Get it in Writing.

The court has shown once again an unwillingness to impute the existence of contractual relations where they cannot be shown to exist. The case concerned the construction of football club Coventry City's Ricoh Arena.

What happened was that extensive discussions had taken place between two construction companies involved as contractor and subcontractor, which had led to the agreement of a number of terms - such as those dealing with the contract price, how variations would be dealt with, the scope of the subcontractor's works and so on - but not others, such as the limit of liability under the warranties on the subcontract. One of the things agreed was that a contract would not come into effect until executed. At the completion of the work, the contractor sought to claim against the subcontractor. The subcontractor rejected the claims on the basis that there was no contractual agreement providing how such claims would be made. The contractor disagreed and claimed that, in any event, it had a right of action based on the common law principle of negligence.

The court's conclusion was that in the absence of a formal signed and executed contract and the agreement of essential terms, no contract existed.

In the absence of a contract, the subcontractor's entitlement to payment was limited to a reasonable remuneration for works completed, on the basis called 'quantum meruit' by lawyers. However, the contractor's attempt to obtain restitution for negligence through the common law was not successful.

This case illustrates the importance of getting the correct paperwork agreed and in place as soon as possible in such circumstances and at least agreeing in writing the major important terms of the contract, even if details need to be agreed later.

Partner Note
Haden Young v Laing O'Rourke Midlands Limited [2008] EWHC 1016 (TCC). See www.bailii.org/ew/cases/EWHC/TCC/2008/1016.html.

There is a good analysis of the issues at http://www.nortonrose.com/knowledge/publications/2008/.

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