What Constitutes a Binding Construction Contract for the Purposes of Adjudication? Malcolm Charles Contracts Ltd v Crispin and Another

15/04/2015

The case of Malcolm Charles Contracts Ltd v Crispin and Another [[2014] All ER (D) 289] decided in November 2014 does much to re-iterate the long established position of the courts that when deciding whether parties to a contract have reached an agreement, an objective test will be applied.

The Facts of the Case

The proceedings related to an Adjudication concerning a building dispute. The Defendants invited the claimant construction company, Malcolm Charles Contracts Ltd (MCC), to tender for a contract to carry out work on their property. 

After some six months of negotiations, on the 1^st August 2011, the Defendants’ architect, Mr Elliott sent a blank copy of the proposed contract to the Defendants for their consideration. The proposed contract was the JCT HOO form described by Mr Elliott to Mr Crispin as "the proposed contract as agreed". Mr Crispin's evidence was that he read the document when he received it and the Court concluded that he would have understood the contents of the document.

A pre-contract meeting was held between the parties on the 9^th August 2011.  It is MCC's case that at this meeting the parties agreed a contract on the basis of the JCT HOO at a price of £369,861 with a commencement date of 9^th  September 2011(this was later moved to the 12^th September 2011) and a contract period of 33 weeks. MCC also stated that at the meeting, Mr Elliott took the Defendants through the documents and drawings that would form the contract and that the parties reached agreement on the scope, price, time and payment mechanism for the venture, and all this was written down in the minutes of the meeting prepared by Mr Elliot.

Both Defendants contended that nothing at all was formally agreed at this meeting.

The Defendants argued that, as far as they were concerned:

• The minutes of the meeting did not give a fully accurate record of the state of discussions.

• The price was not finalised or agreed.

• Many revisions to the drawings were still outstanding and the start date was merely a target date most likely to be unachievable due to outstanding issues such as plans, party wall surveys and building insurance.

• That they did not indicate in any way that they had reached a contractual agreement. They expected that there would not be a binding contract unless or until there was a written contract signed by all parties. 

Subsequently, in September 2011, the first defendant queried whether payment was in full on completion. MCC's representative replied, and asked who should be contacted to arrange for it to have keys to the property. The first defendant agreed that the keys should be collected from his father, and equipment and materials were then brought to the property.

On Thursday 8^th  September 2011 MCC’s foreman attended site to survey the structural steelwork and carry out an external level survey. This was not work that would have been carried out for pricing, or done if MCC did not believe they had they were contracted to the project.

During the weekend of 9^th – 11^th September 2011 MCC’s foreman and other staff took delivery of plant and materials to the site in preparation to start work on Monday 12th September 2011. They duly turned up for work on the stipulated start date and some temporary plumbing works were then carried out.

However, on Sunday 11^th  September 2011 Mr Crispin had sent an email to MCC and Mr Elliott in the following terms :

MCC sent the Defendants an invoice for  £3,648.95 which represented the cost of the plumbing work done on the 12^th September. The Defendants did not make any payment

On 2^nd September 2012 agents for MCC wrote to the Defendants claiming payment for the aborted costs previously claimed and a further £60,000 or so for breach of contract. Again the Defendants did not make any payment.

The dispute was then referred to adjudication. The first adjudicator concluded that he had no jurisdiction to act (the reason for this decision was not given). The (second) adjudicator in a first ruling ruled that on 9^th August 2011 the parties had concluded a contract under terms of the JCT HOO form.

The Defendant’s argued that as there was no construction contract in place, the second adjudicator lacked jurisdiction.

The Decision

In her decision, Carr J quoted from the Supreme Court decision of RTS v Molkerei Alois [2010] BLR 337;

Carr J concluded that when looked at objectively, the words and conduct of the parties at the pre-contractual meeting on the 9^th August 2011 resulted in a binding contractual agreement, the terms of which were evidenced by the minutes of the meeting.  Therefore, the adjudicator’s jurisdiction could not be in doubt and his decision was upheld.

What This Means for Parties to an Adjudication

This case, along with RTS v Molkerei Alois makes it clear that parties to adjudication cannot take for granted that because they themselves did not believe that there was a binding contract between them, that the court, when applying an objective test, will take the same view.  As long as one party can show that:

1. on the basis of the evidence, the reasonable man would say that the parties were in agreement and had intended to create legal relations (the test disregards the parties’ own views), and 

2. the contract is sufficiently certain so as to be enforceable