Diamond Build Ltd v Clapham Park Homes Ltd [2008] EWHC 1439 (TCC)

“The Articles of Agreement of Conditions of Contract will be the JCT Intermediate Building Contract 2005, with Contractor’s Design. A schedule of the amendments is set out in Appendix A to this document … The Contractor is to note that the Articles of Agreement of Contract Particulars within the Form of Contract as ultimately executed will be reproduced as separate documents incorporating all relevant contract details and amendments scheduled hereafter … Articles of Agreement The agreement will be executed as a deed …”

“We have endeavoured to interpret your requirements in accordance with the Specification and site visits. Should our tender prove of interest there are a number of points we would welcome further discussion on.”

“Dear Sirs We the undersigned do hereby tender and undertake to execute the various works in accordance with the Conditions of Contract Specification and to the satisfaction of the Contract Administrator for the sum of: TENDER - £2,489,302.00 … This is a fixed price tender and is not subject to any variation in the costs of labour and materials and will hold for acceptance for a period of three months from the date fixed for the submission or lodgement of tenders … I/We undertake to commence the works within four weeks of acceptance of my/our tender and to complete the works within 36 working weeks of being given possession of the site …”

“We have concerns by the wording of your final paragraph with reference to an anticipated start date. As you will be aware the contract documents stipulate a four week lead-in period and at our meeting on 6 June a contract start date was agreed on 9 July 2007, some 4.5 weeks after the Letter of Intent. We therefore confirm that the contract start date will be 9 July and that this is the date from which the contract completion date will be calculated …”

“…we should advise you that we are unhappy with the start date that was discussed at the initial meeting and it is unlikely that we will have covered all of the processes that are required under our quality control system to meet the proposed date. There are various issues that the contract team will have to clear with you besides placing orders with approximately 30 major items of supply and subcontractors that need to be in place on this contract and we do not see this being completed to enable us to start within the four week period stated in the documents …”

“3.0 Contract Details. 3.1 Date for possession: 23 July 2007. 3.2 Contract Period: 36 weeks. 3.3 Insurances: Insurance details received. 3.4 Warranties: Design Warranties required for M & E works. 3.5 Performance Bond: Not required. 3.6 Parent Company Guarantee: Not required. 3.7 Contract Documents: To follow.”

“On the subject of the 15% overheads and profits, I have considered this further. Having checked through the price specification, I can see no justification for the 15%. Firstly I would point out that the provisional sums stated that profit and overheads are included for elsewhere within the price document, and the adjustment made on the summary page is the only profit and overhead related cost within the price specification. Secondly, the pricing of the Everest windows within the specification are based solely on the Everest quotation with no additional profits or overheads added so again the only profit and overhead adjustment that would be made is for the sum on the summary page. I therefore propose to adjust any costs using the sum included on the summary page as the basis for adjustment.”

“7. CPH to issue signed contract documents [action was to be by CPH].”

“Our contract with the client is on a JCT IFC 2005 form with contractor’s design for the mechanical and electrical services amended to suit the clients requirements. The corresponding domestic subcontract form that goes with this contract is either the SBC Sub/C&A or the SBC Sub/D/C&A all with similar client’s amendments. The website for you to view this information is as follows: … I trust that you would be happy to enter into a contract using one of these standard forms. I am not sure what your original agreement is with our mutual client and although we do not have a design responsibility for the windows; you may have a responsibility to the client. Therefore I should be pleased if the Client’s Quantity Surveyor Derek Cutts would guide us in this matter.”

“Although it is not usual for me to have an input re your contracts with suppliers/subcontractors, it would make sense to use a sub-contractor associated with the main contract, bearing this in mind and as Everest are designing the windows as well as manufacturing and installing the IC Sub/D/A, if available would be the one to use. This is the subcontract with subcontractor’s design. If this has yet to be issued, then would suggest SBC Sub/D/C be used. I look forward to hearing that all has been agreed.”

“Please find enclosed the Contract for the Refurbishment Works on the Clapham Park Estate. Would you please arrange for the Contract to be signed and sealed where indicated and for the drawing schedules and specifications to be signed, again where indicated. The signed documents are to be returned to our offices, we will then pass them on to the employer.”

“5. DB to sign and return contract documents.”

“We hereby give you notice in accordance with paragraph 4 of our letter of intent dated 5 June 2007, that no further work is to be carried out under that letter. Although the letter of intent does not require us to demonstrate any breach in order to terminate, we note the following • The works have been ongoing for 16 weeks, over 40% of the anticipated contract period. • Internal works to 11 units out of 68 total are in progress. No internal works to units have been completed. Some units have been continuously open for 15 weeks. • Attendance by workman is unreliable. • These concerns were raised formally at a meeting on 25 September with a director of Diamond Build. Detailed revised programmes were issued. These have not been met. • Although these 11 units are nearing handover, there is no evidence that works are progressing at an acceptable rate or that attendance is more reliable. • External works to one block out of 10 is in progress with scaffolding erected to a second block.” • The works have been ongoing for 16 weeks, over 40% of the anticipated contract period. • Internal works to 11 units out of 68 total are in progress. No internal works to units have been completed. Some units have been continuously open for 15 weeks. • Attendance by workman is unreliable. • These concerns were raised formally at a meeting on 25 September with a director of Diamond Build. Detailed revised programmes were issued. These have not been met. • Although these 11 units are nearing handover, there is no evidence that works are progressing at an acceptable rate or that attendance is more reliable. • External works to one block out of 10 is in progress with scaffolding erected to a second block.”

“We were shocked and disappointed to receive your letter of 15th November 07 which was sent to our offices by courier at 16.20 hours on Friday 16th November 2007. We are concerned that you have used inaccurate and misleading statements in your letter to substantiate your reasons for writing the letter. Firstly we should point out that the date of the letter of intent was dated 5th June 2007 and that matters in relation to this contract have moved on. Your letter of 5th June 2007 does not limit your liability to us to the sum of £250,000. You have issued instructions on this contract far in excess of that and you have advised us upon contract matters in relation to the issue of sub-contract documents to your named specialist window contractor Messrs Everest Windows. You were aware and complicit in us entering into a sub-contract agreement with them. You have issued the contract documents for signature after we raised the issue of being unable to place orders with sub-contracts as a result of the non-issue of the main contract documents. The issuing of these documents proved that you were able and it was possible for you to enter into a contract with us for the works. Consequently, we are in fact, in contract with you based upon the terms and conditions of the JCT Intermediate Form of Contract 2005 Edition with further amendments as specified in the specification upon which our tender of 2nd April 2007 was based. If it is your intention to terminate this contract you are bound to follow the rules laid down in the 2005 form of contract. To do otherwise would be a repudiation of the contract that exists between us …”

“In the event that we do not enter into a formal contract with you through no fault of Jarvis … you will be reimbursed all fair and reasonable costs incurred and these will be assessed on a quantum meruit basis.”

‘On the appeal no one has argued that there was as yet any contract between the parties [at the date of the issue of the letter of intent]. Moreover, I see the reference to “a formal contract” as only adding force to a view, to which I shall return, that, absent express agreement or necessary implication otherwise, there was to be no contract on the basis of the Preliminaries unless and until there was a “formal contract”, namely one, in the context of those Preliminaries, under seal. This last paragraph of the Letter of Intent, further, may also go some way to have put in the parties’ minds that a relatively leisurely approach could, if necessary, be endured, at any rate by Jarvis, in the completion of a formal contract, notwithstanding that the work by Jarvis had actually begun on the show flats. So long as no fault could fairly be attributed to Jarvis they could always fall back on the not uncomfortable basis of a quantum meruit. The presence of the paragraph also in my view denies the usual force to be attributed to the dictum of Steyn L.J. in Trentham (G Percy) Ltd -v- Archital Luxfer [1993] 1 Lloyd’s RP 25 at 27 that the fact that a transaction is performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations, at all events if the dictum is used to support the existence of some contract other than on a quantum meruit.’

“But ultimately the only issue is whether there is sufficient evidence to support the Judge’s central finding of fact that a binding contract on phase 1 came into existence … In a case where the transaction was fully performed, the argument that there was no evidence upon which the Judge could find that a contract was proved is implausible. A contract can be concluded by conduct. Thus in Brogden v Metropolitan Railway…decided in 1877, the House of Lords concluded in a case where the parties had acted in accordance with an unsigned draft agreement for the delivery of consignments of coal that there was a contract on the basis of the draft. That inference was drawn from the performance in question with the terms of the draft agreement…The argument that there was insufficient evidence to support a finding that a contract was concluded is wrong. But, in deference to Counsel’s submissions, I would go further. One must not lose sight of the commercial character of the transaction. It involved the carrying out of work on one side in return for payment by the other side, the performance by both sides being subject to agreed qualifying stipulations. In the negotiations and during the performance of phase 1 of the work all obstacles to the formation of a contract were removed. It is not a case where there was a continuing stipulation that a contract would only come into existence if a written agreement was concluded. Plainly the parties intended to enter into binding contractual relations. The only question is whether they succeeded in doing so. The contemporary exchanges, and the carrying out of what was agreed in those exchanges, support the view that there was a course of dealing which on Trentham’s side created a right to performance of the work by Archital, and on Archital’s side it created a right to be paid on an agreed basis. What the parties did in respect of phase 1 is only explicable on the basis of what they had agreed in respect of phase 1. The Judge analysed the matter in terms of offer and acceptance. I agree with his conclusion. But I am, in any event, satisfied that in this fully executed transaction a contract came into existence during performance even if it cannot be precisely analysed in terms of offer and acceptance. And it does not matter that a contract came into existence after part of the work had been carried out and paid for. The conclusion must be that when the contract came into existence it impliedly governed pre-contractual performance. I would therefore hold that a binding was concluded in respect of phase 1.”

‘36. There remains the point that particularly impressed the judge, namely that the 12 June letter envisaged a formal contract being signed in the future, being a formal contract that would incorporate the JCT Form, and so it was inconsistent to regard the contract created by the letter and its acceptance as itself incorporating that Form. That is a view with which it is perhaps quite easy to have instinctive sympathy, but it is one with which, on the facts of the present case, I respectfully disagree. The mere fact that two parties propose that their agreement should be contained in a formal contract to be drawn and signed in the future does not preclude the conclusion that they have already informally contractually committed themselves on exactly the same terms. Of course, if they negotiate on a “subject to contract” basis such a conclusion will be precluded. But otherwise it will not, or at least may not. This court in Harvey was not applying any novel principle of law. In Rossiter v. Miller (1878) 3 App. Cas. 1124, at 1151, Lord Blackburn said: “So long as they are only in negotiation either party may retract; and though the parties may have agreed on all the cardinal points of the intended contract, yet, if some particulars essential to the agreement still remain to be settled afterwards, there is no contract. The parties, in such a case, are still only in negotiation. But the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, shew that they continue merely in negotiation. It is a matter to be taken into account in construing the evidence and determining whether the parties have really come to a final agreement or not. But as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed.” 37. Parker J made a statement to similar effect in Von Hatzfeldt−Wildenburg v. Alexander [1912] 1 Ch. 284, at 288, 289: “It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal contract can be ignored.”’ “So long as they are only in negotiation either party may retract; and though the parties may have agreed on all the cardinal points of the intended contract, yet, if some particulars essential to the agreement still remain to be settled afterwards, there is no contract. The parties, in such a case, are still only in negotiation. But the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, shew that they continue merely in negotiation. It is a matter to be taken into account in construing the evidence and determining whether the parties have really come to a final agreement or not. But as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed.” “It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal contract can be ignored.”’