The preliminary issues considered by Waksman J in the TCC in Anchor 2020 Ltd v Midas Construction Ltd [2019] EWHC 435 (TCC) included contractual interpretation, which is likely to attract interest beyond the world of construction law.
The dispute concerned the development of retirement flats in Yateley, Hampshire, with Anchor being the employer and Midas the contractor. Although the parties had negotiated an agreement based on standard JCT Design and Build Contract terms, only Midas signed them. There were also prior Letters of Intent which gave a further indication of what the parties had aimed to achieve in the contract documents. Amongst the document the court considered was a ‘risk register’ used by Midas, which has been used to calculate the contract sum and had been a requirement of the invitation to tender.
Anchor argued that even though their signature was absent, a binding agreement on standard written terms had been concluded and that the contract price for the works was fixed at £18.2 million. Midas, on the other hand, said that they were not bound by the unsigned contract and should be paid on a quantum meruit basis, and sought at least £10 million more.
The Court considered a number of preliminary questions, including which documents bound the parties as well as the approach it should take to any quantum meruit valuation if that had been the proper basis of payment (that is, if the written agreement was not binding).
Carefully considering all of the evidence leading to agreement, the Court preferred Anchor’s position that the parties had intended to be bound by the JCT terms, the contract crystallising at the point when (only) they had signed those terms. He referred to RTS Flexible Systems Ltd v Molkerei Alois Müller Gmbh & Company KG (UK Production) [2010 UKSC 14 in which Lord Clarke stated:
Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. 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 precondition to a concluded and legally binding agreement.
These principles apply to all contracts, including both sales contracts and construction contracts, and are clearly stated in Pagnan SpA v Peed Products Ltd [1987] 2 Lloyd’s Rep 601 … although certain terms of economic significance to the parties were not agreed, neither party intended agreement of those terms to be a precondition to a concluded agreement.
On a true construction of the documents before the Court, it concluded that the risk register, though part of Midas’s tender, had not been incorporated amongst the concluded, binding terms.
Since the unsigned contract terms were found to bind, it was not necessary for the Judge to decide the appropriate approach to a quantum meruit valuation in this case. Helpfully, however, he made certain obiter observations about the approach he might have taken. His view (in line with Anchor’s position) was that the Court might in fact have followed the putative terms of the contract even if it was never executed or binding, whilst taking into account any defects on the one hand or prolongation of the works on the other. Here, he observed, there was at least a binding contract in the form of Letter of Appointment. However he equally accepted that this would not always be the case, given the observations in Keating on Construction Contracts (10th Edition, 2016) that:
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. 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.