The consequences of getting the basics wrong in your construction contract

In all areas of construction, having the right contract in place is of utmost importance to avoid disputes in the future, whether that is regarding payment, the plans for the projects or the parties involved.  A recent case decided in the High Court illustrates the very real dangers of not getting the basics right in this crucial first phase of a construction project.  Andrew Cullyer, Litigation Executive, reviews the case of Cartwright Pond Ltd v Wild [2021] EWHC 1600, discussing the very real dangers of getting the basics wrong and explaining how this situation could have been avoided. 

Overview of Cartwright Pond Ltd v Wild [2021] EWHC 1600

In this case, Ms Wild entered into a contract for substantial building works to be carried out at her residential property in Cheshire by Cartwright Pond. A dispute arose as to:

• The terms of the contract, specifically whether the RIBA (Royal Institute of British Architects) form standard contract conditions applied
• Delays to the project
• Termination of the contract by Ms Wild due to the delays
• Variations and
• Defects.

This situation is a fairly common construction dispute in which neither party can agree, with the documentation, or rather lack of it, not providing clarification for either side. In general, this situation could have been avoided if the principles for avoiding disputes of this nature had been followed:

• Read the contract;
• Keep good records; and
• Take action.

Reading and understanding your construction contract

Incredibly in this case, neither party got the terms of the construction contract correct.  Ms Wild said the contract included the RIBA (Royal Institute of British Architects) form standard contract conditions, while the Judge stated:

“… no contract was ever produced or signed on the RIBA form.  The defendant evidently decided that she could do without a contract administrator and did not suggest that she ever put herself forward as undertaking that task. 

In those circumstances the question arises whether or not the contract incorporated the terms contained in the RIBA form.  Although the defendant pleaded and continued to maintain that it did, I have no doubt that it did not.  The simple fact is that, whilst the specification envisaged that a contract on the RIBA form would be entered into and the claimant said in its tender that it was willing to do so, no such contract was ever drawn up with all of the details included or signed.  None of the exchanges referred to indicate that the parties had agreed to proceed on the basis that the contract which had been formed by 18 April 2018 would incorporate the RIBA form pending, or instead of, the drawing up of a formal contract...,”

The question could be posed about the rightness of the Judge’s position that a document expressly said to be incorporated, by documents he accepts are part of the contract, were not in fact incorporated into the contract.  This would be judged on a case by case basis and so it is difficult to provide general clarification on this point here.

What is clear however is there has been a total failure to get the basics right, which could have been rectified in several ways, which in turn could have avoided subsequent issues:

• If an independent, qualified person had read the contract they would have realised the need for some sort of contract administrator and ensured that the documents were completed correctly and at the very least presented for signature. 
• Had proper records been kept the form could have been properly completed and signed, or at least more evidence would have been available.  
• Had Ms Wild taken appropriate action before the works began, this part of the dispute could well have been avoided.

The Judge would likely have come to a very different conclusion had certain basic steps been taken.

Cartwright Pond asserted that there was no completion date and their obligation was to complete within a reasonable time. On this point, the Judge commented:

“24. I do not accept Ms Lawrenson’s submission that the claimant’s only obligation was to complete within a reasonable time.  The contract as formed contained an express term for completion within 14 weeks, which was not dependent upon the RIBA form being incorporated.”

In other words, the contract expressly and unambiguously provided for a period of completion; no one who had read the documents could conclude otherwise. Costs were likely incurred pursuing this argument, which was ultimately unsuccessful. Ms Wild was certainly not the only one who made basic mistakes.

Delay to the construction project

In principle, Ms West should have been entitled to £50.00 per week damages for the delay; however the Judge found that there was no incorporation of the RIBA form and therefore no mechanism for an extension of time to allow for Ms West’s own delays.

The earlier mistakes within the construction contract itself caused further loss to Ms West.  In addition, delay was the main reason for her terminating the contract.

Termination of the construction contract

The Judge found that there was no sufficiently significant delay to the works to justify termination on the part of Ms Wild. The Judge simply found her version of events not as credible as the version provided by Cartwright Pond. See, for example, the Judge’s comments at paragraphs 54 and 62:

“54. I accept and prefer the claimant’s version of events, in that: (a) the defendant’s chronology in her own witness statement is more consistent with the meeting taking place in late November 2018 than in October; (b) there was no subsequent communication from the claimant complaining about the failure to provide a revised schedule; (c) the evidence indicates that labour resource was increased after 23 November 2018; (d) the correspondence from mid-October 2018 is overall inconsistent with the defendant’s version of events. …

62. …I am satisfied that there is no basis for contending that as at 27 February 2019 the claimant [Cartwright Pond] was in repudiatory breach of the contract.  Whilst there had been culpable delay up to the Christmas break, and whilst there were defective works as at 27 February 2019, it cannot be said in my judgment that these matters were so serious as to show that the claimant would not or could not finish off the contract at that point or that the delay or defects or their combined effect was such as to deprive the defendant [Ms Wild] of substantially the whole benefit of the contract.” [Emphasis added]

It is difficult to escape the conclusion that this finding by the Court was in no small part due to Ms Wild’s failure to keep good records, or take appropriate action at the appropriate time.  Consequently, Ms Wild had to pay £51,043.50 plus interest, plus her own costs and likely a proportion of Cartwright Pond’s costs (although no costs judgment is available so this is speculation).

A further point is that Cartwright Pond should consider themselves fortunate. Given the lack of clear records and ambiguity about the contract this judgment could easily have gone against them.

This case serves as a very grim warning indeed of what can go wrong when you do not:

• Read the construction contract;
• Keep good records; and
• Take action.

To have your questions answered on your construction project or if you wish to bring a claim against a party involved in your construction project, you can contact Andrew Cullyer today on 023 8071 7482 or email andrewcullyer@warnergoodman.co.uk.

For general Litigation or Dispute Resolution enquiries, contact the team on 023 8071 7412.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.