. These requirements are dealt with below.

1. WHAT IS EXTRA WORK?

4-044
Meaning. There is no generally accepted definition of extra work, but in a lump-sum
contract it may be defined as work not expressly or impliedly included in the work for
which the lump sum is payable.148 If work is included in the original contract sum the
contractor must carry it out and cannot recover extra payment for it, although it may
not have thought at the time of entering into the contract that it would be necessary for
the completion of the contract.149 The question is one of construction in each case, but
lump-sum contracts may be broadly classified into those in which the contractor’s
obligation is defined in wide terms, such as “to build a house”, and those in which it is
defined in exact terms, such as “to execute so many cubic metres of excavation”.

(a) Lump-sum contract with work widely defined

4-045
Indispensably necessary works. Where the contractor must complete a whole
work,150 such as a house, or a railway from A to B, for a lump sum, the courts readily
infer a promise on its part to provide everything indispensably necessary to complete
the whole work.151 Such necessary works are not extras, for they are impliedly
included in the lump sum.152 Examples of the applications of this principle are as
follows:

(i) work not expressly specified: where there was a contract to build a house “to
be completed and dry and fit” for occupation by a particular date. The
contractor undertook to provide: “the whole of the materials mentioned or
otherwise in the foregoing particulars necessary for the completion of the
work”, and “to perform all the works of every kind mentioned and
contained in the foregoing specification”. Flooring was omitted from the
specification, and the contractor was not entitled to payment for the cost of
the floorboards, which, although omitted from the specification, “it was
clearly to be inferred from the language of the specification that the plaintiff
was to do the flooring”153;
(ii) work not taken out on the quantities supplied to the contractor for
tender,154 or wrongly stated on the drawings. Where the contractor had
undertaken to make a railway line “from terminus to terminus complete”155
and in carrying out the work it was found that the engineer’s original plan
was quite inadequate and had to be replaced by another, so that the
contractor, upon the engineer’s orders, carried out nearly two million cubic
yards of excavation in excess of the quantities of work set out in a schedule
 to the contract, and thus nearly doubled the excavation originally
contemplated. It was held that these works were not “in any sense of the
words extra works”.156 In standard forms, express contractual provisions
usually deal with errors of description contained within the drawings or
bills;
(iii) unexpected labour caused by difficulties of the terrain,157 by the proposed
method of carrying out the works158 or by greater than anticipated scope of
the work159;
(iv) work caused by the lawful and not unreasonable exercise by the employer of
statutory powers existing at the time of entering into the contract160;
(v) work carried out in a manner directed by the engineer, where the contract
set out no specific method of carrying out particular operations necessary to
complete the works but provided that the works should be carried out under
the engineer’s directions and in the best manner to its satisfaction.161

4-046
No implied warranties by employer. A contractor who has been put to unexpected
expense because of inaccurate quantities or drawings or impracticable plans cannot
usually recover the expense by bringing an action for breach of an implied warranty
that the plans, drawings or bills of quantities are accurate or practicable. Such
warranties are not implied merely from the fact that these documents are submitted to
the contractor for tender,162 nor even from their attachment to the contract as a
schedule163 but the express words of the invitation to tender may show an intention to
warrant the accuracy of statements which it contains.164 Where tender documents
contain a notice that the tenderer must satisfy itself of the correctness of statements in
the documents, “the notice may, at the least, have validity as an element in determining
whether there was a misrepresentation upon which [the tenderer] relied”.165
4-047
Two Australian cases have considered whether an employer owed a duty of care to
a tendering contractor in relation to information supplied. In one case,166 the possible
existence of a duty of care was not ruled out at an interlocutory stage before all the
relevant facts had been established, it being held that certain contractual provisions
did not by themselves necessarily amount to a disclaimer sufficient to negative the
duty. In the other,167 the employer was held not to have assumed responsibility for the
completeness or accuracy of tender information about special site conditions. Both
cases addressed the question with reference to Hedley Byrne v Heller & Partners.168

(b) Lump-sum contract with work exactly defined

4-048
Bills of quantities contract. The term “bills of quantities contract” is used here to
describe a contract where the bills of quantities form part of the contract and describe
the work to be carried out for which a lump sum is payable.169 The quantities “are
introduced into the contract as part of the description of the contract work” and “the
plans do not go to quantity”.170 The contractor may be, and usually is, bound by the
terms of the contract to carry out work in excess of that stated in the bills of quantities
if it is necessary to complete the contract, but in a bills of quantities contract such
excess work is extra work.171 This type of contract has been said to be “obviously
unsafe” for an employer because it can hardly ever be known beforehand what exact
quantities of work may be necessary to complete172; conversely it may save the
contractor much trouble and loss.173
4-049
It is sometimes a difficult question of construction to determine whether the
 quantities form part of the contract. The mere fact that quantities are submitted to the
contractor for the purposes of tender does not make them form part.174 They have
been held not to form part where there was an express power reserved under the
contract to the architect to rectify any mistakes in the quantities upon which the
contractor’s tender was based,175 where there was a schedule to a contract to do work
according to a specification,176 and where there was a contract to erect certain
buildings in accordance with plans and specification and the specification consisted of
a bill of quantities with rather fuller description than usual.177 But quantities were
held to form part of the contract where the contract was to do work “according to the
plans and the quantities there given by the architect”.178 Where there was a contract to
erect and complete, fit for occupation, a block of flats for a lump sum “according to the
plans, invitation to tender, specification and bills of quantities signed by the
contractors”, it was held, though not “by any means without doubt”,179 that the
quantities signed by the contractors formed part of the contract. The contractors were
therefore entitled to recover for all work done by them in completing the contract
which had been omitted from or understated in the bills of quantities. The judge
expressly reserved180 the case of “things that everybody must understand are to be
done, but which happen to be omitted from the quantities”, and thought that it would
be covered by Williams v Fitzmaurice.181

4-050
Other exactly defined contracts. A bills of quantities contract is the most exact way
of defining the amount of work for which the unadjusted lump sum is payable. Where
bills of quantities do not so define the amount of work, that information obviously has
to be derived from elsewhere. It may come from the drawings read with any
specification or other description of the work. Such other forms of contract may define
the work with considerable precision, especially if the contract incorporates detailed
and fully dimensioned drawings. It was said of the contract in Williams v
Fitzmaurice182 that:

“…the contract was that the house should be complete and fit for occupation by August 1,
1858, and not that the works therein before mentioned should be completed by that
day.”183

It follows that the contractor could conversely, by clear words, limit its obligation to
works expressly described in, for example, a specification. Work not so described
would be extra work.184

4-051
Contractor’s implied obligations. Even in an exactly defined contract there is
usually room for the implication of some obligations by the contractor so that its
performance is not extra work. But the greater the detail used in the bills of quantities
or other contract documents to describe the obligation for which the lump sum is
payable the less scope there is for such implication.185

(c) Measurement and value contracts

4-052
In a measurement and value contract186 it is usually immaterial whether any
particular item of work that a contractor has to do is in the contract or not, because the
contractor is entitled to be paid for it at the contract rate if it is applicable, or at a
reasonable price if it is not.187 But where such a contract provides for the payment of a
specified sum of money for a specified item of work, it is a question of construction to
determine what work is impliedly included in that item of work and is not therefore
extra work. It is submitted that the principles of construction applicable to lump-sum
 contracts apply to each item.188 And it may be important to determine whether work is
of the type contemplated by the contract and therefore governed by the conditions of
the contract including price, or is work outside the contract189 and not therefore
subject to the contract conditions or price.

4-053
Comparison with bills of quantities contract. A bills of quantities contract is not a
measurement and value contract in the sense in which the term is used in this book.
Where the contract was for a “lump sum”, the bills of quantities forming part of the
contract, and “all variations to be … added to, or deducted from the lump sum”, it was
held that the final account must be taken by adjusting the lump sum for variations, and
not by re-measuring the works as carried out and applying the bill rates to the
quantities so found.190 But bills of quantities can form part of a measurement and
value contract where they do not define the work for which a lump sum is payable but
constitute a schedule defining units of measurement and rates for pricing those
units.191

4-054
Pricing errors. The difference between a contract to do the work described in the
bills of quantities for a lump sum and a measurement and value contract is important
when considering pricing errors.192 Assume two contracts, one for a lump sum, the
other one measurement and value. Bills of quantities are in each case a contract
document. Say the contractor in pricing the bills of quantities has correctly stated its
price per unit of measurement but has incorrectly extended the price and this error
has been incorporated into the lump sum in the one contract and into its estimated
total of prices in the other. Neither party noticed the error before the contract was
made and there is no ground for rectification.193 If the contract is for a lump sum there
is, it is submitted, no implied right to have the contract price adjusted to take account
of the error.194 If the contract is one of measure and value where the contractor is to
be paid £x per unit of measurement, the error will disappear on valuation of the
measured work at completion.

(d) Other common features

4-055
Omissions. The contract usually gives the employer or the architect power to order
part of the work to be omitted with a consequent adjustment of the contract price. On
the construction of the contract it may not extend to the ordering of variations195; it
may not give the employer the right to omit part of the work from the contract with the
object of giving it or similar work in substitution to another contractor196 and it may
not permit the employer to remove all the work.197 Absent an express power to order
part of the work to be omitted with a consequent adjustment of the contract price,
there is no power to vary a fixed price contract by reducing the work to be done. Even
if there were an implied power which permitted an omission, it does not follow that
the fixed price would be altered in consequence.198
4-056
The financial effect of an omission permitted by the contract depends on the proper
construction of the provision which enables the works to be omitted. In valuing an
omission it is necessary to consider the contract as a whole and, in particular, the
incidence of pricing risk. Potentially relevant material which should be considered
includes the original build up to the price. The hypothetical cost to the contractor of
carrying out the omitted work at the time it would otherwise have been required
would not be relevant at least where the basis of valuation is intended to reflect the
level of pricing in the contract. The object is to achieve an approximation to the
contribution to the contract price which was the subject of the omission.199 Absent an
 express power to order part of the work to be omitted with a consequent adjustment of
the contract price, there is no power to vary a fixed price contract by reducing the
work to be done. Even if there were an implied power which permitted an omission, it
does not follow that the fixed price would be altered in consequence.200 Absent an
express power to order part of the work to be omitted with a consequent adjustment of
the contract price, there is no power to vary a fixed price contract by reducing the
work to be done. Even if there were an implied power which permitted an omission, it
does not follow that the fixed price would be altered in consequence.201

4-057
Contractor’s option. Removing or limiting an option provided to the contractor by
the contract may constitute a variation.202 Thus where an engineering contract entitled
the contractor to crush and use hard material arising from excavation and demolition
works or to import suitable material for fill, an instruction that all hard arisings were
to be crushed was held to be a variation.203

4-058
PC or prime cost sums. The contractor sometimes undertakes to do work or provide
materials at the “PC” or at the “prime cost sum” of £x. These terms are usually defined
in the contract. In the earlier versions of the Standard Form of Building Contract, prime
cost work or materials could only be carried out or supplied by nominated sub-
contractors or suppliers204 and the cost resulting from the nomination was substituted
in the final account for the prime cost sum in the contract. Current versions of the
Standard Form of Building Contract include provisions for prime costs pursuant to
which the contractor estimates the cost of the works but is ultimately paid its
reasonable costs and a fee.205 If there is no contractual definition and where there is
no question of nomination, the ordinary meaning206 of prime cost is, it is submitted, an
estimate207 of net cost, and the intention is therefore that the contractor should only
charge the employer the actual cost to itself. If this cost is less or more than that stated
in the contract the contract sum is adjusted accordingly, subject always to the
principles relating to extra work set out in this chapter.

4-059
Provisional sums. The contract sum may include a provisional sum or provisional
amount to cover some expenditure the amount of which is not known at the time of
entering into the contract. Thus it may be for extras, or for some item which cannot be
exactly estimated, or for a sub-contract which has to be placed after the main contract
is entered into.208 The term is usually defined, but the general rule is that the original
contract sum is adjusted according to whether the actual expenditure ordered is
greater or less than the provisional sum. It is usual to provide for an adjustment of the
contractor’s profit in accordance with the alteration of the contract sum.

4-060
Effect of building regulations. Compliance with building regulations as the works
are carried out may require unanticipated work to be done.209 Subject to relevant
express terms210 there is, it is submitted, normally an implied term by the contractor
not to complete the work in a manner which contravenes relevant building regulations
or other statutory requirements as to methods of construction. Whether the contractor
recovers extra payment for unanticipated work required to comply with the building
regulations depends, it is submitted, upon the application of the principles set out
earlier in this chapter and in particular on: (a) whether the work for which the
contract sum is payable is defined in terms wide enough to include work unspecified
but necessary to comply with building regulations,211 and (b) where the contract work
was not defined in such wide terms, whether the contractor sought the employer’s
instructions before carrying out the unanticipated work necessary to comply with the
 building regulations or whether the contractor can otherwise show a promise to
pay.212

2. AGENT’S AUTHORITY
4-061
An architect or other agent of the employer in the position of the architect has no
implied power to vary the terms of the contract,213 or to vary the contract works such
as by ordering extras,214 or to order as extras works impliedly included in the work for
which the contract sum is payable.215 If therefore the contractor has carried out extra
work under the authority of the architect it must show: (a) that the architect had an
authority to order extra work, and (b) that the particular work for which it is claiming
was properly ordered within the scope of that authority.216 If there is a written
contract the question is one of construction, otherwise it is a question of fact.217
4-062
A contract to do a whole work usually gives the architect an express power to order
extras. Such a power will not, in the absence of express words, be construed as
extending beyond the scope of the original whole work.218 This is because extending
the scope of the original work would amount to varying the terms of the contract itself.
It will be an issue of construction of the relevant contract whether, on the facts, any
given instruction for extras is outside the express power. It is possible that, if there is a
provisional sum for extras, its amount might place some limit on the extent of the
architect’s authority.219 An architect is not ordinarily obliged to exercise a power to
order a variation simply because it is fair to do so but a failure to instruct a variation
which is necessary for the performance of a contract may, depending on the express
terms, give rise to a breach of an implied term.220
4-063
An architect who gives instructions to the contractor which are not empowered by
any provision in the contract does not:

“…saddle the employer with liability. The architect is not the employer’s agent in that
respect. He has no authority to vary the contract. Confronted with such acts, the parties
may either acquiesce, in which case the contract may be pro tanto varied and the acts
cannot be complained of, or a party may protest and ignore them. But he cannot saddle
the employer with responsibility for them.”221

4-064
If work outside the contract is ordered to the knowledge of the employer then,
subject to ordinary principles of agency and offer and acceptance, the contractor will
normally be able to recover a reasonable price for such work on a fresh contract.222
The employer may also act so as to represent that the architect has apparent authority
to order varied work. An architect who orders extras without or in excess of their
authority may be liable to the contractor for breach of warranty of authority.
Architects who order work without disclosing that they are acting as agents for an
employer may be held personally liable. The fact that such a person is acting in a
professional capacity does not necessarily exclude their personal liability.223

3. PAYMENT FOR EXTRA WORK

4-065
The mere fact that a contractor has carried out extra work does not of itself entitle it
to demand extra payment. There must be an express or implied contract to pay.224 The
work may either be properly ordered under a provision in the original contract
entitling the contractor to payment,225 or there might be a fresh contract to pay for the
 work.226

4-066
Work done without request. If the contractor has undertaken to do specified work
with certain materials for an agreed price, and without request uses better materials or
does more work, this does not entitle it to demand extra payment227; and if the
materials or work are not in accordance with the contract the contractor may not be
able to recover the contract price because it has not completed the contract.228 Mere
permission by the employer to do work different from that contracted for must be
distinguished from a request by the employer. Thus where contractors had undertaken
as part of a lump-sum contract to make certain girders and found that it was
impracticable or very expensive to make them in the specified way and applied for,
and were granted, permission to make them thicker, Lord Blackburn said: “I think
there is nothing in that to imply that there was to be a payment for that additional
thickness.”229

4-067
Emergency. It is possible that a contractor who in an emergency, when it is
impossible to obtain instructions from the employer, expends money in preserving the
employer’s property can recover payment.230

4-068
No knowledge of increased expense. If the contractor has undertaken to carry out
certain work at an agreed price and the employer consents to the execution of different
work, the employer is not liable for any increased cost unless it knows, or must be
taken to know, that the different work will cost more.231

4-069
Absence of consideration. The contractor may refuse to carry out certain work
unless the employer promises to pay for it as extra work.232 If it appears that the work
is not in fact extra work because it is included in the work for which the original
contract sum is payable, the employer’s promise may not be binding for lack of
consideration.233 Where a contract is silent on some particular, it may be possible to
argue that better definition in that particular is a matter of mutual benefit and that
acceptance of the definition by each party is supported by consideration moving from
the other.234
4-070
An agreement to pay an additional sum for no extra work may not always fail for
lack of consideration. Where a sub-contract carpenter was in financial difficulties and
the agreed price for its work was too low, it was held that there was consideration for
the main contractor’s promise to pay an additional amount for the same work in that
the main contractor thereby secured benefits or obviated disbenefits from the
continuing relationship with the sub-contractor.235 The benefits were: (i) seeking to
ensure that the sub-contractor did not stop work in breach of contract, (ii) avoiding the
penalty for delay, and (iii) avoiding the trouble and expense of engaging others to
complete the work. But an agreement to pay existing liabilities by instalment may not
be good consideration.236

4-071
Work exceeding contract limit. Contracts sometimes have clauses limiting the value
of variations that can be ordered. Problems can arise in determining whether the value
has been exceeded.237 If the value is exceeded, it is suggested that the principles
discussed in this chapter would determine whether the contractor was entitled to
payment. An architect would generally have no ostensible authority to order work in
excess of the limit. The contractor might, on the facts, be able to establish a new
 contract or an implied promise by the employer to pay or might be able to show that
the architect had apparent authority to order work in excess of the limit.

4-072
Written orders. Contracts frequently provide that extras must be ordered in a
certain manner. The purpose of these provisions is usually to prevent unauthorised or
extravagant claims for extras. A frequent requirement is that there must be a written
order signed by the architect and that no extras will be paid for unless so ordered. In
such a contract a proper written order is a condition precedent to payment for
extras.238
4-073
The form of the order will depend upon the wording of the contract, but in general
the writing relied on must be a clear definite order and not a mere passing reference to
some extra work. Thus progress certificates referring to work claimed to be an
extra,239 and unsigned sketches and drawings prepared in the architect’s office,240
have been held not to be written orders. The contract may require that such orders
must be given before the extra work is carried out,241 but it may be that if an otherwise
valid written order is given retrospectively the courts will treat this as a waiver of the
requirement.

4-074
Recovery without written orders. The general rule is that in the absence of written
orders or other formalities that are conditions precedent to payment, the contractor
cannot recover either under the contract, or on a fresh contract to pay a reasonable
sum, even though the employer has had the benefit of the extra work.242 If there is a
valid and enforceable agreement governing the right to payment there is neither
occasion nor legal justification for the law to superimpose or impute an obligation or
promise to pay a reasonable remuneration. No action can be brought for restitution
while an inconsistent contractual promise subsists.243 To this rule there are certain
exceptions discussed in the following paragraphs.

4-075
Implied promise to pay. When there is a condition in the contract that extras shall
not be paid for unless ordered in writing by the architect and the employer orders
work which they know, or are told, will cause extra cost there may be an implied
promise by the employer that the work should be paid for as an extra and especially so
in cases where any other inference from the facts would be to attribute dishonesty to
the employer.244
4-076
Such a promise may be implied where there has been a waiver of the condition. In
order to constitute a waiver there must be conduct which leads the other party
reasonably to believe that the strict legal rights will not be insisted on.245 Thus, in
principle, a written waiver by the employer would be effective,246 and even an oral
waiver would be sufficient if it were a clear undertaking not to rely on the
condition.247
4-077
Where a contractor maintained that certain work was extra work but the employer
said that it was not and insisted on the work being done, the court upheld an
arbitrator’s award that the work was extra work and that a promise was to be inferred
on the part of the employer to pay for it if it should be found to be extra work.
Although the work was not ordered in writing as an extra in the manner required by
the contract, the court said that it was difficult to see how any other inference could
have been drawn without attributing dishonesty to the employer.248 Where the
architect refused to issue a written order for extras on the ground that work required
to be carried out was included in the contract price, the court upheld an arbitrator’s
 award of sums to be paid in respect of the extras despite the absence of an order in
writing.249 Nevertheless, where windows installed by a nominated sub-contractor
were defective and remedial works were carried out, most of the remedial works were
held to include design changes but the architect had refused to issue a variation
instruction to effect the changes. It was held that the resulting windows were not in
accordance with the main contract or the sub-contract so that neither the main
contractor nor the sub-contractor could recover payment under those contracts.
However, it was further held that, notwithstanding the architect’s refusal to issue a
variation instruction, the employer and the architect had by their words and conduct
agreed to the arrangement whereby the sub-contractor provided the altered windows.
The result was a new contract between the sub-contractor and the employer, to which
the main contractor was not a party, that in consideration of the sub-contractor
providing windows for the hospital the employer would pay them a reasonable
sum.250
4-078
Acceptance of work orally ordered by the architect does not show an implied
promise to pay,251 neither has the architect any ostensible authority to waive a term of
the contract requiring extras to be ordered in writing.252 But the court may find that
where the employer has requested the execution of extra works, and has stood by and
seen the expenditure on them, and taken the benefit of that expenditure, that it would
be a fraud on the part of the employer to refuse to pay on the ground that the work was
not properly ordered. In such a case the employer will be ordered to account for the
value of the extra work.253 The mere fact that the work was done on oral orders by an
agent and payment is then refused is by itself no indication of fraud.254
4-079
A contractor cannot, it seems, rely on the absence of a written order to avoid the
subsequent necessity of giving notice of an intention to claim where the contractual
validity of the oral instruction is not challenged by the employer.255

4-080
Work outside the contract. Extra work may be of the kind contemplated by clauses
of the contract which provide for the ordering of extras or it may be so peculiar and so
different that it is outside the contract.256 It may be work outside the contract if it is
carried out after completion of the original contract work257 or is not within the scope
of the variation clause.258 Extra work outside the contract is not governed by the terms
of that contract, and need not therefore be ordered in writing. Depending on the
circumstances a liability to pay for work outside the contract may be found by
reference either to a new contract or principles of unjust enrichment. The employer is
liable to pay a reasonable price for work carried out at its request,259 but may
exceptionally not be so liable if the original contract is not expressly or by implication
replaced by a new contract260 and if there is no other basis for liability as, for example,
an implied promise to pay. In order to make a person liable on a quantum meruit there
has to be a necessary implication that the person liable is agreeing to pay.261 It is
unlikely to be sufficient for a contractor to claim after the works are completed that
extra work is outside the terms of the contract.262

4-081
Dispute resolution. If there is an appropriate adjudication or arbitration clause, the
adjudicator or arbitrator may have:

“…power to dispense with the conditions precedent and to order that, notwithstanding
the non-performance of those conditions precedent a liability may be established on
which money may be ordered to be paid.”263

Where an architect refused to issue a written order for extras on the ground that work
 Where an architect refused to issue a written order for extras on the ground that work
required to be carried out was included in the contract price, the court upheld an
arbitrator’s award for sums for the extras despite the absence of an order in writing
and their decision was upheld.264 Once it is decided that a certificate ought to have
been issued or ought to have included a higher sum, it is convenient to make the
applicable financial award in the same proceedings so as to avoid the need for further
proceedings in the event that the employer does not pay.265

4-082
Court proceedings. A court can determine whether extra work is properly within
the terms of the variations clause and can make the necessary declaration and
monetary judgment to give effect to that determination.266 Although the court cannot
give instructions or issue certificates,267 that will not in most cases prevent a full
determination of the rights and obligations of the parties.268

4-083
Architect’s final certificate. The parties may by the contract give the architect
power to decide various matters finally between them, and to give a decision in the
form of a certificate.269 The parties may agree that the certificate becomes final and
binding if not challenged within a period.270 Having given the architect this power the
parties are not allowed by the courts, in the absence of fraud or other special
circumstances, to attack the architect’s decision upon such matters. The certificate is
binding and conclusive upon them.271 Thus where architects have certified by final
certificates that certain money is due to the contractor, employers have not been
allowed to go behind the certificate and say that a smaller sum was due because the
certificate included payment for extras not ordered in writing272 or not otherwise
ordered properly,273 or for work which was not extra work,274 or for work which had
not been done at all.275 It is a matter of construction in each case to determine whether
the architect’s decision is intended to be binding and conclusive on matters relating to
extras.276 It seems that “conclusive evidence” clauses are construed neither more nor
less strictly than other clauses since, unlike clauses which seek to exclude liability, they
can work to the benefit of either party.277

4. RATE OF PAYMENT

4-084
Work within the contract. Extra work of the kind contemplated by the contract will
be paid for in the manner provided by the terms of the contract.278 Payment will
usually be at or with reference to the contract rates. If there are no relevant rates, it
will be a reasonable sum.279 Similar principles apply to work which is the subject of an
omission.280 Where the contract provided that “Additional work shall be paid for at
rates pro rata to the estimate” and there were no rates in the estimate which was for a
lump sum, it was held that these words had no application to the pricing of extra work,
for which a reasonable sum was therefore payable.281 Where the contract contained
an agreement to pay the reasonable extra cost of executing work in accordance with an
amended specification over and above the cost that might reasonably have been
incurred in executing work in accordance with the original specification, the
contractor was obliged to identify each element of additional work and the reasonable
cost attributable to each element of such work.282
4-085
Where the contract does not specify a rate but the contractor later proposes a rate to
which the employer agrees, the employer cannot subsequently challenge that rate on
the basis that it is unreasonable. If the employer agrees to pay that rate for the work,
then that becomes, as between the employer and the contractor, the reasonable rate for
 that particular work.283 Where an implied reasonable fee is payable, particularly for
professional services, a combination of reliable evidence as to the time spent and a
reasonable hourly rate for that work would enable the determination of a reasonable
fee.284 Where work is done under a contract in addition to that provided for within the
fixed price, the fixed price may be powerful evidence which assists in the identification
of a reasonable fee for the additional work, at least in the case of the provision of
professional services.285

4-086
Effect of pricing errors. When the contractor has made an error in its pricing of the
tender for a lump-sum contract and there are no grounds for rectification,286 and the
contract provides for payment of variations at rates shown in the tender, a difficult
issue can arise when pricing variations if the error is apparent. In such a case, should
any, and if so, what, adjustment should be made in the rates shown in the tender to
arrive at the new rate for pricing variations?287 The answer may be that rates entered
by mistake cannot be opened up or disregarded on the basis of there being an error.288
It is thought that this is likely to apply generally, in the absence of an express power to
make an adjustment for pricing errors.

4-087
Work outside the contract. For work outside the contract289 the contractor is
entitled to a reasonable sum.290 The normal rule is that however great the amount of
work outside the contract, the work within the contract is paid for at the contract rates
and only work outside the contract is paid for at a reasonable rate291; but:

“…if a man contracts to work by a certain plan, and that plan is so entirely abandoned
that it is impossible to trace the contract, and to what part of it the work shall be applied,
in such a case the workman shall be permitted to charge for the whole work done by
measure and value, as if no contract at all had ever been made.”292

5. APPROPRIATION OF PAYMENTS

4-088
An employer may from time to time pay money generally on account without
appropriating it to any particular items or part of the work. If the contractor has
carried out extra work for which it has no claim for payment from the employer
because of the failure of a condition precedent or for some other reason, the contractor
cannot appropriate the money to payment of such extra work.293 The general rule is
that in the absence of a specific appropriation by the debtor the creditor may
appropriate payments on account to whatever debts it pleases, but:

“…before such a question can arise, it must be plain that there must be two debts. The
doctrine never has been held to authorise a creditor receiving money on account to
apply it towards the satisfaction of what does not, nor ever did, constitute any legal or
equitable demand against the party making the payments.”294

FOOTNOTES
1See the Housing Grants, Construction and Regeneration Act 1996 ss.109, 110 and 113 as
amended by the Local Democracy, Economic Development and Construction Act 2009 Pt
8. Pt II of this Act applies to construction contracts entered into after 1 May 1998: see
para.18-102 and following.

2Sometimes termed an “entire” or a “specific” work.

3See para.4-051 for discussion of work which may be impliedly included in the contract.

4Subject to any unfulfilled condition precedent such as an architect’s certificate: see

para.5-023.

5See para.4-075. The contract may provide many other ways in which an amount
different from the original contract sum may eventually become payable: see, e.g.
Commentary on the Articles of Agreement of the Standard Form of Building Contract,
Ch.20.

6See, e.g. Standard Form of Building Contract Cll.8.7 and 8.8 which apply on termination;
see para.20-468.

7See Appleby v Myers (1867) L.R. 2 C.P. 651 at 661.

8See cases cited below and in Notes to Cutter v Powell (1795) 2 Sm.L.C. 1. For a useful
judicial summary, see Holland Hannen & Cubitts v WHTSO (1981) 18 B.L.R. 80 at 122. The
text which follows does not, however, precisely follow that summary.

9Cutter v Powell (1795) 6 T.R. 320; Munro v Butt (1858) 8 E.B. 739; Appleby v Myers (1867)
L.R. 2 C.P. 651; Hoenig v Isaacs [1952] 2 All E.R. 176, CA. See also, Heywood v Wellers
[1976] Q.B. 446, CA —solicitor’s contract.

10H.B.C., 7th edn, p.165, citing Cutter v Powell (1795) 2 Sm.L.C. 1; note Somervell LJ’s
interpretation of Cutter v Powell in Hoenig v Isaacs [1952] 2 All E.R. 176 at 178, CA.

11Hoenig v Isaacs [1952] 2 All E.R. 176 at 178 and 180. The Standard Form of Building
Contract (see Ch.20) has been held not to be an entire contract: Tern Construction Group
v R.B.S. Garages Ltd (1992) 34 Con. L.R. 137; Richard Buxton (A Firm) v Mills-Owen [2010]
1 W.L.R. 1997, retainer of solicitor to conduct a planning appeal an entire contract; P.C.
Harrington Contractors Ltd v Systech International Limited [2012] EWCA Civ 1371 at [32],
no payment for adjudication decision for completion of discrete parts of the
engagement.

12Appleby v Myers (1867) L.R. 2 C.P. 651 at 661; Hoenig v Isaacs [1952] 2 All E.R. 176 at
180, CA; Notes to Cutter v Powell (1795) 2 Sm.L.C. 1.
13Smales v Lea [2011] EWCA Civ 1325 at [43]; but see P.C. Harrington Contractors Ltd v
Systech International Limited [2012] EWCA Civ 1371 at [32].

14Duncan v Blundell (1820) 3 Stark. 6; Sinclair v Bowles (1829) 9 B. & C. 92; Portman v
Middleton (1858) 4 C.B. (N.S.) 322; see Hoenig v Isaacs [1952] 2 All E.R. 176 at 178, CA. See
also, Vigers v Cook [1919] 2 K.B. 475, CA, an undertaker’s contract.

15[1898] 1 Q.B. 673. Despite both academic criticism of this case and recommendations
from the Law Commission, the case remains good law: Multiplex Constructions (UK) Ltd v
Cleveland Bridge UK Ltd [2010] EWCA Civ 139 at [135] and [138].

16See Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2010] EWCA Civ 139 at
[105].

17The first instance decision in Sumpter v Hedges was not appealed on this point but was
clearly approved by the Court of Appeal: see Multiplex Constructions (UK) Ltd v Cleveland
Bridge UK Ltd [2008] EWHC 2220 at [1077] and [1086] and, on appeal, [2010] EWCA Civ
139 at [95]. This reference was approved in ISG Construction Ltd v Seevic College [2015]
B.L.R. 233 at [7].

18Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2220 at [1079],
upheld on appeal [2010] EWCA Civ 139.

19Contrast the analysis of the law in Law Commission, Pecuniary Restitution for Breach of
Contract (HMSO, 1983), Law Com. No.121 with Denning LJ in Hoenig v Isaacs [1952] 2 All
E.R. 176, CA and with Holland Hannen & Cubitts v WHTSO (1981) 18 B.L.R. 80 at 122.

20Somervell LJ in Hoenig v Isaacs [1952] 2 All E.R. 176 at 178, CA; Sumpter v Hedges
[1898] 1 Q.B. 673.

21See para.4-016.

22Terry v Duntze (1878) 2 H.Bl. 389.

23See Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2220 (TCC)
at [1085].

24See para.18-010 for the definition of “construction contract” under the Act.

25Housing Grants, Construction and Regeneration Act 1996 s.109(1)(a) and (b).
26Housing Grants, Construction and Regeneration Act 1996 s.109(3).

27Scheme for Construction Contracts Pt 2 para.2. See App.B.

28Scheme for Construction Contracts Pt II para.12. That paragraph also contains a

definition of “work” and “contract price”. See App.B.

29Scheme for Construction Contracts Pt II para.4. The terms “relevant period” and “claim
by the payee” are defined in para.12. See App.B.

30See para.3-070.

31Phillimore J in The Tergeste [1903] P. 26 at 34; cf. Rees v Lines (1837) 8 C. & P. 126.

32Roberts v Havelock (1832) 3 B. & Ad. 404.

33Menetone v Athawes (1764) 3 Burr. 1592; Roberts v Havelock (1832) 3 B. & Ad. 404;
Appleby v Myers (1867) L.R. 2 C.P. 651 at 660.

34Denning LJ in Hoenig v Isaacs [1952] 2 All E.R. 176 at 181, CA, where it was also held
that the £400 not paid by the employer could not be treated as retention money because
it formed so large a proportion of the contract sum. If the parties so desired they could
expressly make such a large sum retention money. See also National Coal Board v Neill
[1985] Q.B. 300 at 309, 321.

35For a discussion relating to the retention provisions of the Standard Form of Building
Contract, see para.20-279 and following. For a case on the JCT Standard Form of
Management Contract, see P.C. Harrington Contractors v Co Partnership Developments
(1998) 88 B.L.R. 44, CA.

36For standard form provisions, see Cll.4.18–4.20 of the Standard Form of Building
Contract at para.20-325 and Cl.11.7 of the Infrastructure Conditions of Contract (2014) at
para.21-146.

37P.C. Harrington Contractors Ltd v Tyroddy Construction Ltd [2011] EWHC 813 at [24].

38Relicpride Building Co Ltd v Cordara (2013) 147 Con. L.R. 92; [2013] EWCA Civ 158 at
[40].

39For standard from provisions, see Cl.4.6 of the Standard Form of Building Contract at
para.20-290.
40Lancaster v Bird 73 Con. L.R. 22 and Hostgilt Ltd v Megagart Ltd [1999] S.T.C. 141, both
of which were applied by the Privy Council in National Transport Authority v Mauritius
Secondary Industry Ltd [2010] UKPC 31.

41Tony Cox (Dismantlers) v Jim 5 Ltd (1997) 13 Const. L.J. 209.

42Franks & Collingwood v Gates (1983) 1 Con. L.R. 21.

43Fibrosa Spolka Akcyjna v Fairbairn Lawson Ltd [1943] A.C. 32, HL; Guinness Mahon v
Kensington LBC [1999] Q.B. 215, CA. See also Stocznia Gdynia SA v Gearbulk Holdings Ltd
[2010] Q.B. 27 at [44]. It may be possible to show that even where some contractual
duties have been performed, they are not the contractual duties in respect of which the
relevant payment is due, such that the failure of consideration in respect of the relevant
apportioned services remains total: see Lord Goff (obiter) in Goss v Chilcott [1996] A.C.
788 explained in Giedo Van Der Garde v Force India Formula One Team Ltd [2010] EWHC
2373 at [299].

44Fibrosa Spolka Akcyjna v Fairbairn Lawson Ltd [1943] A.C. 32 at 48, HL; The Julia [1949]
A.C. 293, HL; Rover International v Cannon Film [1989] 1 W.L.R. 912 at 923, 925, CA.

45Fibrosa Spolka Akcyjna v Fairbairn Lawson Ltd [1943] A.C. 32, HL; Whincup v Hughes
(1871) L.R. 6 C.P. 78.

46See Ch.9.

47Fibrosa Spolka Akcyjna v Fairbairn Lawson Ltd [1943] A.C. 32, HL and see especially
Mertens v Home Freeholds Co [1921] 2 K.B. 526, CA, the facts of which are set out in
para.9-068.

48Ferguson & Associates v Sohl (1992) 62 B.L.R. 95, CA.

49For a detailed analysis and justification of the case, see Giedo Van Der Garde v Force
India Formula One Team Ltd [2010] EWHC 2373 at [314]–[323]. The judge held that
Ferguson was explicable as an exercise in apportionment and observed that it was a
good example of the willingness of the court to adopt a flexible and robust approach to
avoid leaving a victim of unjust enrichment without an effective remedy.

50Lord Goff of Chieveley and G. Jones, Goff and Jones, The Law of Restitution 8th edn
(London: Sweet & Maxwell, 2011), para.3-035 and following.

51Denning LJ said of the contract in Hoenig v Isaacs (for the facts see below): “I think this
contract should be regarded as an ordinary lump sum contract.”
52Subject to any unfulfilled condition precedent imposed by the contract, e.g. an
architect’s certificate.

53Hoenig v Isaacs [1952] 2 All E.R. 176, CA; cf. Williams v Roffey Brothers [1991] 1 Q.B. 1,
CA; Hutchinson v Harris (1978) 10 B.L.R. 19 appears to be authority for the proposition
that this principle can apply to an architect’s right to payment under the stages of the
RIBA Conditions of Engagement. See also Turner Page Music v Torres Design Associates
(1997) C.I.L.L. 1263 where, distinguishing Hutchinson v Harris, the doctrine of abatement
was applied to an architect’s claim for fees in respect of work that was simply not carried
out. In Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd 107 Con. L.R. 1 it was
held that abatement was not available as a defence to a claim for professional fees,
applying Hutchinson v Harris. For set-off and counterclaim, see para.19-107 and
following.

54SWI Ltd v P.&I. Data Services Ltd [2007] B.L.R. 430.

55Boone v Eyre (1777) 1 Hy.Bl. 273, cited by Somervell LJ; Hoenig v Isaacs [1952] 2 All E.R.
176 at 178, CA.

56Hoenig v Isaacs [1952] 2 All E.R. 176 at 178, CA. For sale of goods cases, cf. Regent v
Francesco of Jermyn St [1981] 3 All E.R. 327 and Foxholes Nursing Home Ltd v Accora Ltd
[2013] EWHC 3712 (Ch).

57Denning LJ in Hoenig v Isaacs [1952] 2 All E.R. 176 at 181, CA. For the analogy with the
grant of specific performance in contracts for the sale of land when a vendor fails to
make title to some insignificant part, see the judgment of Romer LJ in Hoenig v Isaacs.

58See Hoenig v Isaacs [1952] 2 All E.R. 176 at 179, CA, referring to Dakin v Lee [1916] 1
K.B. 566, CA and Appleby v Myers (1867) L.R. 2 C.P. 651 at 661. See also, Foreman & Co
Proprietary v The Ship “Liddesdale” [1900] A.C. 190 at 200, PC.

59Bolton v Mahadeva [1972] 1 W.L.R. 1009 at 1013, CA.

60Kiely & Sons v Medcraft (1965) 109 S.J. 829, CA. See also, Ibmac Ltd v Marshall (Homes)
Ltd 208 E.G. 851, 23 November 1968, CA: one-third value not substantial completion.

61[1972] 1 W.L.R. 1009, CA.

62See also, Technistudy Ltd v Kelland [1976] 1 W.L.R. 1042 at 1045, CA.

63For repudiation, see para.6-086 and especially “Work partly carried out” at para.9-060.
64See para.4-004.

65Cutter v Powell (1795) 2 Sm.L.C. 1; Sinclair v Bowles (1829) 9 B. & C. 92; Sumpter v
Hedges [1891] 1 Q.B. 673 discussed at para.4-004; see also, Ellis v Hamlen (1810) 3 Taunt.
52, but see Ridley J in Dakin v Lee [1916] 1 K.B. 566 at 572, CA; Stegmann v O’Connor
(1899) 81 L.T. 627, CA; Vigers v Cook [1919] 2 K.B. 475, CA.

66See para.4-016 and following.

67Bolton v Mahadeva [1972] 1 W.L.R. 1009 at 1015, CA.

68See para.6-086: “Repudiation generally.”

69See Holland Hannen & Cubitts v WHTSO (1981) 18 B.L.R. 80 at 125. See also,
“Acceptance”: para.4-023.

70Hoenig v Isaacs [1952] 2 All E.R. 176 at 181, CA; Holland Hannen & Cubitts v WHTSO
(1981) 18 B.L.R. 80.

71Munro v Butt (1858) 8 E. & B. 738; Appleby v Myers (1867) L.R. 2 C.P. 651. Acceptance
does not prevent the employer counterclaiming for damages for defects: see para.12-009.

72“In the case of goods sold and delivered, it is easy to show a contract from the retention
of goods; but this is not so where work is done on real property”, Bramwell B in
Pattinson v Luckley (1875) 10 Ex. 330 at 334.

73[1898] 1 Q.B. 673, CA. Despite both academic criticism of this case and
recommendations from the Law Commission, the case remains good law: Multiplex
Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2010] EWCA Civ 139 at [135] and [138].

74Lord Goff of Chieveley and G. Jones, Goff and Jones, The Law of Unjust Enrichment, 8th
edn (London: Sweet & Maxwell, 2011).

75Collins LJ in Sumpter v Hedges [1898] 1 Q.B. 673 at 676, CA; see also, Whitaker v Dunn
(1887) 3 T.L.R. 602, DC (where substantial performance might have been argued) and
Wheeler v Stratton (1911) 105 L.T. 786. For a modern case in which a claim in restitution
failed, see Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2010] EWCA Civ
139.

76Denning LJ in Hoenig v Isaacs [1952] 2 All E.R. 176 at 181, CA. SWI Ltd v P.&I. Data
Services Ltd [2007] B.L.R. 430.
77[1952] 2 All E.R. 176, CA.

78[1898] 1 Q.B. 673, CA.

79Somervell LJ in Hoenig v Isaacs [1952] 2 All E.R. 176 at 180, CA. In Sumpter v Hedges
[1898] 1 Q.B. 673, CA, the employer was held liable to account for the value of unfixed
materials which it had used in the works. For goods, see the Torts (Interference with
Goods) Act 1977.

80Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 W.L.R. 1129, HL; Bank of
Boston v European Grain [1989] 2 W.L.R. 440 at 445, HL; Stocznia Gdanska SA v Latvian
Shipping Co [1998] 1 W.L.R. 574, HL.

81See para.10-008.

82See “Recovery of money paid” at para.4-014.

83Including any payments due pursuant to the Housing Grants, Construction and
Regeneration Act 1996 s.109.

84See further para.10-024, and following: “Forfeiture Clauses”.

85See Melville Dundas Ltd v George Wimpey (UK) Ltd [2007] 1 W.L.R. 1136.

86See Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2220 (TCC)
at [1075]–[1076], not challenged on appeal.

87Stocznia Gdynia SA v Gearbulk Holdings Ltd [2010] Q.B. 27; Cavenagh v William Evans
Limited [2012] EWCA Civ 697, [41], adopting the statement in Stocznia Gdynia SA v
Gearbulk Holdings Ltd at [44].

88Law Reform (Frustrated Contracts) Act 1943: see para.6-069. For a case where payment
on termination was contractually provided for, see National Coal Board v Leonard &
Partners (1985) 31 B.L.R. 117.

89Appleby v Myers (1867) L.R. 2 C.P. 651.

90Newfoundland Government v Newfoundland Railway (1888) 13 App. Cas. 199, PC.

91For a Schedule of Rates contract, see Arcos v Electricity Commission (1973) 12 B.L.R. 65
(New South Wales CA); for a hybrid contract, see Commissioner for Roads v Reed & Stuart
(1974) 12 B.L.R. 55 (Australia HC).

92See “Management and Construction Management Contracts” at para.1-044.

93See Re Ford & Bemrose (1902) H.B.C., 4th edn, Vol.2, p.324 at 333, CA (18 T.L.R. 443). See
also para.4-048 and following.

94Arcos v Electricity Commission (1973) 12 B.L.R. 65 (New South Wales CA) at 75.

95Whitaker v Dunn (1887) 3 T.L.R. 602, DC.

96Cf. Newfoundland Government v Newfoundland Railway (1888) 13 App. Cas. 199, PC.

97Appleby v Myers (1867) L.R. 2 C.P. 651.

98Appleby v Myers (1867) L.R. 2 C.P. 651 at 661.

99See also, “Management and Construction Management Contracts” at para.1-044.

100See Hoffmann LJ, dissenting in the result, in Team Services v Kier Management (1993)
63 B.L.R. 76 at 91, CA.

101Team Services v Kier Management (1993) 63 B.L.R. 76, CA. See also, “Deletions from
printed documents” at para.3-010.

102Lord Goff of Chieveley and G. Jones, Goff & Jones, The Law of Restitution, 7th edn
(London: Sweet & Maxwell, 2006).

103Furmans Electrical Contractors v Elecref Ltd [2009] EWCA Civ 170.

104Gilbert & Partners v Knight [1968] 2 All E.R. 248, CA, the facts of which appear at
para.14-115; cf. Morrison-Knudsen v British Columbia Hydro and Power Authority (1978)
85 D.L.R. (3d) 186, (1991) 7 Const. L.J. 227 (British Columbia CA); ERDC Construction v
H.M. Love & Company (1994) 70 B.L.R. 67 at 90 (Court of Session).

105Benedetti v Sawiris [2013] UKSC 50; [2014] A.C. 938 at [9].

106Benedetti v Sawiris [2013] UKSC 50; [2014] A.C. 938 at [9]–[10].

107Benedetti v Sawiris [2013] UKSC 50; [2014] A.C. 938 at [9].

108Moffatt v Laurie (1855) 15 C.B. 583; Turriff Construction Ltd v Regalia Knitting Mills Ltd
(1971) 9 B.L.R. 20 discussed at para.2-012; cf. Holland Hannen & Cubitts v WHTSO (1981)
18 B.L.R. 80 at 125: the decision on issue 12. This may also be true where the agreed
price is conditional and that condition has not been fulfilled: see Tallington Lakes Ltd
(No.01595671) v Larking Gowen (A Firm) [2014] EWCA Civ 959, a case involving
accountancy services. See also Supply of Goods and Services Act 1982 s.15.

109Housing Grants, Construction and Regeneration Act 1996 s.109: see para.4-007.

110Roberts v Havelock (1832) 3 B. & Ad. 404; Appleby v Myers (1867) L.R. 2 C.P. 651.

111British Steel v Cleveland Bridge [1984] 1 All E.R. 504; (1981) 24 B.L.R. 94; Lord Goff of
Chieveley and G. Jones, Goff & Jones, The Law of Unjust Enrichment, 8th edn (London:
Sweet & Maxwell, 2011), Ch.16; Chitty on Contracts, edited by H. Beale, 32nd edn
(London: Sweet & Maxwell, 2015), Vol.1, para.29-077.

112Trollope & Colls Ltd v Atomic Power Constructions Ltd [1963] 1 W.L.R. 333; Peter Lind
& Co Ltd v Mersey Docks and Harbour Board [1972] 2 Lloyd’s Rep. 234.

113Robert Goff J in British Steel Corp v Cleveland Bridge and Engineering [1984] 1 All E.R.
504 at 511; (1981) 24 B.L.R. 94 at 122.

114For a full consideration of circumstances in which recovery may be made pursuant to

anticipated contracts which do not materialise, see Lord Goff of Chieveley and G. Jones,
Goff & Jones, The Law of Unjust Enrichment, 8th edn (London: Sweet & Maxwell, 2011),
Ch.16.

115[1995] 1 W.L.R. 212, a case concerning failed negotiations between a property

developer and an owner of land. See also, P. Coulson, “Restitution—Friend or Foe” (1995)
Const. L.J. 41 and J. Mannolini, “Restitution Where Anticipated Contract Fails to
Materialise” (1996) 59 M.L.R. 111.

116The statement in Sabemo Pty Ltd v North Sydney M.C. [1977] 2 N.S.W.L.R. 880 at 902–
903 that recovery in quasi-contract could occur “if the other party unilaterally decides to
abandon the project, not for any reason associated with bona fide disagreement
concerning the terms of the contract to be entered into, but for reasons which, however
valid, pertain only to his own position and do not relate at all to that of the other party”
was not supported in English law: Regalian Properties v London Docklands Development
Corp [1995] 1 W.L.R. 212 at 230–231.

117(2003) 94 Con. L.R. 1; [2003] C.I.L.L. 2027.

118Mowlem Plc v P.H.I. Group Ltd [2004] B.L.R. 421 at 426. In that case, materials were
supplied in circumstances where it was known to both parties that there was a dispute
as to entitlement to payment for them but the supply was for their mutual benefit. This
was insufficient to prove a right to payment.

119[2015] EWCA Civ 73; 159 Con. L.R. 1.

120See para.4-080.

121Thorn v London Corp (1876) 1 App. Cas. 120 at 127, HL; Parkinson & Co v
Commissioners of Works [1949] 2 K.B. 632, CA; Greenmast Shipping v Jean Lion [1986] 2
Lloyd’s Rep. 277; see also, Cana Construction Co v R. (1973) 37 D.L.R. (3d) 418 (Canada SC);
(1973) 21 B.L.R. 12.

122Parkinson v Commissioners of Works [1949] 2 K.B. 632, CA; Viscount Simon in British
Movietone News v London and District Cinemas [1951] A.C. 166 at 184, HL; cf. Thorn v
London Corp (1876) 1 App. Cas. 120 at 128, HL. Parkinson v Commissioners of Works is a
special case on its facts: McAlpine Humberoak v McDermott International (1992) 58 B.L.R.
1 at 19, CA and relies heavily on the now discredited case of Bush v Whitehaven Trustees
(1888) 52 J.P. 392, CA and H.B.C., 4th edn, Vol.2, p.122 which is not “worth recording as an
exposition of any principle of law”: Lord Radcliffe in Davis Contractors v Fareham UDC
[1956] A.C. 696 at 732, HL.

123Parkinson v Commissioners of Works [1949] 2 K.B. 632, CA. See also para.4-084 and
following, “Rate of payment”.

124See Morrison-Knudsen v British Columbia Hydro and Power Authority (1978) 85 D.L.R.
(3d) 186, (1991) 7 Const. L.J. 227 (British Columbia CA), which considers English
authorities; ERDC Construction v H.M. Love & Company (1994) 70 B.L.R. 67 at 90 (Court of
Session).

125Costain Civil Engineering v Zanen Dredging (1996) 85 B.L.R. 85 at 92G/H.

126Craven-Ellis v Canons Ltd [1936] 2 K.B. 403, CA; Rover International v Cannon Film
[1989] 1 W.L.R. 912, CA; Pavey & Matthews Pty Ltd v Paul (1987) 162 C.L.R. 221; (1990) 6
Const. L.J. 279 (Australia HC).

127Taylor v Bhail (1995) 50 Con. L.R. 70 at 76–78. See, generally para.6-071 as to illegality.

128See Benedetti v Sawiris [2013] UKSC 50; [2014] A.C. 938 at [9].

129Benedetti v Sawiris [2013] UKSC 50; [2014] A.C. 938.

130ERDC Group Ltd v Brunel University [2006] B.L.R. 255.

131Rover International v Cannon Film [1989] 1 W.L.R. 912 at 927, CA. The price under the
unenforceable contract might be relevant evidence or provide an upper limit: Pavey &
Matthews Pty Ltd v Paul (1987) 162 C.L.R. 221 at 263 (Australia HC); Sanjay Lachhani v
Destination Canada (UK) Ltd (1996) 13 Const. L.J. 279 at 284. The first four sentences of
this paragraph (previously at p.86 of the 6th edition) were cited with approval in Serck
Controls v Drake & Scull Engineering (2000) 73 Con. L.R. 100 at 112.

132Pavey & Matthews Pty Ltd v Paul (1987) 162 C.L.R. 221 (Australia HC) but see Benedetti
v Sawiris [2013] UKSC 50; [2014] A.C. 938 save in exceptional circumstances, “subjective
revaluation” whereby the amount may be increased on the basis that the specific
defendant had valued the services at a higher than market price, was not to be
recognised.

133ERDC Group Ltd v Brunel University [2006] B.L.R. 255.

134See Crown House Engineering v Amec Projects (1989) 48 B.L.R. 32 at 54, 57, CA; Sanjay
Lachhani v Destination Canada (UK) Ltd (1996) 13 Const. L.J. 279 at 283, 284; Serck
Controls v Drake & Scull Engineering (2000) 73 Con. L.R. 100 at 115.

135Serck Controls v Drake & Scull Engineering (2000) 73 Con. L.R. 100 at 113.

136ERDC Group Ltd v Brunel University [2006] B.L.R. 255.

137Way v Latilla [1937] 3 All E.R. 759 at 764 and 766, HL; M.R. Hornibrook (Pty) Ltd v Eric
Newham (1971) 45 A.L.J.R. 523; Lusty v Finsbury Securities (1991) 58 B.L.R. 73 at 82, CA.
Stephen Donald Architects Ltd v Christopher King [2003] EWHC 1867; [2003] C.I.L.L. 2027;
Vedatech Corporation v Crystal Decisions [2002] All E.R. (D) 318.

138See Banque Paribas v Venaglass Ltd (1994) C.I.L.L. 918, CA, in valuing a quantum
meruit entitlement between a developer and a freeholder, prices in the construction
contract between the developer and the contractor could be referred to.

139ERDC Group Ltd v Brunel University [2006] B.L.R. 255.

140This sentence (previously in the 6th edition) was cited with approval in Weldon Plant
v Commission for New Towns [2000] B.L.R. 496 at 502 and in Serck Controls v Drake &
Scull Engineering (2000) 73 Con. L.R. 100 at 112.

141See Lusty v Finsbury Securities (1991) 58 B.L.R. 73 at 83, CA and generally, “Expert
witnesses” at para.19-072 and following and “Contingency” at para.9-027.
142Tallington Lakes Ltd (No.01595671) v Larking Gowen (a firm) [2014] EWCA Civ 959 at
37.

143Tallington Lakes Ltd (No.01595671) v Larking Gowen (a firm) [2014] EWCA Civ 959 at
37.

144BP Exploration Co (Libya) Ltd v Hunt [1979] 1 W.L.R. 783; Claymore Services Ltd v
Nautilus Properties Ltd [2007] B.L.R. 452.

145General Tire & Rubber Co v Firestone Tire & Rubber Co Ltd [1975] 1 W.L.R. 819, CA per
Lord Wilberforce, at 836; Claymore Services Ltd v Nautilus Properties Ltd [2007] B.L.R.
452; Sycamore Bidco Ltd v Breslin [2013] EWHC 174 (Ch), [12].

146Claymore Services Ltd v Nautilus Properties Ltd [2007] B.L.R. 452; Sycamore Bidco Ltd v
Breslin [2013] EWHC 174 (Ch), [11]–[12].

147Serck Controls v Drake & Scull Engineering (2000) 73 Con. L.R. 100 at 128.

148Cf. Kemp v Rose (1858) 1 Giff. 258 at 268.

149Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597.

150Sometimes referred to as a “specific” or an “entire” work.

151Williams v Fitzmaurice (1858) 3 H. & N. 844; Coker v Young (1860) 2 F. & F. 98; Sharpe v
San Paulo Railway (1873) L.R. 8 Ch. App. 597.

152Williams v Fitzmaurice (1858) 3 H. & N. 844; Coker v Young (1860) 2 F. & F. 98; Sharpe v
San Paulo Railway (1873) L.R. 8 Ch. App. 597.

153Williams v Fitzmaurice (1858) 3 H. & N. 844 at 851; but in Linklaters Business Services
v Sir Robert McAlpine Ltd [2010] EWHC 2931 (TCC); (2010) 133 Con. L.R. 211 at [150]–
[155], on particular contract terms, the contractor would have been entitled to additional
payment for builders’ work that was necessary to enable piping work to be carried out.

154Scrivener v Pask (1866) L.R. 1 C.P. 715; Re Ford and Bemrose (1902) H.B.C., 4th edn,
Vol.2, p.324, CA.

155Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597 at 608. Note Cl.25 of the contract
in that case set out at 599.
156Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597. See also, Thorn v London Corp
(1876) 1 App. Cas. 120, HL, explained in Re Ford and Bemrose (1902) H.B.C. (4th edn),
Vol.2, p.324 at p.332, CA.

157Bottoms v York Corp (1892) H.B.C. (4th edn), Vol.2, p.208, CA; McDonald v Workington
Corp (1892) H.B.C. (4th edn), Vol.2, p.228, CA; Re Nuttall & Lynton & Barnstaple Railway
(1899) H.B.C. (4th edn), Vol.2, p.279 and (1899) 82 L.T. 17, CA. See Jackson v Eastbourne
Local Board (1885) H.B.C. (4th edn), Vol.2, p.81 at p.90, HL, for statement of principle.

158Thorn v London Corp (1876) 1 App. Cas. 120, HL; Tharsis Sulphur & Copper Co v
M’Elroy & Sons (1878) 3 App. Cas. 1040, HL; Canterbury Pipe Lines v Canterbury Drainage
(1979) 16 B.L.R. 76 at 121. cf. Bacal Construction v Northampton DC (1975) 8 B.L.R. 88, CA
discussed at para.6-043; Simplex v Borough of St Pancras (1958) 14 B.L.R. 80, architect’s
instruction held to be a variation even though without it the contractor would have been
in breach of contract.

159Atkins Ltd v Secretary of State for Transport (2013) 146 Con. L.R. 169; [2013] EWHC 139
(TCC).

160Rigby v Bristol Corp (1860) 29 L.J. Ex. 359.

161Neodox v Swinton and Pendlebury BC (1958) 5 B.L.R. 34; cf. Leedsford v City of Bradford
(1956) 24 B.L.R. 45, CA, artificial stone to be obtained from X Ltd “or other approved
firm” did not give contractor option to submit any firm for approval, the approval not to
be unreasonably withheld. Insistence on X Ltd did not entitle contractor to additional
payment.

162Thorn v London Corp (1876) 1 App. Cas. 120, HL; Re Ford and Bemrose (1902) H.B.C.
(4th edn), Vol.2, p.324, CA. See further para.6-043 and following for a full discussion of
inaccurate statements and when they give rise to a remedy.

163Thorn v London Corp (1876) 1 App. Cas. 120, HL.

164See Bacal Construction v Northampton DC (1975) 8 B.L.R. 88, CA.

165Cremdean Properties v Nash (1977) 241 E.G. 837 at 841 upheld at (1977) 244 E.G. 547,
CA. For misrepresentation, see paras 6-006 to 6-036.

166Morrison-Knudsen International v Commonwealth of Australia (1972) 13 B.L.R. 114

(Australia HC).

167Dillingham Construction v Downs (1972) 13 B.L.R. 97 (New South Wales SC).

168[1964] A.C. 465, HL. For a full discussion, see Ch.7 and in particular “Employer’s pre-
contract information” at para.7-061.

169Bills of quantities may be an important contract document without describing the

work for which a lump sum is payable: see para.4-048. In such a case the contract is not
a bills of quantities contract in the sense used here.

170Patman and Fotheringham v Pilditch (1904) H.B.C. (4th edn), Vol.2, p.368 at p.373.

171Kemp v Rose (1858) 1 Giff. 258; Patman and Fotheringham v Pilditch (1904) H.B.C. (4th
edn), Vol.2, p.368.

172Kemp v Rose (1858) 1 Giff. 258 at 268.

173See the advice of Stephen J to contractors in Priestley v Stone (1888) H.B.C. (4th edn),
Vol.2, p.134 at p.140.

174Re Ford and Bemrose (1902) H.B.C. (4th edn), Vol.2, p.324, CA.

175Young v Blake (1887) H.B.C. (4th edn), Vol.2, p.110.

176Sharpe v San Paulo Railway (1873) L.R. 8 Ch.App. 597.

177In Re Ford and Bemrose (1902) H.B.C. (4th edn), Vol.2, p.324, CA.

178Kemp v Rose (1858) 1 Giff. 258.

179Patman & Fotheringham v Pilditch (1904) H.B.C. (4th edn), Vol.2, p.324 at p.372, CA. It
was necessary to distinguish the very strong case of Re Ford and Bemrose (1902) H.B.C.
(4th edn), Vol.2, p.324, CA and the dictum of Lord Esher at 330.

180Patman & Fotheringham v Pilditch (1904) H.B.C. (4th edn), Vol.2, p.324 at p.373, CA.

181(1858) 3 H. & N. 844 and see para.4-045.

182See para.4-045.

183(1858) 3 H. & N. 844 at 851.

184For the position where quantities do not form part of the Standard Form of Building
Contract see Ch.20.

185See cases cited above in this chapter, and for implication of terms generally, see
para.3-051 and following. For design and build contracts, see para.1-034.

186For meaning, see para.4-052.

187Re Walton-on-the-Naze UDC v Moran (1905) H.B.C. (4th edn), Vol.2, p.376 at p.380.

188Cf. Appleby v Myers (1867) L.R. 2 C.P. 651.

189For meaning, see para.4-080.

190London Steam Stone Sawmills Co v Lorden (1900) H.B.C. (4th edn), Vol.2, p.301, DC.

191See below and see Infrastructure Conditions of Contract Cll.11.2 and 11.3 at paras 21-
138 and 21-139; cf. Mitsui v Att Gen of Hong Kong (1986) 33 B.L.R. 1, PC.

192See para.4-086 for effect of pricing errors on pricing variations.

193See para.12-015.

194The unreported case of M.J. Gleeson Ltd v Sleaford UDC (1953) noted in H.B.C. (12th
edn), para.5-014, may be of assistance.

195R. v Peto (1826) 1 Y. & J.Ex. 37.

196See Maidenhead Electrical Services Ltd v Johnson Control Systems Ltd unreported 26
January 1996; Amec Building Ltd v Cadmus Investment Company (1996) 51 Con. L.R. 105;
(1996) 13 Const. L.J. 50. See also the American case of Gallagher v Hirsch (1899) N.Y. 45
App. Div. 467; the Canadian case of Simplex Floor Finishing v Duranceau (1941) D.L.R. 260
(Supreme Court); the Australian cases of Carr v J.A. Berriman Pty Ltd (1953) 27 A.L.J.R.
273 and Commissioner of Main Roads v Reed & Stuart (1974) 12 B.L.R. 55 (Australia HC).

197Abbey Developments Ltd v P.P. Brickwork Ltd (2003) C.I.L.L. 2033.

198S.W.I. Ltd v P.&I. Data Services Ltd [2007] B.L.R. 430; Trustees of the Strathfield Saye
Estate v A.H.L. Construction Ltd [2004] EWHC 3286 (TCC).

199MT Højgaard A/S v E.ON Climate and Renewables UK [2015] EWCA Civ 407; [2015]
B.L.R. 55, CA.
200S.W.I. Ltd v P.&I. Data Services Ltd [2007] B.L.R. 430.

201S.W.I. Ltd v P.&I. Data Services Ltd [2007] B.L.R. 430.

202Crosby v Portland UDC (1967) 5 B.L.R. 121; English Industrial Estates v Kier
Construction (1991) 56 B.L.R. 93.

203English Industrial Estates v Kier Construction (1991) 56 B.L.R. 93.

204Bickerton v N.W. Metropolitan Regional Hospital Board [1970] 1 W.L.R. 607 at 610 and
623, HL. Lord Reid said at 610 that the ordinary meaning of “prime cost sums” was
“sums entered or provided in bills of quantities for work to be executed by nominated
sub- contractors”.

205See Cl.4.3 of the Standard Form of Building Contract at para.21-285.

206See para.3-029.

207See Bickerton v N.W. Metropolitan Regional Hospital Board [1970] 1 W.L.R. 607 at 610,
HL; cf. Tuta Products v Hutcherson Bros (1972) 46 A.L.J.R. 549 (Australia HC), where there
was said to be an inference that prime cost sums, which were only estimates over which
the builder had no control, were inherently subject to adjustment when the true cost
emerged.

208See further para.13-055. For the meaning of the term in the Standard Form of
Building Contract, see para.20-374.

209See generally “Building Act 1984 and the Building Regulations” at para.16-046 and
following.

210e.g. Cl.6 of the Standard Form of Building Contract at para.20-394; and see Townsend
(Builders) v Cinema News [1959] 1 W.L.R. 119, CA, more fully reported at (1958) 20 B.L.R.
118, CA; Acrecrest v Hattrell [1983] Q.B. 260 at 267, CA; Equitable Debenture Assets Corp v
William Moss (1984) 2 Con. L.R. 1. For implied terms, see para.3-051 and following.

211See para.4-044.

212See para.4-075.

213Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597; Stockport MBC v O’Reilly [1978]
1 Lloyd’s Rep. 595 at 601.

214R. v Peto (1826) 1 Y. & J.Ex. 37; Cooper v Langdon (1842) 10 M. & W. 785; Ranger v G.W.
Railway (1854) 5 H.L.C. 72, HL; Carlton Contractors v Bexley Corp (1962) 60 L.G.R. 331.

215Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597.

216See Maidenhead Electrical Services Ltd v Johnson Control Systems Ltd unreported 26
January 1996; Amec Building Ltd v Cadmus Investment Company (1996) 51 Con. L.R. 105,
(1996) 13 Const. L.J. 50. See also the American case of Gallagher v Hirsch (1899) N.Y. 45
App. Div. 467; the Canadian case of Simplex Floor Finishing v Duranceau (1941) D.L.R. 260
(Supreme Court); the Australian cases of Carr v J.A. Berriman Pty Ltd (1953) 27 A.L.J.R.
273; Commissioner of Main Roads v Reed & Stuart (1974) 12 B.L.R. 55 (Australia HC).

217Wallis v Robinson (1862) 3 F. & F. 307, N.P.; R. v Peto (1826) 1 Y. & J. Ex. 37 noting the
remarks of Moulton LJ in Stevens v Mewes & Davis unreported 8 June 1910, CA, cited
H.B.C. (11th edn), para.7.044.

218R. v Peto (1826) 1 Y. & J. Ex. 37; Russell v Sa da Bandeira (1862) 13 C.B. (N.S.) 149; cf. Sir
Lindsay Parkinson & Co Ltd v Commissioners of Works [1949] 2 K.B. 632, CA, discussed in
para.4-035.

219For provisional sums, see para.4-059.

220Davy Offshore v Emerald Field Contracting (1991) 55 B.L.R. 1 at 61.

221Stockport MBC v O’Reilly [1978] 1 Lloyd’s Rep. 595 at 601.

222Russell v Sa da Bandeira (1862) 13 C.B. (N.S.) 149; Astilleros Canarios v Cape Hatteras
Shipping (“The Cape Hatteras”) [1982] 1 Lloyd’s Rep. 518.

223Sika Contracts v Gill and Closeglen Properties (1978) 9 B.L.R. 11.

224Tharsis Sulphur and Copper Co v M’Elroy & Sons (1878) 3 App. Cas. 1040 at 1053, HL.

225See para.4-074.

226See para.4-075, “Implied promise to pay”; para.4-080, “Work outside the contract”.

227Wilmot v Smith (1828) 3 C. & P. 453; Bottoms v York Corp (1892) H.B.C. (4th edn), Vol.2,
p.208, CA.
228Forman v The Liddesdale [1900] A.C 190, PC; Ashwell and Nesbit Ltd v Allen & Co (1912)
H.B.C. (4th edn), Vol.2, p.462, CA; Holland Hannen & Cubitts v WHTSO (1981) 18 B.L.R. 80
at 121—the decision on the 11th issue.

229Tharsis Sulphur and Copper Co v M’Elroy & Sons (1878) 3 App. Cas. 1040 at 1053, HL.
The majority of the House of Lords seem to have decided the case on the grounds that:
(a) the work was not an extra; and (b) there was no order in writing as required by the
contract. See also, Kirk & Kirk Ltd v Croydon Corp [1956] J.P.L. 585; cf. Simplex Concrete
Piles Ltd v St Pancras BC (1958) 14 B.L.R. 80.

230Lord Goff of Chieveley and G. Jones, Goff & Jones, The Law of Unjust Enrichment, 8th
edn (London: Sweet & Maxwell, 2011), para.18-50 and following.

231Lovelock v King (1831) 1 Moo. & Rob. 60; Johnson v Weston (1859) 1 F. & F. 693; Thames
Iron Works, etc., Co v Royal Mail, etc., Co (1861) 13 C.B.(N.S.) 358 at 378.

232Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597 at 608 per James LJ: “It is
perfectly nudum pactum.” See also para.2-001. For the right to set up by way of an
equitable defence, despite the absence of consideration, a promise acted upon by the
promisee so as to affect its legal position and for the limitations to that right, see
“Promissory estoppel” at para.12-004. For a promise to perform a duty owed to another,
see New Zealand Shipping Co Ltd v A.M. Satterthwaite & Co Ltd [1975] A.C. 154, PC; Pao
On v Lau Yiu Long [1980] A.C. 614 at 632, PC.

233But cf. Simplex Concrete Piles v St Pancras BC (1958) 14 B.L.R. 80.

234See Ficom v Sociedad Cadex [1980] 2 Lloyd’s Rep. 118 at 132; Simon Container
Machinery v Emba Machinery [1998] 2 Lloyd’s Rep. 429 at 434.

235Williams v Roffey Brothers [1991] 1 Q.B. 1, CA; cf. “Economic duress” at para.6-082.

236Re Selectmove [1995] 1 W.L.R. 474 at 481, CA.

237See, e.g. Arcos Industries v Electricity Commission of NSW (1973) 12 B.L.R. 65 (New
South Wales SC); cf. the form of contract in McAlpine & Son v Transvaal Provincial
Administration (1974) 3 S.A.L.R. 506.

238Russell v Sa da Bandeira (1862) 13 C.B. (N.S.) 149; Taverner & Co Ltd v Glamorgan CC
(1941) 57 T.L.R. 243; cf. Astilleros Canarios v Cape Hatteras Shipping [1982] 1 Lloyd’s Rep.
518.

239Tharsis Sulphur and Copper Co v M’Elroy & Sons (1878) 3 App. Cas. 1040, HL.
240Myers v Sarl (1860) 3 E. & E. 306.

241Lamprell v Billericay Union (1849) 18 L.J. Ex. 282.

242Kirk v Bromley Union (1848) 12 Jur. 85; Ranger v G.W. Railway (1854) 5 H.L.C. 72, HL;
Taverner & Co Ltd v Glamorgan CC (1941) 57 T.L.R. 243.

243Trimis v Mina (2000) T.C.L.R. 346 (NSW, CA) citing Pavey & Matthews v Paul (1987) 162
C.L.R. 221 at 256. See also S.&W. Process Engineering Ltd v Cauldron Foods Ltd [2005]
EWHC 153 at [51]–[55].

244Extract from H.B.C. (6th edn), p.313, referred to with approval by Humphreys J in
Taverner & Co Ltd v Glamorgan CC (1941) 57 T.L.R. 243 at 245. See also, Tool Metal
Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 1 W.L.R. 761, HL and para.4-067
and consider restitution referred to in para.4-064.

245Denning LJ in Rickards v Oppenheim [1950] 1 K.B. 616 at 626, CA.

246See Taverner & Co Ltd v Glamorgan CC (1941) 57 T.L.R. 243 at 245. See “Waiver” at
para.12-005.

247See Molloy v Liebe (1910) 102 L.T. 616; cf. Franklin v Darke (1862) 6 L.T. 291. In certain
circumstances the contractor may be able to say that the employer is estopped from
setting up the absence of a written order as a defence. For estoppel there must be a clear
unequivocal representation by the employer, see Woodhouse Ltd v Nigerian Produce Ltd
[1972] A.C. 741, HL. See also para.12-003.

248Molloy v Liebe (1910) 102 L.T. 616 at 617. Update Constructions Pty Ltd v Rozelle Child
Care Centre Ltd (1990) 20 N.S.W.L.R. 251 at 271; Trimis v Mina (2000) T.C.L.R. 346 at 357
(NSW, CA).

249Brodie v Cardiff Corp [1919] A.C. 337, HL. Cf. Kirk v Bromley Union (1848) 12 Jur. 85;
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corp [2008] EWHC 797 (Comm) at 81.

250Holland Hannen & Cubitts v WHTSO (1981) 18 B.L.R. 80 at 125; cf. Davy Offshore v
Emerald Field Contracting (1991) 55 B.L.R. 1.

251Taverner v Glamorgan CC (1941) 57 T.L.R. 243; Kirk v Bromley Union (1848) 12 Jur. 85.

252Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597.

253Hill v South Staffs Railway (1865) 12 L.T.(N.S.) 63 at 65 also at (1874) L.R. 18 Eq 154.
This result could, it is suggested, also be achieved by reference to principles of unjust
enrichment: see para.4-080.

254Taverner & Co Ltd v Glamorgan CC (1941) 57 T.L.R. 243 at 246.

255Hersent v Burmah Oil [1978] 2 Lloyd’s Rep. 565.

256Thorn v London Corp (1876) 1 App. Cas. 120, HL; Goodyear v Weymouth Corp (1865) 35
L.J.C.P. 12; Blue Circle Industries v Holland Dredging (1987) 37 B.L.R. 40, CA; cf. Sir Lindsay
Parkinson & Co Ltd v Commissioners of Works [1949] 2 K.B. 632, CA, discussed in para.4-
035.

257Russell v Sa da Bandeira (1862) 13 C.B. (N.S.) 149.

258Costain Civil Engineering v Zanen Dredging (1996) 85 B.L.R. 85.

259Reid v Batte (1829) Moo. & M. 413; Russell v Sa da Bandeira (1862) 13 C.B. (N.S.) 149;
Astilleros Canarios v Cape Hatteras Shipping [1982] 1 Lloyd’s Rep. 518.

260Gilbert & Partners v Knight [1968] 2 All E.R. 248, CA; cf. Thorn v London Corp (1876) 1
App. Cas. 120 at 134, HL.

261Gilbert & Partners v Knight [1968] 2 All E.R. 248 per Davis LJ at 251, CA.

262See McAlpine & Son v Transvaal Provincial Administration (1974) 3 S.A.L.R. 506.

263Greer LJ in Prestige & Co Ltd v Brettell [1938] 4 All E.R. 346 at 354, CA, referring to
Brodie v Cardiff Corp [1919] A.C. 337, HL and Neale v Richardson [1938] 1 All E.R. 753, CA.
For arbitration generally, see Ch.17.

264Brodie v Cardiff Corporation Brodie v Cardiff Corp [1919] A.C. 337, HL. Cf. Kirk v
Bromley Union (1848) 12 Jur. 85.

265Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at
3861, CA. See also para.5-036.

266Beaufort Developments v Gilbert Ash [1999] 1 A.C. 266.

267Beaufort Developments v Gilbert Ash [1999] 1 A.C. 266 at 299, per Lord Hope.
268Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850, CA.

269For mistakes of law by architects and grounds for attacking their certificates, see
para.5-044 and following.

270Brighton University v Dovehouse Interiors Ltd [2014] EWHC 940 (TCC); (2014) 153 Con.
L.R. 147, where an issue arose as to when a challenge to an architect’s certificate had
commenced.

271See generally Ch.5 and para.5-038 and following.

272Goodyear v Weymouth Corp (1865) 35 L.J.C.P. 12; Laidlaw v The Hastings Pier Co (1874)
H.B.C. (4th edn), Vol.2, p.13.

273Lapthorne v St. Aubyn (1885) 1 Cab. & El. 486.

274Laidlaw v The Hastings Pier Co (1874) H.B.C. (4th edn), Vol.2, p.13; Richards v May
(1883) 10 Q.B.D. 400, DC.

275Laidlaw v The Hastings Pier Co (1874) H.B.C. (4th edn), Vol.2, p.13; For a sale of goods
case where a mistake subsequently admitted by an official certifier did not invalidate the
certificate, see Alfred C. Toepfer v Continental Grain Co [1974] 1 Lloyd’s Rep. 11, CA, but
note that this was a certificate in rem, i.e. upon which numerous persons in a chain of
transactions would rely. The Toepfer case was approved in Gill & Dufus v Berger (No.2)
[1984] A.C. 382 at 394, HL and applied in Gill & Dufus v Berger [1982] 1 Lloyd’s Rep. 101.

276See Pashby v Birmingham Corp (1856) 18 C.B. 2; Re Meadows & Kenworthy (1896)
H.B.C. (4th edn), Vol.2, p.265, CA, affirmed HL. See further, para.5-038 and following.

277Gill & Dufus v Berger [1982] 1 Lloyd’s Rep. 101 at 104.

278Thorn v London Corp (1876) 1 App. Cas. 120 at 134, 127, HL; Canterbury Pipe Lines v
Christchurch Drainage (1979) 16 B.L.R. 76 at 122 (New Zealand CA). See Cl.5.2 of the
Standard Form of Building Contract at para.20-375 and Cl.12.6 of the Infrastructure
Conditions of Contract at para.21-159 and following.

279Tinghamgrange Ltd v Dew Group Ltd (1995) 47 Con. L.R. 105, a reasonable sum may
include sums paid to sub-contractors or suppliers as loss of profit on an omission;
Weldon Plant v Commission for New Towns [2000] B.L.R. 496 at 501, a fair valuation of
extra work may include overheads and profit. See further para.4-031 and following as to
reasonable sum.
280MT Højgaard A/S v E.ON Climate and Renewables UK [2015] EWCA Civ 407; [2015]
B.L.R. 55 and para.4-055.

281Reliance Shopfitters Ltd v Hyams unreported 1960, HH Percy Lamb QC, Official
Referee.

282See Petromec Inc v Petroleo Brasileiro SA [2007] EWCA Civ 1371; (2007) 115 Con. L.R.
11.

283Oakrock Ltd v Travelodge Hotels Ltd [2014] EWHC 1868 (TCC), [22].

284Tallington Lakes Ltd v Larking Gowen [2014] EWCA Civ 959 at 37.

285Tallington Lakes Ltd v Larking Gowen [2014] EWCA Civ 959 at 37.

286See para.12-015.

287The lump sum is not altered, see para.4-048.

288Henry Boot Construction v Alstom Combined Cycles [2000] B.L.R. 247, CA; and see
para.20-383. See also, I.N.D. Wallace QC, “Variation Valuation: No Correction of Pricing
Errors” [2001] I.C.L.R. 221.

289See also para.4-080.

290See para.4-031.

291Sir Lindsay Parkinson & Co Ltd v Commissioners of Works [1949] 2 K.B. 632, CA.

292Lord Kenyon in Pepper v Burland (1792) 1 Peake N.P. 139.

293Lamprell v Billericay Union (1849) 18 L.J. Ex. 282.

294Lamprell v Billericay Union (1849) 18 L.J. Ex. 282. A similar rule was applied to work
illegal under the Defence Regulations. See para.6-069 and following.
18 JAN 2021 PAGE 116
Keating on Construction Contracts 10th Edition
Chapter 5: Employer’s Approval and Architect’s Certificates

CHAPTER 5

EMPLOYER’S APPROVAL AND ARCHITECT’S CERTIFICATES

CONTENTS
A. Employer’s Approval 5-001
B. Architect’s Certificates 5-008
1. Types of Certificate 5-008
2. Certificates as Condition Precedent 5-023
3. Recovery of Payment Without Certificate 5-028
4. Binding and Conclusive Certificates 5-038
5. Attacking A Certificate 5-049
(a) Not within the architect’s jurisdiction 5-050
(b) Not properly made 5-054
(c) Disqualification of the certifier 5-062
(d) Effect of an arbitration clause 5-070

A. EMPLOYER’S APPROVAL
5-001
Construction against employer. A contract may provide that work must be
completed to the approval of the employer. “There is, after all, nothing to prevent a
party from requiring that work shall be done to his own satisfaction.”1 Such a
provision if construed in the employer’s favour would be very onerous. If goods do not
meet with the approval of a buyer and they rejects them the seller can sell the goods
for what they are worth. But in the case of a construction contract, when the work is
fixed to the land it becomes the property of the owner of the land.2 If the employer is
entitled to say, “I do not approve of the work; you have not carried out your contract,
therefore you cannot recover on the contract”, the contractor is in an unfortunate
position. It cannot sell the work to a third party because it is not its property. It cannot
recover on the contract because it has not fulfilled it. It may have difficulty even in
showing an implied promise to pay a reasonable sum, because mere use and
occupation of building work is not evidence of such a promise.3 For these reasons, and
perhaps also because of the maxim “no man shall be a judge in his own cause”,4
clauses of this nature are given a reasonable construction and are construed against
the employer as discussed in the following two paragraphs.5

5-002
Not usually a condition precedent to payment. The court leans against a
construction making the approval of the employer a condition precedent to payment,
and prefers a construction making the promise to complete according to the employer’s
 approval, and the promise to pay, independent of one another.6 In such a case if the
work does not meet with the employer’s approval it cannot refuse to pay under the
contract, but can only seek a reduction in the contract price by way of set-off, or
counterclaim for damages.7

5-003
Reasonable, honest and not capricious. Normally the employer’s approval must not
be unreasonably, or dishonestly, or capriciously withheld.8 What is reasonable is a
question of fact.9 The right to withhold approval may by the terms of the contract be
limited to certain parts or qualities of the work.10 If approval is subject to the
completion of certain tests which the employer through its own default fails to carry
out, it cannot withhold its approval because the work has not satisfied other tests not
agreed upon in the contract.11

5-004
Express words. Exceptionally, however, the court may be constrained by express
words.

“Where from the whole tenor of the agreement it appears that however unreasonable
and oppressive a stipulation or condition may be, the one party intended to insist upon
and the other to submit to it, a court of justice cannot do otherwise than give full effect
to the terms which have been agreed upon between the parties … without stopping to
consider how far they may be reasonable or not.”12

Thus a sub-contract provided that if the sub-contract works did not proceed as rapidly
and satisfactorily as required by the main contractors or their agent, the main
contractors could put on extra men themselves and deduct the additional cost from the
money due under the sub-contract. The court was satisfied that the intention was that
this power could be exercised if the main contractors “were dissatisfied, whether with
or without sufficient reason”, with the progress of the work. It was added that, in the
circumstances, the clause was not unreasonable as the main contractors were probably
under stringent terms themselves to complete to time.13
5-005
Where a contractor had undertaken to complete a carriage to B’s “convenience and
taste”, it was held (despite a jury’s verdict in favour of the contractor) that B was
entitled to reject it if it did not accord with their convenience and taste, assuming that
their rejection was bona fide and not capricious.14 But the rejection of goods, which
can be resold, differs in substance from that of work to land, which cannot.

5-006
Approval by alter ego. If work is to be done to the satisfaction of an agent it may, on
the construction of the contract, “be plain that he is to function only as the alter ego of
his master”,15 and not to act in the independent manner of an architect as the term
“architect” is used in this chapter. Approval by such an agent is, it is submitted, subject
to the same principles as apply to the employer’s approval.

5-007
Approval by employer and architect. Where work was to be carried out to the
approval of both the employer and the architect and they had expressed their
approval, and the architect had given a final certificate of satisfaction which the
contract made binding upon the parties, it was held that the employer, in the absence
of fraud or collusion, could not claim for damages for defects.16

B. ARCHITECT’S CERTIFICATES
 1. TYPES OF CERTIFICATE

5-008
In construction contracts, the certifier is usually an architect or surveyor. In
engineering contracts, they are usually an engineer. In other construction contracts,
there may be provision for other professionals or individuals to certify. The text that
follows refers to “architect” and “architect’s certificate” generally to apply to all such
persons and their certificates.

5-009
Formal requirements. The formal requirements17 of an architect’s certificate
depend on the terms of the contract, but construction contracts seldom stipulate
precise formalities. In any event, minor immaterial errors will not invalidate a
certificate if no one is misled.18 It must, however, clearly and unambiguously appear
that the document relied upon is the physical expression of a certifying process and
regard should be had to its “form”, “substance” and “intent”.19 A certificate is subject to
the usual rules of construction, taking account of the surrounding factual matrix.20
5-010
The document should be:

“…the expression in a definite form of the exercise of the judgment, opinion or skill of
the engineer, architect or surveyor in relation to some matter provided for by the terms
of the contract.”21

It is important that any certificate should be clear and unambiguous so that the parties
know where they are and should not be left in doubt or dispute as to their consequent
mutual rights and liabilities.22 An ambiguity may be resolved by having recourse to
any documents which can be properly regarded as being issued as part of the
certificate.23 The use of the word “certify” is not, in most contracts, mandatory but the
architect would be well advised to use the word24 and to follow as closely as they can
the language of the clause from which their power to certify derives.
5-011
A certificate is not normally effective unless it is issued or delivered. Mere signature
is not enough.25 What constitutes issuance or delivery will depend on the terms of the
contract and many contracts deal expressly with the service of notices and
certificates.26 Where a local authority contract required certificates to be issued to the
local authority employer with a duplicate to be sent to the contractor, it was held that,
to be issued, the certificate had to be sent to the employer’s treasury department so
that payment could be effected.27 It is thought that, if the contract is silent, delivery of
the certificate to both the employer and the contractor is likely to be an implied
requirement.
5-012
The nature and effect of an architect’s certificate depends upon the construction of
the particular contract, but in general such certificates may be divided into:

(i) progress or interim certificates;

(ii) final certificates; and
(iii) other certificates.

These are discussed in the following paragraphs.

5-013
Progress or interim certificates. These certificates are issued from time to time
during the course of the work certifying that, in the opinion of the architect, work has
been carried out, and, in some cases, materials supplied, to the value of £x.
5-014
Two decisions show the approach of the courts in relation to such certificates.

“Certification may be a complex exercise involving an exercise of judgment and an

investigation and assessment of potentially complex and voluminous material. An
assessment by an engineer of the appropriate interim payment may have a margin of
error either way … At the interim stage it cannot always be a wholly exact exercise. It
must include an element of assessment and judgment. Its purpose is not to produce a
final determination of the remuneration to which the contractor is entitled but is to
provide a fair system of monthly progress payments to be made to the contractor.”and
“the nature of the exercise required by the contract to be performed by [the contractor]
and the engineer at the interim stage is so different from that required at the final
account stage. … It seems to me that the submissions of [counsel for the employer] fail to
take account of the fundamental differences between what the engineer is required to
do at the interim stage and what he is required to do at the final stage. The position
would be otherwise if this were, say, a contract for a fixed sum of £1m whose only
payment provision was that the price was to be paid by ten equal monthly instalments of
£100,000. … The right to payment of £100,000 for that work would be unaffected by any
other provisions of the contract. It would not be reviewed or recalculated at the end of
the contract. But this kind of contractual arrangement is quite different from that
provided by the contract in this case, where there is a single contract price and one set of
elaborate provisions for dealing with instalment payments on account and a very
different set of elaborate provisions for ascertaining the contract price finally payable in
the light of the work actually done and the events that occur during the carrying of the
works.”28

5-015
Interim certificates are thus approximate estimates, made in some instances for the
purpose of determining whether the employer is safe in making a payment in advance
of the contract sum,29 in others whether it is under a duty to pay an instalment and, if
so, how much it is to pay.30 A contractual right to receive payments for the value of
work done and materials supplied arises not upon the work being done31 but upon the
issue of the interim certificate in respect of such work and materials.32 Such
certificates are not normally binding upon the parties as to quality or amount and are
subject to adjustment on completion.33 They have been described as having
“provisional validity”34 or being “provisional estimates of the sum to which the
contractor is entitled by way of instalment payments”.35 The sum certified is not the
true final value of the work done and materials supplied but what in the opinion of the
engineer is due on the basis of the monthly statement.36
5-016
It has been held under the 1963 Standard Form of Building Contract that the
employer is not obliged to pay more than the amount stated as due on the face of an
interim certificate. Whatever the cause of an undervaluation, the contractor’s remedy
is to request the architect to make an appropriate adjustment in a subsequent
certificate or to take the dispute to arbitration.37 Any error in an interim certificate can
and should be corrected in the next certificate.38 In arbitration the contractor may be
entitled to interest on sums which should have been certified.39 Now that a claim for
damages for late payment of a debt is, in principle, recoverable,40 the contractor may
also have a remedy for interest for late payment as damages for breach of an express
or implied term of the contract if the architect fails to issue certificates at the proper
time or for the correct sum.41 Since the introduction of adjudication under s.108 of the
Housing Grants, Construction and Regeneration Act 1996, there is a further remedy for
undervaluation.42
5-017
 Where negative interim certificates are issued their validity and effect will depend
on the express terms of the contract. Some standard forms contemplate such
certificates: see, for instance, Cl.51.1 of the NEC3 Form.43 In the absence of any express
provision, it is thought unlikely that a negative certificate would create an obligation
on the contractor to pay a sum to the employer. In appropriate cases, if an interim
certificate contained an overpayment, the employer could seek to reopen and revise
that certificate and obtain reimbursement of the excess by way of an adjudicator’s
decision or a judgment of the court or award of an arbitrator. In many cases, any
negative certificate will in practice simply be taken into account by reducing sums due
in subsequent certificates when the contractor continues to carry out work which
properly falls to be included in later certificates.
5-018
At common law, an employer who has a bona fide arguable contention that an
interim certificate overvalues the contractor’s right to payment has equivalent
remedies to those available to the contractor and can resist proceedings for summary
judgment on that ground.44 Since the introduction of s.111 of the Housing Grants,
Construction and Regeneration Act 1996,45 the employer may not withhold payment
unless an effective notice has been given.46 Once a sum has been certified in an
interim certificate then, in the absence of an effective “pay less” notice, the contractor
is entitled to payment of the sum certified and it is not open to the employer to dispute
the contents of the interim certificate.47 If an effective notice is given, then the
employer may withhold payment and apply for any appropriate remedies. There is a
special provision for the period of payment for any sum found to be due after an
adjudication under the Act.48
5-019
Subject to the effect of words showing that it is merely intended to make advances
on money not legally due until completion,49 a progress certificate properly given
creates a debt due.50 A cause of action is created in respect of any overdue payment,
whether the overdue payment results from a failure to pay a sum certified or from the
failure to certify that sum.51 A cause of action in respect of a certifier’s failure to
include a sum in an interim certificate is not the same as a cause of action in respect of
the failure to include a sum in the final certificate even if the two sums happen to be
the same.52 An interim certificate may also give rise to a cause of action for interest on
the unpaid sum or the uncertified sum and successive interim certificates may give rise
to successive causes of action for that sum and for interest on that sum from the date of
the later certificate.53 Subject to rights of set-off and service of any applicable notice,54
the contractor can seek summary judgment for the amount certified upon the issue of a
certificate for payment of an instalment.55 If an employer’s claim to set-off raises issues
which have to be referred to arbitration, payment of the amount due in an interim
certificate is not, without express words, a condition precedent to the employer’s right
to go to arbitration.56

5-020
Final certificates. A final certificate may certify the amount finally payable to the
contractor under the contract, or the satisfaction of the architect that work conforms
with the contract, or both.57 Section 111 of the Housing Grants, Construction and
Regeneration Act 1996, discussed above,58 applies equally to payment due under a final
certificate.59 A failure to serve a valid withholding notice will preclude the employer
from refusing to pay the sum certified in the final certificate, pending the ultimate
resolution of any dispute. A claim to have a sum included in a final certificate is a fresh
cause of action, different from the claim to have had such sum included in an interim
certificate even if the two sums happen to be the same.60 As discussed below, in respect
of both the amount finally payable and conformity of the work with the contract, the
architect’s decision embodied in their certificate is often binding and conclusive on the
 parties.61 If an architect or engineer issues an unqualified certificate authorising final
payment, that is in practice likely to be very strong evidence of their satisfaction,
whether or not the contract contains terms providing for certification and whether or
not, if it does, they provide for such a certificate to have a final or conclusive effect.62

5-021
Other certificates. The contract may empower the architect to certify various
matters, such as the happening of an event which entitles the employer to exercise a
right of forfeiture63 or to record an extension of time given by the architect to the
contractor.64 The architect’s decision may be binding and conclusive upon these
matters.65

5-022
Retention money. It is usual to provide for the retention of a percentage of the value,
sometimes subject to a limit as to amount, to provide a fund for the payment of
amending defects.66 In one case the contractor was:

“…entitled … under certificates … to payment by the employer from time to time by

instalments, when in the opinion of the architect actual work to the value of £1,000 has
been executed in accordance with the contract, at the rate of 90 per cent of the value of
the work so executed …”

It was held that an arbitration award was wrong on the face of it in finding that the
contractor was only entitled to 90 per cent of each completed £1,000; it was entitled to
payment of 90 per cent of the value of work actually executed at the time of granting a
certificate.67

2. CERTIFICATES AS CONDITION PRECEDENT

5-023
The contract may show by express words, or upon reading it as a whole, that the
architect’s68 or engineer’s certificate is a condition precedent to payment whether
interim or final69 and not merely evidence of the architect’s or engineer’s opinion.70 It
is a condition precedent if upon the true construction of the contract the employer only
agrees to pay what is certified by the architect,71 or only to pay upon a certificate of
satisfactory completion by the architect.72 In such a case, if the contractor fails to
obtain the certificate required for payment it has no present claim at law or in equity,73
unless it can show one of the special circumstances for recovery of payment without a
certificate discussed in the next section of this chapter. It may, however, have a cause
of action for a sum which ought to have been certified74 and an immediate right of
adjudication75 or arbitration to seek to secure a certificate or alter the contents of an
existing one.76 Once it is decided that a certificate ought to have been issued or ought
to have included a higher sum, it is convenient to make the applicable financial award
in the same proceedings, rather than merely a declaration relating to a certificate, so as
to avoid the need for further proceedings in the event that the employer does not
pay.77
5-024
The contractor may be able to show that on the wording of the contract a certificate
is not a condition precedent to payment.78 If the contract only requires a certificate
showing the architect’s satisfaction, the contractor can sue on the contract when it has
obtained such a certificate notwithstanding that it does not certify that a sum of money
is payable.79
5-025
Contracts may provide that the issue of various certificates other than payment
 Contracts may provide that the issue of various certificates other than payment
certificates is a condition precedent to the exercise of certain rights, e.g. to deduct
liquidated damages,80 to the right of a main contractor to claim damages for delay
from a sub-contractor81 or to initiate a process leading to contractual determination of
the contractor’s employment.82

5-026
Right to suspend work. The Court of Appeal of New Zealand has held that a
contractor has no implied right of temporary suspension of the works for non-payment
upon the wrongful withholding of a progress certificate whose issue was a condition
precedent to payment.83 Where applicable, s.112 of the Housing Grants, Construction
and Regeneration Act 1996 gives a right to suspend performance and obtain cost where
there is non-payment.84

5-027
Third parties. Assignees of the contractor are in no better position than the
contractor85 but third parties whose rights arise on completion may be able to enforce
such rights although no certificate of completion has been given. Thus where H lent
money to T, a contractor, on the employer’s guarantee to repay upon completion of the
contract works in accordance with the construction contract, it was held that H could
recover from the employer when the works were completed in fact, although no
certificate of completion had been given as required by the construction contract. The
contract of guarantee between H and the employer did not require certified
completion.86 Similarly a claim against a surety under a bond, whose condition was to
satisfy damages suffered by the employer from the contractor’s default, succeeded
without an architect’s certificate of the amount of loss suffered by the employer and
caused by the determination of the contractor’s employment upon receivership.87 The
certificate under the construction contract was held to be irrelevant to a claim under
the bond. Where payment under an agreement for lease was said to be dependent on
the issue of a certificate under a building contract, such certificate was not a condition
precedent to payment under the agreement for lease because, in that context, there
were no provisions designed to ensure fairness in the certification process. The
certificate was merely one trigger which gave rise to the obligation to pay.88

3. RECOVERY OF PAYMENT WITHOUT CERTIFICATE

5-028
Certificate not a condition precedent. If a certificate is not a condition precedent to
recovery, the contractor will obviously be able to recover without one.89

5-029
Waiver of condition precedent. The requirement of a certificate as a condition
precedent to payment is for the benefit of the employer. It may therefore waive its
right to insist upon a certificate. It is submitted that the same principles apply as in the
case of waiver of a condition requiring written orders.90

5-030
Disqualification of the certifier. If as a result of fraud, collusion or otherwise the
architect is disqualified as certifier and fails to grant a certificate, the condition
precedent goes and the contractor can sue.91

5-031
Prevention by the employer. The mere failure of the architect to certify where there
has been no fraud or collusion or wrongful interference by the employer does not of
itself enable the contractor to recover.92 However, if the employer or its agent prevents
the architect giving a certificate, the employer cannot rely on its absence, for “no
 the architect giving a certificate, the employer cannot rely on its absence, for “no
person can take advantage of the non-fulfilment of a condition the performance of
which has been hindered by himself”.93 Where the interference of the employer’s
agents delayed works so that they were not completed to time, the employer was not
allowed to resist payment on the ground that the absence of the architect’s certificate
extending time made the contractor liable to penalties.94
5-032
Where the architect under the contract retired and no one was appointed to take
their place, it was common ground that the contractor’s claim for loss and expense
under the agreement could not be maintained by action in the absence of a certificate
from the architect. The court held, nevertheless, that the employer’s acts and
omissions, including but not limited to its failure to appoint a successor architect,
amounted to a failure by it to take such steps as were necessary to enable the
contractor’s claim for loss and expense to be ascertained and amounted to a breach of
contract.95
5-033
Whether a failure to act by the architect or the engineer will amount to a breach of
contract by the employer will depend on the terms of the contract and whether the act
was one carried out as agent of the employer. The duty to certify has been treated as a
situation where the architect does not act as agent so as to make the employer liable to
the contractor for those certifying functions.96 It is thought that this may not be
correct.97 In principle, the architect or engineer still acts as the agent of the employer
in certifying but has an implied obligation to act fairly.98 Where the act is not carried
out as agent then the employer will only be liable if there is a failure by the employer
to co-operate. This may occur if the employer fails to call upon the architect or
engineer to act where the employer knows that they are not acting in accordance with
the contract.99
5-034
If the architect wrongly neglects, or deliberately, as a result of a mistaken view of
their powers, refuses to issue a certificate, and the employer concurs in their action
and the contractor has done everything necessary for the issue of the certificate, the
employer cannot take advantage of the absence of the certificate.100 Thus a contract
provided that payment should be made upon the issue by the employer’s surveyor
(acting in the position of an architect) of a certificate that the work had been
satisfactorily carried out. The surveyor contended that their function of certification
extended to economy of time, labour and materials, and demanded, with the
concurrence of the employer, certain information for this purpose. It was not given
and the surveyor therefore refused to certify. The court held that on the construction of
the contract their function of certifying was confined to whether the work had been
satisfactorily carried out and that an “illegitimate condition precedent to any
consideration of the granting of a certificate” had been insisted on by the surveyor and
the employer. Consequently the employer could not rely on the absence of the
certificate. If the employer had, contrary to the surveyor, taken the correct view of the
surveyor’s functions, it would have been its duty to appoint another surveyor. Failure
to appoint another surveyor would have absolved the contractor from the necessity of
obtaining a certificate.101

5-035
Death or incapacity of the certifier. The position upon the death or incapacity of
the architect depends upon the construction of the contract. The matter may be dealt
with expressly,102 or it may be an implied term that the employer has a right to appoint
a new architect.103 The right may also be a duty and failure to appoint a new architect
a breach of contract by the employer entitling the contractor to damages.104 If there is
no term express or implied providing for the appointment of a new architect, it is
submitted that the employer cannot rely upon the absence of a certificate caused by
 the death or incapacity of the architect.105

5-036
Effect of proceedings. Where there is a wide arbitration clause, the contractor’s
remedy may be to take immediate arbitration proceedings to secure the appropriate
certificate.106 Where there is an award of an arbitrator that may be treated, in itself, as
being equivalent to a certificate.107 Where there is a statutory right of adjudication108
the same position might apply. Whether an adjudicator or an arbitrator can issue a
certificate or give an instruction will depend on the powers given by the terms under
which they act. The court does not have those powers but this will not, generally, be of
significance.109 The court could award payment as if a certificate had been issued and
therefore the contractor could equally obtain a remedy in this way. The sensible course
is to claim not merely a right to the certificate but also the amount said to be due so
that a monetary award can be made in the same proceedings if the claim is
established.110
5-037
In none of those proceedings is a certificate a condition precedent to a decision,
award or judgment for a sum of money to be paid to the contractor111 because:

“It does not, however, follow from the fact that a certificate is a condition precedent that
the absence of a certificate is a bar to the right to payment. This is because the decision
of the engineer in relation to certification is not conclusive of the rights of the parties,
unless they have clearly so provided. If the engineer’s decision is not binding, it can be
reviewed by an arbitrator (if there is an arbitration clause which permits such a review)
or by the court. If the arbitrator or the court decides that the engineer ought to have
issued a certificate which he refused to issue, or to have included a larger sum in a
certificate which he did issue, they can, and ordinarily will, hold that the contractor is
entitled to payment as if such certificate had been issued and award or give judgment
for the appropriate sum.”112

4. BINDING AND CONCLUSIVE CERTIFICATES

5-038
Definition. A certificate is binding and conclusive if there is no possibility of an
appeal on the merits, in any proceedings, against the matters determined in that
certificate. A final and binding certificate may, in certain circumstances, be challenged
but the grounds of challenge will be limited. For instance, the court113 may entertain
an application for a declaration and other relief if the architect has departed from their
instructions in a material respect so that either party would be able to say that the
certificate was not binding because they had not done what they were appointed to
do114 or if there are grounds which disqualify the certifier.115
5-039
The words “final”, “binding” and “conclusive” have been used singly or in
combination to describe such a certificate. The use of the word “final” is unsatisfactory
as a final certificate may be conclusive on some matters only, or not conclusive at
all.116 A final certificate may also affect liability under the Civil Liability (Contribution)
Act 1978.117

5-040
When is a certificate binding and conclusive? The question whether, and if so to
what extent, a certificate is binding and conclusive:

“…must depend upon the construction of [the] particular contractual documents and
though a consideration of the opinions of courts on other words in other contracts in
other cases is of assistance the adjudication … involves thereafter a return to a study of
 the contract under review.”118

Whilst it is a question of construction in each case to determine whether it was

intended that a particular certificate should be conclusive upon the matter with which
it purports to deal, very clear words are necessary for a certificate to have that effect.
5-041
As Lord Hoffmann observed:

“…to make the certificate conclusive could easily cause injustice. It may have been given
when the knowledge of the architect about the state of the work or the effect of external
causes was incomplete. Furthermore, the architect is the agent of the employer. He is a
professional man but can hardly be called independent. One would not readily assume
that the contractor would submit himself to be bound by his decisions, subject only to a
challenge on the grounds of bad faith or excess of power. It must be said that there are
instances in the 19th century and the early part of this one in which contracts were
construed as doing precisely this. There are also contracts which provided that in case of
dispute, the architect was to be arbitrator. But the notion of what amounted to a conflict
of interest was not then as well understood as it is now. And of course the inclusion of
such clauses is a matter for negotiation between the parties or, in a standard form, the
two sides of the industry, so that what is acceptable will to some extent depend upon the
bargaining strength of one side or the other. At all events, I think that today one should
require very clear words before construing a contract as giving an architect such
powers.”119

5-042
It is not possible to formulate a comprehensive test to determine whether a
certificate is binding and conclusive.120 Express words are frequently used, such as, for
example, that “the certificate of the engineer … shall be binding and conclusive on both
parties”.121 A final certificate which is a condition precedent to payment may be
conclusive.122 Progress certificates are usually not conclusive but have a provisional
validity.123

5-043
Binding and conclusive certificates. The decision of an architect as stated in their
certificate may be as binding and conclusive between the parties as if it were an
award.124 An architect, engineer or other person in granting ordinary certificates in
construction contracts is not an arbitrator125 and they cannot be compelled to state
their reasons. They are not obliged to observe the rules of natural justice by giving both
parties a hearing or other opportunity to state their case in a manner applicable to
those acting judicially. They are required to act independently, honestly and fairly,
provided that what is regarded as fair is flexible and tempered to the particular facts
and occasion.126 Fairness may require the certifier to invite representations from a
party if they have received them from the other but this need not necessarily be so.127
Fairness also entitles one or both of the parties to ask for a speedy decision, at least if
limitation is becoming a problem.128 It has been said that the object of making the
architect’s decision in a final certificate binding and conclusive is to have the benefit of
their skill and knowledge as an independent person to decide what is finally due
between the parties without recourse to the enormous expense and trouble often
involved in judicial proceedings.129 This does not appear to reflect current judicial
thinking130 or the approach of the legislature.131

5-044
Effect of such certificates. When parties have agreed that the architect shall decide
matters finally between them they are not allowed in the absence of fraud or special
circumstances132 to go against their decision upon such matters merely because they
 are dissatisfied with it. Thus, if the question of extras is within the architect’s
jurisdiction to decide finally, the contractor cannot recover more than the amount
allowed by the certificate.133 Conversely, the employer cannot go behind the certificate
and say that a lesser sum is due.134 If a certificate is given which the contract shows
was intended to be a final expression of the architect’s satisfaction, the employer is not
allowed subsequently to allege that there are any defects.135 This may cover patent and
latent defects.136
5-045
Cases which have decided whether or not a certificate is binding and conclusive
should be treated with caution. The question is one of construction and depends on the
particular terms of the contract137 and the judicial approach to such clauses. These
cases are examples of the approach of the courts. An arbitration clause was held to be
subject to the final certificate clause so that the architect’s final certificate was
conclusive and could not be reopened by the arbitrator save in the exceptional
circumstances therein stated.138 A majority of the House of Lords held that a final
certificate was conclusive in proceedings begun both before and after the date of its
issue. Lord Diplock, dissenting, held that the final certificate was conclusive that
everything which had to be done had by the date of the certificate been done and all
defects made good but that there was no exclusion of claims for alleged earlier defects
and their consequences.139 A certificate issued at the beginning of the maintenance
period was held to terminate the contractor’s obligations subject only to the
maintenance period provisions.140 It was held that the final certificate was conclusive
as to time and once the architect had issued a final certificate, he was functus officio
and was precluded from subsequently issuing any valid certificate.141 It was held that
a final certificate was not conclusive as to consequential losses suffered by the
employer between practical completion and the date of the final certificate.142 The
Court of Appeal held that a final certificate which was conclusive so as to bar a
contractual claim also barred an equivalent claim in tort.143 The Court of Appeal
decided that the final certificate had no conclusive effect.144 The Hong Kong Court of
Appeal held that the maintenance certificate was not conclusive that the works had
been performed in accordance with the contract.145 The Court of Appeal held that the
conclusive effect of a final certificate not restricted to such materials and workmanship
as were expressly reserved by the contract to the opinion of the architect for approval
of quality and standards respectively, but included all materials and workmanship
where approval of such matters is inherently something for the opinion of the
architect.146 A final certificate was conclusive evidence that all the work had been
completed in accordance with the requirements of the contract.147 It was held that a
final certificate was an evidential bar and precluded the claimant from being able to
prove the facts necessary to establish liability, so that the contractor was not “liable”
under s.1(6) of the Civil Liability (Contribution) Act 1978 and was not liable to
contribute under that Act.148 The Court of Appeal held that the agreement of the final
account and final statement was conclusive evidence of compliance with the
provisions of the contract in relation to patent and latent defects, and that the
reference to quality of material and standard of workmanship also covered compliance
with statutory requirements but did not apply to the contractor’s breach of its
obligation to complete the design of the works.149

5-046
“And” clauses. A contractor must frequently complete work according to a
specification or to a certain standard and to the satisfaction of the architect. It is a
question of construction in each case whether this imposes a double obligation on the
contractor. There is no rule of law or principle of construction applicable to
construction contracts that, where the contract contains a term that a structure is to be
erected in a prescribed manner and to the satisfaction of the employer’s architect or
 engineer, the contractor fulfils that obligation if the architect or engineer is in fact
satisfied even though the structure has not been erected in the prescribed manner. The
general principles of construction apply and the meaning of any clause must be
ascertained from within the particular contract by construing the contract as a whole
and giving effect so far as possible to every part of it.150 In that case, the engineer had
issued an unqualified certificate of satisfaction, but the obligation to satisfy the
engineer was held to be cumulative upon other obligations. The balance of English
authority was said to favour a cumulative approach, but there was in fact held to be no
particular applicable rule of law.151
5-047
In some cases it has been held that it does not impose a double obligation, in the
sense that when the architect had given a certificate of satisfaction the employer was
not permitted to give evidence showing that the work was not according to the
specification or the required standard.152 Where work was to be completed in
accordance with plans and a specification, the work to be carried out to the satisfaction
of the surveyor and local sanitary inspector, and they expressed their satisfaction upon
completion, and defects then appeared, it was held that their approval was merely an
added protection to the employer. It was not conclusive, so that the employer was
entitled to recover damages.153

5-048
Expiration of time. The contract may provide that a certificate is not to become
conclusive until the expiration of a certain period from its issue,154 or that it shall not
be conclusive if either party takes prescribed steps, such as commencing arbitration
proceedings155 or adjudication proceedings156 within a limited time. Where the
prescribed steps refer to commencement of “adjudication, arbitration or other
proceedings” within a limited time, certain proceedings commenced within that
limited time will not permit other proceedings to be commenced later.157

5. ATTACKING A CERTIFICATE

5-049
In addition to the question of whether a certificate is not conclusive, there may be
other grounds on which a particular certificate, when given, can be successfully
attacked and set aside. This involves a consideration not only of the parties’ intention
to be derived from the contract, but of their conduct and that of the architect.

(a) Not within the architect’s jurisdiction

5-050
The architect’s decision is not conclusive upon matters which are not within the
architect’s jurisdiction to decide.158 A decision may be conclusive on some matters but
not on others.159

5-051
Employer’s breach of contract. It seems that clear language is required before an
architect’s powers of certification extend to cover breaches of contract by the
employer.160 Where contracts do provide that breaches of contract by the employer
can give rise to extensions of time or loss and expense then those matters fall within
the remit of the certifier for that purpose. In the absence of clear words if an architect
gives a certificate for payment and the contractor has incurred losses caused by the
employer’s breach of contract, such as delay or interference, the certificate is not
conclusive upon the contractor’s claim for damages unless it is an award upon a proper
reference of the dispute.161 However, the contractor may waive its rights to object to
 the certificate by expressly seeking the architect’s decision on the matter.162

5-052
New contract. The architect’s power of certifying under a contract cannot extend to
matters which have arisen under a new and independent contract.163

5-053
Outside time-limit. If there is a time-limit for the giving of a certificate, a purported
certificate given after the expiry of the time-limit is void and of no effect unless the
parties agree to extend the time.164 It is a question of construction in each case
whether the time-limits in a certification clause provide a timetable which is
mandatory. Express words are likely to be necessary to have that effect. An alteration
to the timetable must be made pursuant to any express or implied terms for its
alteration agreed by the parties.165

(b) Not properly made

5-054
A certificate is invalid, and therefore not conclusive, if it is not properly made in
accordance with the contract.166 This will also be so if any necessary precondition as to
its issue has not been fulfilled.167

5-055
Form of certificate. The certificate must be in the form, if any, required by the
contract.168 Thus a mere checking of the contractor’s account for extras was held not to
be a certificate of satisfactory completion.169 Where, an engineer’s “decision” was
required as a condition precedent to arbitration, an informal rejection of the
contractor’s claims was held not to amount to such decision.170 If the architect is
merely required to certify their satisfaction with no express requirement for a written
certificate, an oral statement of satisfaction is sufficient.171 In all cases it must be clear
that there was an intention to issue the certificate in question and that it was in
substance what the contract required.172 The ordinary rules of construction apply173
so that the test of intention, it is submitted, is objective. It is thought that evidence of
surrounding circumstances such as relevant letters or conversations would frequently
be admissible in deciding whether a document or, in the unusual case, an oral
statement, was the certificate.174 A certificate was held upon the facts of the case to be
the final certificate, although not so expressed upon its face, by reference in particular
to an accompanying letter which said “We are enclosing the final certificate”.175

5-056
Delegation of duties. In giving a certificate, the architect is entitled to make use of
the assistance of others, such as, for example, a quantity surveyor, for detailed matters
of measurement and valuation, but the certificate must be the architect’s. The architect
cannot delegate the whole function of certifying.176 An engineer may receive help from
the resident or project engineer.

“In the commercial world many decisions are made by people such as [the engineer],
who append their signatures to letters drafted by others. It would require compelling
evidence to establish in such circumstances that the decision was not that of the
signatory.”177

5-057
Given by wrong person. A certificate must be given by the person or persons
authorised by the contract.178 If a particular person is named as the certifier, in the
 absence of a term indicating the contrary, that person and no other can give the
certificate.179 Where the contract identifies the certifier by description, as, for
example, “anyone whom from time to time the (employer) might choose to select as
chief engineer”,180 or “AB or other the engineer” of the employer,181 then the person
who is the properly appointed engineer at the time when the certificate is required to
be given has power to certify182 unless some other act of appointment is required.183

5-058
Parties not heard. The architect is not normally bound to give anything in the nature
of a formal hearing.184 When acting under the conventional forms of contract, they are
not obliged to observe the rules of natural justice in a manner applicable to those
acting judicially. They are required to act independently, honestly and fairly, provided
that what is regarded as fair is flexible and tempered to the particular facts and
occasion.185 Fairness may require the certifier to invite representations from a party if
they have received them from the other but this need not necessarily be so. Fairness
also entitles one or both of the parties to ask for a speedy decision, at least if limitation
is becoming a problem.186 Where the contract provided that the certifier’s decision on
a wide range of matters was to “be final and without appeal” it was said that they could
if they wished hear arguments from the parties, and state their own view to obtain
their opinions, provided that they gave equal opportunity to each party and did not
allow their judgment to be influenced by directions given to them in their capacity
solely as agent for the employer.187 On the special wording of another contract it was
said that they must hear the parties before giving their certificate in relation to any
dispute.188

5-059
Mistake by architect. A certificate of the architect intended to be binding and
conclusive “cannot be impeached for mere negligence, or mere mistake or mere
idleness on the part of the architect”.189 The position was formerly said to be different
where there is a valuation.190 But in Campbell v Edwards,191 Lord Denning MR said
that the law has been transformed because the parties now have, since the decisions of
the House of Lords in Sutcliffe v Thackrah192 and Arenson v Arenson,193 a claim for
negligence against architects and valuers.194 The distinction sometimes made between
a speaking and a non-speaking valuation is not a relevant distinction, the real question
being whether it is possible to say from all the evidence which is properly before the
court what the valuer or certifier has done and why they have done it. The first step is
to see what the parties have agreed as a matter of contract to remit to the expert.195 If
they have departed from their instructions in a material respect, either party would be
able to say that the certificate was not binding because they had not done what they
were appointed to do.196
5-060
Otherwise:

“…it is simply the law of contract. If two persons agree that the price of property should
be fixed by a valuer on whom they agree, and he gives that valuation honestly and in
good faith, they are bound by it. Even if he has made a mistake they are still bound by it.
The reason is because they have agreed to be bound by it.”197

5-061
It has never been held that the law relating to valuations also applies to a conclusive
architect’s certificate. The point is unlikely to arise factually since it is improbable both
that an architect’s certificate would be open to the limited challenge indicated in the
previous paragraph and that the parties had failed to take steps to prevent it becoming
conclusive, for example by starting arbitration proceedings within the prescribed time.
It is suggested, however, that there is no relevant distinction in principle between
 It is suggested, however, that there is no relevant distinction in principle between
conclusive share valuations and conclusive architect’s certificates.

(c) Disqualification of the certifier

5-062
Professional independence. An architect is not an arbitrator but does have:

“…two different types of function to perform. In many matters he is bound to act on his
client’s instructions, whether he agrees with them or not; but in many other matters
requiring professional skill he must form and act on his own opinion.”198

This was said with reference to the architect’s position under the Standard Form of
Building Contract but it may be taken as applicable to most forms of construction
contract where the architect, engineer or other person performs the traditional duties
of agent for the employer of supervision and of certification.199 The precise role and
duties of the decision maker will be determined by the terms of the contract under
which they are required to act.200 In performing these functions, the architect or
engineer is required to act independently201 and honestly. It has been said that the
concepts of being independent, impartial, fair and honest are overlapping but not
synonymous.202 The use of the word “impartially” does not overlay independence and
honesty so as to encompass natural justice. The duty is one to act “fairly”, so long as
what is regarded as fair is flexible and tempered to the particular facts and
occasion.203
5-063
The employer and the contractor make their contract on the understanding that in
all matters where the architect has to apply their professional skill they will act in a
fair and unbiased204 manner in applying the terms of the contract.205 It is such an
unusual state of affairs for the employer itself to be the certifier and decision maker
that this can only be achieved by an express term.206 The matters in respect of which
the architect is required to act include not only certificates for payment and for
satisfaction with the works but many instances where the architect has to form a
professional opinion upon matters which will affect the amount paid to (or to be
deducted from) the contractor. If the architect fails to act in accordance with the duty
to act independently, honestly, “impartially” and “fairly” where the contract requires
that, the architect is said to be disqualified as a certifier and the certificates are of no
effect.207 The architect will remain disqualified unless the contractor with full
knowledge of the facts waives the breach.208 An employer may be able to rely on an
erroneous certificate issued by an honest but incompetent architect.209

5-064
Fraud, collusion, dishonesty. Fraud or collusion with one of the parties, or
dishonesty, disqualifies the certifier.210 It has been held that a clause providing that the
architect’s certificate should not be set aside or attempted to be set aside on the ground
of fraud or collusion was not void as against public policy, and consequently an
allegation of fraud on the part of the architect in giving a certificate was not
entertained by the court.211 The decision has been strongly criticised212 and open to
review by the Court of Appeal.213

5-065
Failure to certify independently. Without any fraud or turpitude on the part of the
architect they may so mistake their position, or lack the firmness to repel unworthy
communications by one of the parties, that they lose the independence required of
them and therefore become disqualified.214 Where the architect failed to issue
certificates at the proper time and wrote to the contractor saying:
 “…had you better not call and see my clients, because in the face of their instructions to
me I cannot issue a certificate whatever my own private opinion in the matter…”

it was held that the architect had become so much under the influence of the employer
that they had lost their independence, and had not recovered it when they gave a final
certificate which was therefore set aside.215

5-066
Unknown interests. A certifier is disqualified if they conceal any unusual interest
which might influence their mind as certifier, such as a promise to the employer, as
opposed to a mere estimate, that the final cost should not exceed a certain figure.216

5-067
Known interests do not disqualify. The known interests of the architect at the time
of entering into the contract do not disqualify them.217 The interests of the architect
which the contractor knows of, or, it is submitted, must be taken to know of, at the time
of entering into the contract include: that the architect will have given an estimate of
the cost to the employer; that they are paid by and is liable to dismissal by or in
damages for negligence to the employer; that they “has in divers ways to look after the
interest”218 of the employer, including supervising the works to see that they comply
with the contract; and that they may have a conflict of interest which is an
“intrinsically inherent possible concomitant” of their position under the contract,
particularly if they are deciding a dispute between the employer and contractor where
their own conduct forms the subject matter of the dispute.219 There is “neither
unfairness nor partisanship in ensuring that the work is properly carried out”.220 A
contractor cannot therefore claim that the architect:

“…must be in the position of an independent arbitrator, who has no other duty which
involves acting in the interests of one of the parties”.221

5-068
The architect may consult with the employer, and report to it on the quality of the
work, and upon the contractor’s expenditure, and give it an estimate of the proper sum
to be paid to the contractor. Such actions, in the absence of fraud or collusion, do not
disqualify them, provided they do not submit to the employer’s control and
influence222 so as to be incapable of forming an independent view when they come to
give their certificate.223 On a legal matter such as the construction of the contract the
architect is entitled to consult with the employer’s solicitor and counsel,224 provided, it
is submitted, they treat what they say not as a direction but as advice only, which they
are in no way bound to follow. Architects may think it more appropriate, in practice, to
take independent advice.
5-069
An architect is not disqualified merely by being a shareholder in,225 or even the
president of,226 the employer company, or an employee of the employer,227 provided
that the contractor knows or, it seems, must be taken to know, of the architect’s
interest.228 With local authority contracts, the architect is very often an employee of
the employer.

(d) Effect of an arbitration clause

5-070
The existence of an arbitration clause in a contract may affect the question whether
a certificate is binding and conclusive in a number of ways. As a matter of construction
of the particular terms of the contract: the existence of the arbitration clause may show
that the certificate was not intended to be binding and conclusive at all229; the
 arbitration clause may have no effect so that the certificate may remain conclusive
both in a court of law and in any arbitration230; or the arbitration clause may permit a
review of the merits of the certificate in an arbitration but, if very clear words are
used,231 not in a court of law.232

FOOTNOTES
1Minster Trust v Traps Tractors [1954] 1 W.L.R. 963 at 973.

2See para.11-015.

3See para.4-023.

4See Dimes v Grand Junction Canal (Proprietors) (1852) 3 H.L. Cas. 794, HL.

5Dallman v King (1837) 7 L.J.C.P. 6; Stadhard v Lee (1863) 32 L.J.Q.B. 75.

6Dallman v King (1837) 7 L.J.C.P. 6, at 9 and 11. Another way of stating the effect of this
proposition is to say that the court treats the promise to complete to the employer’s
approval as a mere term and not as a condition.

7Dallman v King (1837) 7 L.J.C.P. 6. See “Substantial performance” at para.4-016 and

following.

8Dallman v King (1837) 7 L.J.C.P. 6; Parsons v Sexton (1847) 4 C.B. 899; Andrews v Belfield
(1857) 2 C.B.(N.S.) 779. See also, Cammell Laird & Co v The Manganese Bronze and Brass
Co [1934] A.C. 402, HL: sale of goods to be completed to “entire satisfaction” of a third
party; Minster Trust v Traps Tractors [1954] 1 W.L.R. 963 at 973.

9Ripley v Lordan (1860) 2 L.T. 154.

10Ripley v Lordan (1860) 2 L.T. 154.

11Mackay v Dick (1881) 6 App. Cas. 251, HL.

12Cockburn CJ in Stadhard v Lee (1863) 32 L.J.Q.B. 75 at 78; Diggle v Ogston Motor Co

(1915) 112 L.T. 1029. See also, Minster Trust Ltd v Traps Tractors [1954] 1 W.L.R. 963 at
973; cf. Renard Constructions v Minister for Public Works (1992) 33 Con. L.R. 72 (New
South Wales CA).
13Stadhard v Lee (1863) 32 L.J.Q.B. 75 at 78.

14Andrews v Belfield (1857) 2 C.B. (N.S.) 779. See also, Docker v Hyams [1969] 1 W.L.R.
1060 at 1065, CA, where the effect of cases dealing with agreements to provide ships or
goods to the purchaser’s approval is reviewed.

15Minster Trust Ltd v Traps Tractors [1954] 1 W.L.R. 963 at 973.

16Bateman (Lord) v Thompson (1875) H.B.C. (4th edn), Vol.2, para.36, CA.

17See also “Form of certificate” at para.5-055.

18Emson Contractors v Protea Estates (1987) 39 B.L.R. 126; B.R. & E.P. Cantrell v Wright &
Fuller Ltd [2003] B.L.R. 412 at 431.

19Token Construction v Charlton Estates (1973) 1 B.L.R. 48 at 52, CA, citing Minster Trust v
Traps Tractors Ltd [1954] 1 W.L.R. 963; B.R. & E.P. Cantrell v Wright & Fuller Ltd [2003]
B.L.R. 412 at 430.

20B.R. & E.P. Cantrell v Wright & Fuller Ltd [2003] B.L.R. 412 at 431.

21Token Construction v Charlton Estates (1973) 1 B.L.R. 48 at 52, CA adopting H.B.C. (10th
edn), para.479; B.R. & E.P. Cantrell v Wright & Fuller Ltd [2003] B.L.R. 412 at 431. Contrast
Costain International Ltd v Att Gen (1983) 23 B.L.R. 48 (Hong Kong CA), where it was held
that an “order in writing signed by the engineer” effecting a “variation in time for
completion of the contract” was not a “certificate” for the purposes of an arbitration
clause limiting arbitration before completion, inter alia, to disputes concerning the
withholding of any certificate.

22Token Construction v Charlton Estates (1973) 1 B.L.R. 48 at 58, CA; cf. Pyrok Industries v
Chee Tat Engineering (1988) 41 B.L.R. 124 (Hong Kong HC).

23B.R. & E.P. Cantrell v Wright & Fuller Ltd [2003] B.L.R. 412 at 430–431.

24Token Construction v Charlton Estates (1973) 1 B.L.R. 48 at 57, CA.

25London Borough of Camden v Thomas McInerney (1986) 2 Const. L.J. 293; cf. Token
Construction v Charlton Estates (1973) 1 B.L.R. 48, CA, where the point was not decided.

26Cf. Anglian Water Authority v R.D.L. Contracting (1988) 43 B.L.R. 98, holding that notice
of an engineer’s decision under Cl.66 of the ICE Conditions (5th edn) was on the facts
properly served on the employer.

27London Borough of Camden v Thomas McInerney (1986) 2 Const. L.J. 293.

28Dyson LJ in Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R.
3850 at 3871, CA.

29See Tharsis Sulphur and Copper Co v M’Elroy (1878) 3 App. Cas. 1040, HL; cf. Canterbury
Pipe Lines v Christchurch Drainage (1979) 16 B.L.R. 76 at 95 (New Zealand CA).

30See Standard Form of Building Contract, Cll.4.9–4.13 at para.20-278 and following.

31As to the position where there is no system of interim certificates: see Rupert Morgan
Building Services Ltd v Jervis [2004] 1 W.L.R. 1867 at 1871, CA.

32Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850, CA.

33Lamprell v Billericay Union (1849) 18 L.J.Ex. 282.

34Beaufort Developments v Gilbert-Ash [1999] 1 A.C. 266 at 276, HL.

35Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at 3870,
CA.

36Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at 3862,
CA.

37Lubenham v South Pembrokeshire DC (1986) 33 B.L.R. 39 at 55, CA.

38Rupert Morgan Building Services Ltd v Jervis [2004] 1 W.L.R. 1867 at 1870, CA.

39See para.17-095 for entitlement to interest in arbitration.

40Sempra Metals Ltd v Inland Revenue Commissioners [2008] 1 A.C. 561.

41Hiap Hong & Company v Hong Huat Development Company Ltd (2001) 17 Const. L.J. 530
(Singapore CA) suggests that there is no such remedy but see I.N.D. Wallace QC,
“Singapore Court of Appeal: Two Recent Decisions” (2001) 17 Const. L.J. 479.

42See para.18-007 and following for the applicability of the Act, and para.18-021 and
following for adjudication.

43See Ch.23 for a general commentary on the NEC form.

44C.M. Pillings v Kent Investments (1985) 30 B.L.R. 80, CA; cf. R.M. Douglas v Bass (1990)
53 B.L.R. 119 and see “No dispute” at para.18-074 and following.

45This section is substituted by the Local Democracy, Economic Development and

Construction Act 2009 s.144 but the principle stated remains applicable: see App.A.

46To be effective a notice must specify the amount proposed to be withheld and the
ground for withholding payment: s.111(2) and see para.18-112 and following. For the
applicability of the Act see para.18-007 and following.

47Rupert Morgan Building Services Ltd v Jervis [2004] 1 W.L.R. 1867, CA.

48Housing Grants, Construction and Regeneration Act 1996 s.111(9). See Ch.18 for
adjudication under the 1996 Act.

49See para.4-004 and cf. Canterbury Pipe Lines v Christchurch Drainage (1979) 16 B.L.R.
76 at 95 (New Zealand CA).

50Pickering v Ilfracombe Railway (1868) L.R. 3 C.P. 235; Rupert Morgan Building Services
Ltd v Jervis [2004] 1 W.L.R. 1867, CA.

51Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at 3876,
CA.

52Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at 3870,
and 3873, CA.

53Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at 3876,
CA.

54C.M. Pillings v Kent Investments (1985) 30 B.L.R. 80, CA; cf. R.M. Douglas v Bass (1990)
53 B.L.R. 119 and see “No dispute” at para.18-074 and following.

55Workman, Clark & Co v Lloyd Brazileno [1908] 1 K.B. 968, CA; Rupert Morgan Building
Services Ltd v Jervis [2004] 1 W.L.R. 1867, CA. For summary judgment, see para.19-119
and following and for set-off and counterclaim, see para.19-107 and following.
56C.M. Pillings v Kent Investments (1985) 30 B.L.R. 80, CA; London Borough of Barking &
Dagenham v Terrapin Construction Ltd [2000] B.L.R. 479, CA.

57For general considerations relating to a final certificate under the Standard Form of
Building Contract, see B.R. & E.P. Cantrell v Wright & Fuller Ltd [2003] B.L.R. 412 at 434.

58As stated above, Housing Grants, Construction and Regeneration Act 1996 s.111 is
amended by Local Democracy, Economic Development and Construction Act 2009 s.144
but the principle remains applicable: see App.A.

59Rupert Morgan Building Services Ltd v Jervis [2004] 1 W.L.R. 1867 at 1870, CA.

60Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at 3870
and 3873, CA. For a criticism of this proposition, see W. MacLaughlin, “Accrual of a cause
of action for payment in engineering contracts” (2006) 22 Const. L.J. 445.

61See, e.g. Cl.1.9.1 of the Standard Form of Building Contract discussed in para.20-055;
Crown Estates Commissioners v John Mowlem & Co Ltd (1994) 70 B.L.R. 1, CA.

62National Coal Board v Neill [1985] Q.B. 300 at 308. The judgment expresses it as being
factually “conclusive” evidence of satisfaction.

63For forfeiture, see para.11-001.

64See Sattin v Poole (1901) H.B.C. (4th edn), Vol.2, para.306, DC. Contrast Costain
International Ltd v Att Gen (1983) 23 B.L.R. 48 (Hong Kong CA) referred to in para.5-010.
For liquidated damages and extension of time, see para.10-001 and following.

65See para.5-038 and following.

66See, e.g. Cll.4.18–4.20 of the Standard Form of Building Contract discussed in para.20-
325 and following. See also para.4-011.

67F.R. Absalom Ltd v Great Western (London) Garden Village Society [1933] A.C. 592 at
611, HL.

68“Architect” is used to mean the architect as defined by the contract. See para.5-057,
“Given by wrong person”.

69See Costain Building and Civil Engineering v Scottish Rugby Union (1993) 69 B.L.R. 80
(Court of Session), for a decision on the then ICE Conditions.
70Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at 3861,
CA.

71Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597 at 612; Lubenham v South
Pembrokeshire DC (1986) 33 B.L.R. 39 at 55, CA, considering the 1963 Standard Form of
Building Contract; cf. South Australian Railways Commissioner v Egan (1973) 47 A.L.J.R.
140.

72Morgan v Birnie (1833) 9 Bing. 672; Grafton v Eastern Counties Railway (1853) 8 Ex. 699;
Scott v Liverpool Corp (1858) 28 L.J.Ch. 230; Westwood v The Secretary of State for India
(1863) 7 L.T. 736; Wallace v Brandon & Byshottles UDC (1903) H.B.C. (4th edn), Vol.2,
para.362, CA.

73Scott v Liverpool Corp (1858) 28 L.J.Ch. 230 at 239; Glenn v Leith (1853) 1 Comm. Law
Rep. 569; Stevenson v Watson (1879) 4 C.P.D. 148; Morgan v Lariviere (1875) L.R. 7 H.L.
423, HL.

74Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at 3861,
CA.

75Under of Housing Grants, Construction and Regeneration Act 1996 s.108: see para.18-
021 and following.

76Lubenham v South Pembrokeshire DC (1986) 33 B.L.R. 39, CA.

77Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at 3861,
CA.

78See the Scottish case of Howden v Powell Duffryn Steam Coal Co 1912 S.C. 920; Re
Hohenzollern, etc. and City of London Contract Corp (1886) 54 L.T. 596, H.B.C. (4th edn),
Vol.2, para.100, CA; cf. London Gas Light Co v Chelsea Vestry (1860) 2 L.T. 217.

79Pashby v Birmingham Corp (1856) 18 C.B. 2 at 32.

80See para.10-037 and Reinwood Ltd v L. Brown & Sons Ltd [2008] 1 W.L.R. 696.

81Brightside Kilpatrick v Mitchell Construction [1975] 2 Lloyd’s Rep. 493 at 497.

82See para.11-003 for determination and para.20-481 for Cl.8.4 of the Standard Form of
Building Contract, where the requirement is a “notice” not a certificate.
83Canterbury Pipe Lines v Christchurch Drainage (1979) 16 B.L.R. 76; cf. Lubenham v
South Pembrokeshire DC (1986) 33 B.L.R. 39 at 70, CA.

84See para.18-114 and following. s.112 has been amended by the Local Democracy,
Economic Development and Construction Act 2009: see App.A.

85Lewis v Hoare (1881) 44 L.T. 66, HL. For assignments, see para.13-001.

86Lewis v Hoare (1881) 44 L.T. 66, HL.

87Nene Housing Society v National Westminster Bank (1980) 16 B.L.R. 22; cf. Perar BV v
General Surety and Guarantee Co Ltd (1994) 66 B.L.R. 72, CA; Trafalgar House
Construction v General Surety (1995) 73 B.L.R. 32, HL and para.11-052.

88London Regional (St George’s Court) Ltd v Ministry of Defence [2008] EWCA Civ 1212;
[2009] B.L.R. 20 at [27]–[28].

89See “Certificates as Condition Precedent” at para.5-023.

90See para.4-072.

91Panamena Europea Navigacion v Frederick Leyland [1947] A.C. 428, HL; Hickman v
Roberts [1913] A.C. 229, HL; Brunsden v Beresford (1883) 1 Cab. & El. 125. For full
discussion of disqualification, see para.5-062 and following.

92Neale v Richardson [1938] 1 All E.R. 753, CA; Botterill v Ware Guardians (1886) 2 T.L.R.
621; Cooper v Uttoxeter Burial Board (1864) 11 L.T. 565; cf. Kellett v New Mills UDC (1900)
H.B.C. (4th edn), Vol.2, para.298; Scott v Liverpool Corp (1858) 28 L.J.Ch. 230 at 236.

93Blackburn J in Roberts v Bury Commissioners (1870) L.R. 5 C.P. 310 at 326; Panamena
Europea Navigacion v Frederick Leyland [1947] A.C. 428, HL. This passage was cited with
approval in Al Waddan Hotel Ltd v MAN Enterprise SAL (Offshore) [2015] B.L.R. 478.

94Russell v Sa da Bandeira (1862) 13 C.B. (N.S.) 149; see also, Roberts v Bury
Commissioners (1870) L.R. 5 C.P. 310. For penalties, used here in the sense of liquidated
damages, see para.10-001.

95Croudace v London Borough of Lambeth (1986) 33 B.L.R. 20, CA, referring to Smith v
Howden Union, H.B.C. (4th edn), Vol.2, 156; Al Waddan Hotel Ltd v MAN Enterprise SAL
(Offshore) [2015] B.L.R. 478. See also Construction Award No. 3 (1994) Const.L.Y. 65 at 81.
96See Penwith DC v V.P. Developments Ltd [1999] EWHC 231 (TCC), followed in B.R. & E.P.
Cantrell v Wright & Fuller Ltd [2003] B.L.R. 412 at 435. Cf. Hiap Hong & Company v Hong
Huat Development Company Ltd (2001) 17 Const. L.J. 530 (Singapore, CA) and I.N.D.
Wallace QC, “Singapore Court of Appeal; Two Recent Decisions” (2001) 17 Const. L.J. 479.

97This agency issue was considered but not decided in Tameside Metropolitan BC v
Barlow Securities Group Services Ltd [2001] B.L.R. 113 at 124, CA.

98See Sutcliffe v Thackrah [1974] A.C. 727, HL; Scheldebouw BV v St James Homes Ltd
[2006] B.L.R. 113 at 125 and para.14-016.

99Panamena Europea Navigacion v Frederick Leyland (1943) 76 Lloyd’s Rep. 113, CA;
[1947] A.C. 428, HL; Perini Corporation v Commonwealth of Australia [1969] 2 N.S.W.R.
350; Penwith DC v V.P. Developments Ltd unreported 21 May 1999, TCC followed in B.R. &
E.P. Cantrell v Wright & Fuller Ltd [2003] B.L.R. 412 at 435.

100Panamena Europea Navigacion v Frederick Leyland [1947] A.C. 428, HL; Hotham v East
India Co (1787) 1 T.R. 638; Oshawa (City of) v Brennan Paving Co Ltd [1955] S.C.R. 76
(Canada SC); cf. Perini v Commonwealth of Australia (1969) 12 B.L.R. 82; R&C Electrical
Engineers Ltd v Shaylor Construction Ltd [2012] B.L.R. 373 at [61] where the court
distinguished between circumstances which prevented the contractual machinery being
operated, and circumstances in which one party refused to operate that machinery
although in a position to do so, where the problem was capable of being cured; Al
Waddan Hotel Ltd v MAN Enterprise SAL (Offshore) [2015] B.L.R. 478.

101Panamena Europea Navigacion v Frederick Leyland [1947] A.C. 428 at 435 and 436, HL;
Kellett v New Mills UDC (1900) H.B.C. (4th edn), Vol.2, para.298 at 300 and Al Waddan
Hotel Ltd v MAN Enterprise SAL (Offshore) [2015] B.L.R. 478.

102See Articles of Agreement art.3, Standard Form of Building Contract, para.20-022 and
cases cited under “Given by wrong person” at para.15-057.

103Cf. Panamena Europea Navigacion v Frederick Leyland [1947] A.C. 428 at 436, HL.

104Croudace v London Borough of Lambeth (1986) 33 B.L.R. 20, CA.

105Cf. Kellett v New Mills UDC (1900) H.B.C. (4th edn), Vol.2, para.298 at 300.

106Lubenham v South Pembrokeshire DC (1986) 33 B.L.R. 39, CA and see para.3-063; I.N.D.
Wallace QC, “Interim Certificates—Another Heresy? The Lubenham Case” (1987) 3 Const.
L.J. 172. Contrast Canterbury Pipe Lines v Christchurch Drainage (1979) 16 B.L.R. 76 at 120
(New Zealand CA), where the employer refused to meet the progress payment and
denied the contractor the opportunity to obtain redress through arbitration.
107See Birse Construction Ltd v Co-operative Wholesale Society (1997) 84 B.L.R. 58, CA
where a nominated sub-contractor was entitled to payment of sums contained in an
award in an arbitration between the employer and the contractor, even where the
award was not paid. The award was treated as being equivalent to a certificate which
gave the sub-contractor rights under the sub-contract.

108Housing Grants, Construction and Regeneration Act 1996 s.108 and see para.18-021
and following.

109Beaufort Developments (NI) Ltd v Gilbert-Ash Ltd [1999] 1 A.C. 266 at 290, per Lord
Hope, HL.

110Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at
3861, CA.

111Brodie v Cardiff Corp [1919] A.C. 337, HL; Neale v Richardson [1938] 1 All E.R. 753, CA;
Prestige & Co v Brettell [1938] 4 All E.R. 346, CA; Beaufort Developments (NI) Ltd v Gilbert-
Ash Ltd [1999] 1 A.C. 266, HL. For arbitration generally, see Ch.17; for adjudication see
para.18-021 and following and for court proceedings see Ch.19.

112Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] 1 W.L.R. 3850 at
3861, CA.

113Or arbitrator, if there is a comprehensive arbitration clause: see para.5-070.

114Jones v Sherwood Computer Services [1992] 1 W.L.R. 277, CA; Nikko Hotels v MEPC Ltd
[1991] 2 E.G.L.R. 103 at 108; Healds Foods Ltd v Hyde Dairies Ltd, unreported, December
1, 1994, Potter J; West of England Shipowners v Cristal Ltd [1996] 1 Lloyd’s Rep. 370 at 377,
CA; Macro v Thompson [1996] B.C.C. 707; Mercury Communications Ltd v Director General
of Telecommunications [1996] 1 W.L.R. 48, HL; Conoco v Phillips Petroleum (1996) C.I.L.L.
1204; Dixons Group Plc v Murray-Oboynski (1997) 86 B.L.R. 16. See further “Mistake by
architect” at para.5-059; and consider Re Davstone Estates Ltd’s Leases [1969] 2 Ch. 378
applying Lee v Showmen’s Guild of Great Britain [1952] 2 Q.B. 329 at 342 and 354, CA;
Kaye (P. & M.) Ltd v Hosier & Dickinson [1972] 1 W.L.R. 146 at 157, HL: “The court retains
ultimate control in seeing that the architect acts properly and honestly and in
accordance with the contract”, per Lord Wilberforce.

115See para.5-044, “Effect of such certificates” and para.5-062 and following

“Disqualification of the certifier”.

116See para.5-043 and following and Robins v Goddard [1905] 1 K.B. 294, CA, discussed in
Beaufort Developments (NI) Ltd v Gilbert-Ash Ltd [1999] 1 A.C. 266 at 276–279, HL.
117Oxford University Fixed Assets Ltd v Architects Design Partnership (1999) 15 Const. L.J.
470.

118Ata Ul Haq v City Council of Nairobi (1962) 28 B.L.R. 76 at 95, PC; cf. Mitsui v Att Gen of
Hong Kong (1986) 33 B.L.R. 1 at 18, PC.

119Beaufort Developments (NI) Ltd v Gilbert-Ash Ltd [1999] 1 A.C. 266 at 276.

120Cf. Halsbury’s Laws of England, edited by Lord MacKay of Clashfern, 5th edn (London:
LexisNexis, 2014), Vol.6, para.332.

121Kennedy v Barrow-in-Furness Corp (1909) H.B.C. (4th edn), Vol.2, para.411 at 413, CA.
See para.20-055 for a discussion of the effect of Cl.1.9.1 of the Standard Form of Building
Contract.

122Sharpe v San Paulo Railway (1873) L.R. 8 Ch.App. 597.

123See para.5-013.

124Goodyear v Weymouth Corp (1865) 35 L.J.C.P. 12 at 17.

125Sutcliffe v Thackrah [1974] A.C. 727, HL; cf. Pacific Associates v Baxter [1990] Q.B. 993,
CA where it was decided that an engineer did not owe the contractor a duty of care in
relation to certification. See also para.14-135.

126See AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] 1 W.L.R. 2339,
CA: a decision under Cl.66 of the ICE Conditions (5th edn). See also, Hounslow LBC v
Twickenham Garden Developments [1971] Ch. 233 at 259: a decision with reference to a
notice under Cl.25(1) of the 1963 Standard Form of Building Contract. Most certificates in
practice depend on the architect receiving information from the contractor. It is thought
that architects would normally be ill-advised to issue certificates adverse to the
contractor in avoidable ignorance of their case. See further “Parties not heard” at para.5-
058.

127AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] 1 W.L.R. 2339 at
2355, CA.

128AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] 1 W.L.R. 2339 at
2355, CA.

129Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597 at 609 and 611; Tullis v Jacson
[1892] 3 Ch. 441 at 444.

130See Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 A.C. 266 at 276, per
Lord Hoffmann.

131By the introduction of adjudication under of Housing Grants, Construction and

Regeneration Act 1996 s.108.

132See para.5-062 and following.

133Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597; Brunsden v Staines Local Board
(1884) 1 Cab. & El. 272.

134See para.4-083.

135Harvey v Lawrence (1867) 15 L.T. 571; Bateman (Lord) v Thompson (1875) H.B.C. (4th
edn), Vol.2, para.36, CA; Dunaberg Railway v Hopkins (1877) 36 L.T. 733; Kaye (P. & M.) Ltd
v Hosier & Dickinson [1972] 1 W.L.R. 146, HL; Crown Estates Commissioners v John
Mowlem (1994) 70 B.L.R. 1 and see cases referred to in the text, below; cf. Billyack v
Leyland Construction Co Ltd [1968] 1 W.L.R. 471.

136In the case of Cl.30.8.1.1 of the 1981 JCT Standard Form of Building Contract with
Contractor’s Design, it did not cover design defects: London Borough of Barking &
Dagenham v Terrapin Construction Ltd [2000] B.L.R. 479 at 486 and 487, CA.

137It should be particularly noted that the final certificate clause in the Standard Form of
Building Contract has been amended on a number of occasions over the years.

138East Ham Corporation v Bernard Sunley [1966] A.C. 406, HL.

139P. & M. Kaye v Hosier & Dickinson [1972] 1 W.L.R. 146, HL. See also para.11-033.

140Ata Ul Haq v City Council of Nairobi (1962) 28 B.L.R. 76, PC; see also Loke Hong Kee v
United Overseas Land (1982) 23 B.L.R. 35, PC, a one-off decision reached as a matter of
pure construction without reference to any previous authority.

141Fairweather v Asden Securities (1979) 12 B.L.R. 40; cf. E.CC Quarries v Merriman (1988)
45 B.L.R. 90. See also B.R. & E.P. Cantrell v Wright & Fuller Ltd [2003] B.L.R. 412 at 438.

142H.W. Nevill (Sunblest) v William Press (1981) 20 B.L.R. 78.

143William Hill v Bernard Sunley (1982) 22 B.L.R. 1, CA. See also Wharf Properties v Eric
Cumine Associates (1984) 29 B.L.R. 106 (Hong Kong HC): deciding that a sub-contractor’s
final certificate was conclusive and following William Hill v Bernard Sunley on the tort
point. For tortious claims generally, see Ch.7 and in particular para.7-040 and following.

144Crestar v Carr (1987) 37 B.L.R. 113, CA.

145Att Gen of Hong Kong v Wang Chong Construction (1992) 8 Const. L.J. 137 (Hong Kong
CA).

146Crown Estates Commissioners v John Mowlem & Co Ltd (1994) 70 B.L.R. 1, CA; Tameside
Metropolitan MBC v Barlow Securities Group Services Ltd [2001] B.L.R. 113 at 124. For a
criticism of Crown Estates, see I.N.D. Wallace QC, “Not what the RIBA/JCT meant …”
(1995) 11 Const. L.J. 184.

147Matthew Hall Ortech v Tarmac Roadstone (1997) 87 B.L.R. 96.

148Oxford University Fixed Assets Ltd v Architects Design Partnership (1999) 15 Const. L.J.
470; approved in Co-operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] 1
W.L.R. 1419 at 1436, HL; I.N.D. Wallace QC, “RIBA/JCT Final Certificates Again” (2002) 18
Const. L.J. 1.

149London Borough of Barking & Dagenham v Terrapin Construction Ltd [2000] B.L.R. 479.

150National Coal Board v Neill [1985] Q.B. 300.

151Cf. however, the older cases cited in National Coal Board v Neill [1985] Q.B. 300;
Stratford BC v Ashman (1960) N.Z.L.R. 503 at 517; Major v Greenfield (1965) N.Z.L.R. 1035
at 1061.

152Harvey v Lawrence (1867) 15 L.T. 571; Bateman (Lord) v Thompson (1875) H.B.C. (4th
edn), Vol.2, para.36, CA; Dunaberg Railway v Hopkins (1877) 36 L.T. 733.

153Newton Abbot Development Co Ltd v Stockman Bros (1931) 47 T.L.R. 616, followed in
Billyack v Leyland Construction Co Ltd [1968] 1 W.L.R. 471; see also, Bird v Smith (1848) 12
Q.B. 786; Petrofina SA of Brussels v Compagnia Italiana, etc. (1937) 53 T.L.R. 650 at 653,
CA: dealing with the construction of a charterparty; Minster Trust Ltd v Traps Tractors
[1954] 1 W.L.R. 963.

154Bateman (Lord) v Thompson (1875) H.B.C. (4th edn), Vol.2, para.36, CA.

155See para.20-055 and following for the relevant provision of the Standard Form of
Building Contract.

156Brighton University v Dovehouse Interiors Ltd (2014) 153 Con. L.R. 147; [2014] EWHC
940 (TCC).

157Trustees of the Marc Gilbard 2009 Settlement Trust v OD Developments and Projects Ltd
[2015] B.L.R. 213 at [30].

158See Northampton Gaslight Co v Parnell (1855) 24 L.J.C.P. 60; Russell v Sa da Bandeira

(1862) 13 C.B. (N.S.) 149; Roberts v Bury Commissioners (1870) L.R. 5 C.P. 310; Ashwell and
Nesbit v Allen (1912) H.B.C. (4th edn), Vol.2, para.462, CA; Panamena, etc. v Frederick
Leyland & Co Ltd [1947] A.C. 428, HL.

159See Re Meadows and Kenworthy (1896) H.B.C. (4th edn), Vol.2, para.265 (CA, affirmed
HL); East Ham BC v Bernard Sunley & Sons Ltd [1966] A.C. 406, HL, explaining the final
certificate under the 1939 RIBA form (pre-1957 revision). See also, Kaye (P. & M.) Ltd v
Hosier & Dickinson [1972] 1 W.L.R. 146, HL referred to in para.5-044.

160Russell v Sa da Bandeira (1862) 13 C.B. (N.S.) 149; Roberts v Bury Commissioners, see
(1870) L.R. 5 C.P. 310; Lawson v Wallasey Local Board (1883) 48 L.T. 507, CA.

161Lawson v Wallasey Local Board (1883) 48 L.T. 507, CA, upholding the Divisional Court
(1883) 11 Q.B.D. 229, but on different grounds; cf. Sattin v Poole (1901) H.B.C. (4th edn),
Vol.2, para.306, DC. See also Roberts v Bury Commissioners (1870) L.R. 5 C.P. 310 at 327.
For extension of time, see para.8-022.

162Sattin v Poole (1901) H.B.C. (4th edn), Vol.2, para.306, DC.

163Trade Indemnity Co v Workington Harbour and Dock Board [1937] A.C. 1, HL.

164E.C.C. Quarries v Merriman (1988) 45 B.L.R. 90.

165B.R. & E.P. Cantrell v Wright & Fuller Ltd [2003] B.L.R. 412 at 437. See also, Tameside
MBC v Barlow Securities Group Services Ltd [2001] B.L.R. 113 at 125.

166Lamprell v Billericay Union (1849) 18 L.J.Ex. 282; Coleman v Gittins (1884) 1 T.L.R. 8,
where an employer successfully resisting payment on a technicality was not awarded his
costs; Kaye (P. & M.) Ltd v Hosier & Dickinson [1972] 1 W.L.R. 146 at 157, HL; John Barker
Construction v London Portman Hotel (1996) 83 B.L.R. 31 at 62, extension of time not
based on a proper application of the provisions of the contract was held to be invalid
based on the court having limited powers of review but see, now, Beaufort Developments
(NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 A.C. 266.
167Crestar v Carr (1987) 37 B.L.R. 113, CA.

168See also “Formal requirements” at para.5-009.

169Morgan v Birnie (1833) 9 Bing. 672; Elmes v Burgh Market Co (1891) H.B.C. (4th edn),
Vol.2, para.170 at 171.

170Monmouthshire CC v Costelloe and Kemple (1965) 63 L.G.R. 429, CA also 5 B.L.R. 83;
Havant BC v South Coast Shipping (No.1) (1996) 14 Const. L.J. 420 at 426; Al Waddan Hotel
Ltd v MAN Enterprise SAL (Offshore) [2015] B.L.R. 478 at [67].

171Roberts v Watkins (1863) 14 C.B. (N.S.) 592; Elmes v Burgh Market Co (1891) H.B.C. (4th
edn), Vol.2, para.170.

172See Token Construction Company Ltd v Charlton Estates Ltd (1973) 1 B.L.R. 48, CA (not
overruled on this point by Modern Engineering (Bristol) Ltd v Gilbert Ash (Northern) Ltd
[1974] A.C. 689, HL) applying a passage from Minster Trust Ltd v Traps Tractors Ltd
[1954] 1 W.L.R. 963 at 982, per Devlin J.

173See para.3-029 and following.

174B.R. & E.P. Cantrell v Wright & Fuller Ltd [2003] B.L.R. 412 at 431.

175London Borough of Merton v Lowe (1981) 18 B.L.R. 130, CA.

176Clemence v Clarke (1880) H.B.C. (4th edn), Vol.2, paras 54 and 59, CA; cf. Burden Ltd v
Swansea Corp [1957] 1 W.L.R. 1167 at 1173, HL; cf. also Croudace v London Borough of
Lambeth (1986) 33 B.L.R. 20, CA, where the finding of the employer’s breach of contract
in not appointing a new architect implicitly assumes that their duties cannot be
delegated.

177Anglian Water Authority v R.D.L. Contracting (1988) 43 B.L.R. 98 at 112.

178Lamprell v Billericay Union (1849) 18 L.J. Ex. 282.

179Ess v Truscott (1837) 2 M. & W. 385; Att Gen v Briggs (1855) 1 Jur. (N.S.) 1084.

180Ranger v G.W. Railway (1854) 5 H.L.C. 72 at 91, HL.

181Kellett v Mayor of Stockport (1906) 70 J.P. 154. See also Cunliffe v Hampton Wick Local
Board (1893) H.B.C. (4th edn), Vol.2, para.250, CA; also 9 T.L.R. 378.
182Ranger v G.W. Railway (1854) 5 H.L.C. 72, HL.

183Croudace v London Borough of Lambeth (1986) 33 B.L.R. 20 at 33, CA: where the
architect under the contract was the employer’s “Chief Architect”, but a successor had to
be nominated under the contract, not merely to the office.

184See Megarry J in Hounslow LBCLBC v Twickenham Garden Developments [1971] 1 Ch.

233 at 259, applying Panamena v Leyland [1947] A.C. 428; AC Hatrick (N.Z.) Ltd v Nelson
Carlton Construction Co Ltd [1964] N.Z.L.R. 72 and on appeal at [1965] N.Z.L.R. 144;
Canterbury Pipe Lines Ltd v Christchurch Drainage Board (1979) 16 B.L.R. 76, 98; AMEC
Civil Engineering Ltd v Secretary of State for Transport [2005] 1 W.L.R. 2339, CA.

185AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] 1 W.L.R. 2339 at
2354, CA.

186AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] 1 W.L.R. 2339 at
2355, CA.

187Page v Llandaff, etc., DC (1901) H.B.C. (4th edn), Vol.2, para.316 at 320. For employer’s
influence, see para.5-065.

188Eaglesham v McMaster [1920] 2 K.B. 169 at 174, where the architect was both certifier
and arbitrator which is unlikely today because of justifiable doubts of the arbitrator’s
impartiality under s.24(1)(a) of the Arbitration Act 1996, see paras 17-045 to 17-047. See
also Armstrong v South London Tramways Co (1891) 7 T.L.R. 123, CA.

189Clemence v Clarke (1880) H.B.C. (4th edn), Vol.2, para.54 at 65, CA; Goodyear v
Weymouth Corp (1865) 35 L.J.C.P. 12; Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App.
597. See also, Campbell v Edwards [1976] 1 W.L.R. 403, CA: valuation not impeachable for
mistake; Toepfer v Continental Grain Co [1974] 1 Lloyd’s Rep. 11, CA: grain purchase,
“Official … certificates of inspection to be final as to quality”, binding, despite admitted
mistake but it was a certificate in rem: see para.4-083, fn.275.

190Collier v Mason (1858) 25 Beav. 200; approved in Dean v Prince [1954] Ch. 409, CA,
distinguished in Toepfer v Continental Grain Co [1974] 1 Lloyd’s Rep. 11, CA and said by
Lord Denning MR in Campbell v Edwards [1976] 1 W.L.R. 403 at 407, CA, to require
reconsideration. See now Jones v Sherwood Computer Services [1992] 1 W.L.R. 277, CA;
Nikko Hotels v MEPC Ltd [1991] 2 E.G.L.R. 103 at 108; Healds Foods Ltd v Hyde Dairies Ltd
unreported 1 December 1994, Potter J); West of England Shipowners v Cristal Ltd [1996] 1
Lloyd’s Rep. 370 at 377, CA; Macro v Thompson [1996] B.C.C. 707; Mercury
Communications Ltd v Director General of Telecommunications [1996] 1 W.L.R. 48, HL;
Conoco v Phillips Petroleum (1996) C.I.L.L. 1204; Dixons Group Plc v Murray-Oboynski
(1997) 86 B.L.R. 16.
191[1976] 1 W.L.R. 403 at 407, CA.

192[1974] A.C. 727, HL.

193[1977] A.C. 405, HL.

194Whereas an employer may have a claim against its architect, a contractor normally
does not: see Pacific Associates v Baxter [1990] Q.B. 993, CA; John Holland Construction &
Engineering Ltd v Majorca Products (2000) 16 Const. L.J. 114 (Victoria SC) and see
generally para.14-135 and following.

195As a matter of construction, it is possible for the parties to agree to remit to the expert
the question of the interpretation of those instructions. If so the court would not
intervene on the question whether that interpretation was correct: Conoco v Phillips
Petroleum (1996) C.I.L.L. 1204; Dixons Group Plc v Murray-Oboynski (1997) 86 B.L.R. 16.

196Jones v Sherwood Computer Services [1992] 1 W.L.R. 277, CA.

197Lord Denning MR in Campbell v Edwards [1976] 1 W.L.R. 403 at 407, CA; Jones v
Sherwood Computer Services [1992] 1 W.L.R. 277, CA not following Burgess v Purchase &
Sons [1983] Ch. 216; Nikko Hotels v MEPC Ltd [1991] 2 E.G.L.R. 103 at 108; West of
England Shipowners v Cristal Ltd [1996] 1 Lloyd’s Rep. 370 at 377, CA; Macro v Thompson
[1996] B.C.C. 707; Mercury Communications Ltd v Director General of Telecommunications
[1996] 1 W.L.R. 48, HL; Conoco v Phillips Petroleum (1996) C.I.L.L. 1204; Dixons Group Plc
v Murray-Oboynski (1997) 86 B.L.R. 16. Cf. Baber v Kenwood Manufacturing [1978] 1
Lloyd’s Rep. 175, CA. For the related topic of determination by an expert, see J. Kendall,
Expert Determination: Dispute Resolution, 2nd edn (London: Sweet & Maxwell, 1996).

198Lord Reid in Sutcliffe v Thackrah [1974] A.C. 727 at 737, HL. There are many old cases
which speak in terms of the architect as an adjudicator or quasi-arbitrator but these
terms are no longer appropriate.

199In Costain Ltd v Bechtel [2005] T.C.L.R. 6 it was held that the same duty arguably
applied to the project manager appointed in that case. See also C. O’Carroll and N.F.
Jones, “The independence and impartiality of contract administrators under various
standard forms of construction contracts” (2007) Const. L.J. 475.

200Scheldebouw BV v St James Homes [2006] B.L.R. 113.

201Notwithstanding that they are usually not and cannot be regarded as independent of
the employer: Scheldebouw BV v St James Homes [2006] B.L.R. 113 and despite doubts
expressed as to the position of the architect by Lord Hoffmann in Beaufort Developments
(NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 A.C. 266 at 276.

202Scheldebouw BV v St James Homes [2006] B.L.R. 113 at 125.

203AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] 1 W.L.R. 2339 at
2354, CA. See also A. Axelson, “The Discretion of the Certifier: A drafting tool best left in
the toolshed?” (2007) 23 Const. L.J. 253.

204See further “Known interests do not disqualify” at para.5-067.

205Sutcliffe v Thackrah [1974] A.C. 727 at 737, HL. Lord Morris, at 751 and Lord Salmon,
at 759, also use the term “impartially” as part of the description of the duty of the
architect but not suggesting that the architect should or could have the impartiality of an
arbitrator. As to this see Lord Dilhorne at 756–757; the observations on the position of
the architect by Lord Hoffmann in Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd
[1999] 1 A.C. 266 at 276, HL; AMEC Civil Engineering Ltd v Secretary of State for Transport
[2005] 1 W.L.R. 2339 at 2355, CA and Scheldebouw BV v St James Homes (2006) B.L.R. 113
at 125.

206Scheldebouw BV v St James Homes (2006) B.L.R. 113 at 125.

207Hickman v Roberts [1913] A.C. 229, HL.

208Hickman v Roberts [1913] A.C. 229 at 233, 235 and 238. See also, Thornton Hall &
Partners v Wembley Electrical Appliances Ltd [1947] 2 All E.R. 630 at 634, CA; Lazarus
Estates Ltd v Beasley [1956] 1 Q.B. 702 at 712, CA, where Denning LJ said “Fraud unravels
everything … It vitiates judgments, contracts and all transactions whatsoever”.

209Lubenham v South Pembrokeshire DC (1986) 33 B.L.R. 39.

210South Eastern Railway v Warton (1861) 2 F. & F. 457; Sharpe v San Paulo Railway
(1873) L.R. 8 Ch. App. 597.

211Tullis v Jacson [1892] 3 Ch. 441.

212Czarnikow v Roth, Schmidt & Co [1922] 2 K.B. 478 at 488, CA; cf. Scott v Liverpool Corp
(1856) 25 L.J. Ch. 230 at 232.

213Lazarus Estates Ltd v Beasley [1956] 1 Q.B. 702 at 712, CA; Campbell v Edwards [1976] 1
W.L.R. 403 at 407; Midland Bank Trust Co Ltd v Green [1980] Ch. 590 at 625. See also, Re
Davstone Estates Ltd’s Leases [1969] 2 Ch. 378.
214Hickman v Roberts [1913] A.C. 229, HL; Panamena v Frederick Leyland & Co [1947] A.C.
428 at 437, HL; Minster Trust Ltd v Traps Tractors Ltd [1954] 1 W.L.R. 963, relating to
certifiers who are not in the position of architects.

215Hickman v Roberts [1913] A.C. 229, HL.

216Kimberley v Dick (1871) L.R. 13 Eq. 1; Kemp v Rose (1858) 1 Giff. 258. The giving of an
estimate is part of an architect’s duties under the RIBA Appointment of an Architect and
this must be known to contractors.

217Bristol Corp v Aird [1913] A.C. 241 at 258, HL; Beaufort Developments (NI) Ltd v Gilbert-
Ash (NI) Ltd [1999] 1 A.C. 266 at 276, HL; AMEC Civil Engineering Ltd v Secretary of State
for Transport [2005] 1 W.L.R. 2339 at 2355, CA; Scheldebouw BV v St James Homes (2006)
B.L.R. 113 at 124. Cf. the position of an arbitrator under the Arbitration Act 1996 s.24(1)
and paras 17-045 to 17-047.

218Sutcliffe v Thackrah [1974] A.C. 727 at 741, HL.

219AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] 1 W.L.R. 2339 at
2354 and 2356, CA.

220Sutcliffe v Thackrah [1974] A.C. 727 at 741. See also, Scott v Carluke Local Authority
(1879) 6 R. 616 at 617; Cross v Leeds Corp (1902) H.B.C. (4th edn), Vol.2, para.339, CA; but
noting that the terminology should be that used in Sutcliffe v Thackrah. See also para.14-
058 and following for a full discussion of the architect’s duties to the employer of which
duties the contractor must, it is submitted, at least in outline, be treated as having
knowledge.

221Panamena v Frederick Leyland & Co [1947] A.C. 428 at 437, HL.

222See, e.g. the facts of Hickman v Roberts [1913] A.C. 229, HL.

223Panamena v Frederick Leyland & Co [1947] A.C. 428, HL distinguishing Hickman v

Roberts [1913] A.C. 229, HL and approving the Scottish cases of Scott v Carluke L.A. (1879)
6 R. 616 and Halliday v Hamilton’s Trustees (1903) 5 F. 800. For what amounts to
interference or obstruction in the issue of certificates where the Standard Form of
Building Contract is used, see Burden v Swansea Corp [1957] 1 W.L.R. 1167 at 1180, HL.
Such conduct would, it is submitted, if acquiesced in by the architect, disqualify them.

224See Panamena v Frederick Leyland & Co [1947] A.C. 428 at 437 and 444, HL.

225Ranger v G.W. Railway (1854) 5 H.L.C. 72, HL; Hill v South Staffs Railway (1865) 12 L.T.
63, 65.

226Panamena v Frederick Leyland & Co [1947] A.C. 428, HL.

227Cross v Leeds Corp (1902) H.B.C. (4th edn), Vol.2, para.339, CA.

228Ranger v G.W. Railway (1854) 5 H.L.C. 72, HL; Scheldebouw BV v St James Homes (2006)
B.L.R. 113 at 128.

229Robins v Goddard [1905] 1 K.B. 294, CA; Beaufort Developments (NI) Ltd v Gilbert-Ash
Ltd [1999] 1 A.C. 266, HL. See also, Ranger v G.W. Railway (1854) 5 H.L.C. 72, HL; National
Coal Board v Neill [1985] Q.B. 300 at 309.

230Re Meadows and Kenworthy (1896) H.B.C. (4th edn), Vol.2, para.265 (CA, affirmed HL);
Brunsden v Staines Local Board (1884) 1 Cab. & El. 272; East Ham BC v Bernard Sunley &
Sons Ltd [1966] A.C. 406, HL; Harbour and General Works Ltd v Environmental Agency
[2000] 1 All E.R. 50 at 61, CA.

231Beaufort Developments (NI) Ltd v Gilbert-Ash Ltd [1999] 1 A.C. 266, HL overruling
Northern Regional Health Authority v Derek Crouch [1984] Q.B. 644, CA: see para.17-028.

232Sharpe v San Paulo Railway (1873) L.R. 8 Ch. App. 597: certificate expressed as “final
and conclusive on both parties without any appeal” but subject to arbitration; Clemence v
Clarke (1880) H.B.C. (4th edn), Vol.2, paras 54 and 65; Eaglesham v McMaster [1920] 2 K.B.
169: architect to be “sole arbitrator or umpire” and certificate to be “final and binding”;
cf. Crown Estates Commissioners v John Mowlem & Co Ltd (1994) 70 B.L.R. 1, CA. It seems
that if a contract provides that either a certificate of the architect or an award of the
arbitrator is to be conclusive, it is conclusive if given before a dispute had arisen but not
if given thereafter: Lloyd Bros v Milward (1895) H.B.C. (4th edn), Vol.2, p.262, CA;
Milestone v Yates [1938] 2 All E.R. 439.

2016 The Estate of Donald Keating and Sweet & Maxwell