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Payment Despite Poorly Worded Contract

PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.

When entering into a contract for building or other trade services, it is advisable to seek professional advice at the outset to avoid finding oneself involved in costly, complex and lengthy litigation over a poorly drafted contract later on. Such is the lesson to be learned from a recent appeal against an order to pay a builder substantial further sums on a contract for which the original estimate was £88,000.

The case dates back to 2005, when a plumber and heating engineer, who was at the time trading as a bathroom specialist, was asked to provide a quotation for extensive building work on a house that was in the process of being bought. The builder said that he could not give a fixed quote, instead providing an estimate of the cost of the required works, which included the estimated cost of materials and subcontractors’ labour.

After completion of the contract, which involved some additional works, the customer refused to pay more than the original estimate, claiming that the agreed price had been exceeded and the work had not been completed satisfactorily.

At the initial hearing on the matter, the judge found in favour of the builder, whom he described as ‘honest but unsophisticated’. The judge stated that the costs proposed in the estimate could not be considered to be fixed and that provided the final price was reasonable, it should be paid. The judge considered that a reasonable price for the work would be around £85,000 plus a profit margin of £30,000. He therefore ordered the customer to pay the builder £34,183.52, which included interest.

The customer subsequently appealed, on the grounds that the judge had been wrong in his estimation and that the price quoted was a fixed price rather than an estimate. The Court of Appeal made some minor adjustments to the sum payable but dismissed the appeal, ruling that statements such as ‘approximate labour and expenses costs’ taken from the original estimate could not be considered to be references to a fixed price quotation. On the other hand, there was no clear indication in the estimate as to how the final price should be calculated.

Lord Justice Gross summarised, “In the absence of an express agreement as to how the price of the works was to be ascertained, I conclude that there was an implied agreement that the price to be paid would be a reasonable price for the work to be done and the materials to be supplied, as would also be the case in respect of the additional works, no other means of ascertaining the price having been agreed.”

“This is a good example of the need to ensure that any agreement entered into for the provision of trade services is based upon sound documentation right from the start,” says Jeremy Walker, Partner at DFA Law. “A great deal of expense would have been avoided in this instance if the parties had sought legal advice before, rather than after, the services were provided. There is a standard form of contract for small building works, which could easily have been modified and used as a clear basis for a contract.”

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