Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991]

English Contract Law

Williams v Roffey Bros &  Nicholls (Contractors) Ltd [1991]
‘Carpenter Shop’ by Carl Larsson

The amendment of an existing contract underpins the argument between contracting parties when a main building contractor secures a residential refurbishment project and accepts the tender of a carpentry subcontractor’s tender despite the low value of his submission.

Having agreed to both first and second fix twenty-seven flats within a specified time for £20,000, the respondent carried out the work on the understanding that payments were made on an arbitrary basis, and so after six months he had first-fixed all twenty-seven flats but second-fixed only nine, while having been paid £16,200 for the work performed.

Aware that his tender was now unprofitable, the respondent renegotiated to keep his business afloat and avoid the financial penalty clause applied to the appellants should the project overrun, whereupon both parties agreed to continue working together on the condition that a further £10,300 would be paid in incremental payments of £575 for each flat completed, however when the respondent left the project only £1,500 had been paid and only seventeen of the twenty-seven flats were substantially completed.

Initially seeking around £33,000 in damages the respondent reduced his claim to around £11,000, citing that the appellants had breached the terms of their oral agreement; whereas the appellants argued that the agreement to pay the additional £10,300 was unenforceable due to non-completion, and that no consideration had been given by the  respondent during revision of the original contract. 

Argued in the Kingston-Upon Thames County Court the judge found that while the flats had not been completed there had been sufficient consideration as to allow calculable damages of around £11,800, and awarded accordingly, while presented to the Court of Appeal the issues around payment for incomplete performance of a contract and the argument for lack of consideration were given closer examination before the Court  noted how p.126, para.183 of Chitty on Contracts stated that:

“The requirement that consideration must move from the promisee is most generally satisfied where some detriment is suffered by him e.g. where he parts with money or goods, or renders services, in exchange for the promise. But the requirement may equally well be satisfied where the promisee confers a benefit on the promisor without in fact suffering any detriment.”

Thus the Court dismissed the appeal on grounds that the respondent’s agreement to continue working toward completion of the flats provided a degree of benefit to the appellants, because failure to do so rendered them subject to the penalty clause, while the Court finally reminded the parties that:

(i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and (ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and (iii) B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and (iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and (v) B’s promise is not given as a result of economic duress or fraud on the part of A; then (vi) the benefit to B is capable of being consideration for B’s promise, so that the promise will be legally binding.”

Holwell Securities Ltd v Hughes [1974]

Holwell Securities Ltd v Hughes [1974]
‘Post Office’ by David Gilmour Blythe

Conveyance of property and the requisite methods of notice when accepting an offer are clearly defined under s.196 of the Law of Property Act 1925, so when a buyer elected to take advantage of an option to purchase, they did so in a way that flirted with the prescribed method yet failed to secure the bargain despite arguments to the contrary.

Having decided to sell his home the respondent wrote to the appellants setting out an option to purchase which expired within a six-month period, while the specific terms of the offer outlined in clause 2 stated clearly that:

“The said option shall be exercisable by notice in writing to the intending vendor at any time within six months from the date hereof…”

Contrastingly s.196(4) of the Law of Property Act 1925 also explains that:

“Any notice required or authorised by this Act to be served shall also be sufficiently served, if it is sent by post in a registered letter addressed to the lessee, lessor, mortgagee, mortgagor, or other person to be served, by name, at the aforesaid place of abode or business, office, or counting-house, and if that letter is not returned through the post-office undelivered; and that service shall be deemed to be made at the time at which the registered letter would in the ordinary course be delivered.”

And so on this occasion the appellants solicitors drafted a written acceptance of the offer before hand delivering it to the respondent’s solicitors while noting within the correspondence that a copy of the written notice of acceptance and a deposit cheque had also been posted to the respondent’s home. 

After receiving the letter the solicitors telephoned the respondent to advise him they had received the notice, and that a copy of it was on its way to him, whereupon he explained that he had already made travel plans, and so having been instructed by his solicitors to leave despite the expected letter, he vacated his home for a number of days.

After being franked and handed to the post-office, the letter ultimately failed to arrive at the respondent’s home, thus the appellants sought legal action to secure the purchase on grounds that a contract for both sale and purchase had been executed irrespective of whether the posted letter had arrived, while it was also argued that the oral communication between the solicitors and the respondent further confirmed acceptance of the offer when factoring in the solicitors possession of the letter.

In the first instance the appellants relied upon Henthorn v Fraser, in which the Court of Appeal had held that:

“Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.”

However the court ruled against them, before the Court of Appeal overruled and distinguished Henthorn in light of an absence of expressed postal methods expressed within the purchase option, and so dismissed the appeal on grounds that failure of the respondent to physically take receipt and read the notice became fatal to any claim of right to buy, while clarifying that:

“If a notice is to be of any value it must be an intimation to someone. A notice which cannot impinge on anyone’s mind is not functioning as such.”

Davis Contractors Ltd v Fareham Urban District Council [1956]

English Contract Law

Davis Contractors Ltd v Fareham Urban District Council [1956]
‘Construction Site’ by Jan Altink

The principle of ‘frustration’ and the nature of commercial contracts are both given equal consideration when a local authority fails to acknowledge or pay costs exceeding the original agreement despite pleas for reasonability by the claimants.

Shortly after World War II the appellants tendered for the construction of a large number of houses over a fixed period, and so due to the economic fragility of the country, their submission included a letter outlining allowances for rising material costs and labour shortages, while after further negotiations the respondents allowed them to perform their contractual obligations until the agreed eight-month period expired. 

Upon discovery that only a fraction of the total number of houses had been completed the appellants cited frustration through inclement weather, delays in material deliveries and a shortage of labour, whereupon the local authority expressed no disagreement with their statement and the work continued for another fourteen months, however upon completion the total cost of the work was £115,233 versus the agreed £94,424, which left the appellants facing a loss of around £20,000.

When asked to pay the additional sum on grounds of quantum meruit (payment for services rendered and therefore deserved) the respondents refused to pay and offered only the amount contracted for, before the appellants claimed recovery on grounds that:

1. The letter submitted with the tender was part of the contract.

2. The contract was entered into on the proviso that both materials and labour were available.

3. Because those two elements were absent the contract had ceased to exist thus any subsequent performance was subject to a quantum meruit. 

Under arbitration the doctrine of frustration was given considered significance in favour of the appellants on the strength of the letter, while in court the judge also agreed the letter formed part of the contract and so awarded accordingly. 

Under challenge the Court of Appeal disagreed and referred the matter back for greater clarification of frustration, and so with the arbitrator remaining resolute on the letter the Court held that the letter was a mere facet of negotiations therefore frustration had not occurred, after which it was put before the House of Lords in order that the appellants could advance their contention that where frustration failed quantum meruit ought to succeed.

To clarify, the nature of frustration relies more upon unforeseen circumstances affecting both parties to a contract as opposed to one at a loss through unexpected events, while in this instance the appellants were aware that labour and material shortages were likely, and neither party had agreed that the original contract had ceased to exist and that another had begun.

With this in mind the House dismissed the appeal on grounds that unless agreed to, the terms of the original contract had remained unaltered despite the increased duration of the project and escalating costs incurred by the appellants, all of which amounted to little more than a seemingly well-drafted plan gone awry, while the House clarified for the parties that:

“[F]rustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do.”

Chartbrook Ltd v Persimmon Homes Ltd [2009]

English Contract Law

Chartbrook Ltd v Persimmon Homes Ltd [2009]
‘The Purchase Contract’ by Quentin Metsys

Rectification of contract and the exclusionary rule of pre-contract negotiations when deciphering both parties intentions are uneasy bedfellows within English law, and yet  these two principles proved effective when the complex and confused drafting of a multimillion pound construction project created heated litigation.

When the land dealer respondents and property developer appellants undertook a mixed development scheme, schedule 6 of the contract bred uncertainty and conflict through opposing interpretations that at first glance favoured of the respondents to the tune of almost £3.6m, and so relying upon the argument of construction to claim their fees the respondents took the matter to court where in the first instance the judge found in their favour and awarded the amount before a failed appeal left the appellants pursuing a remedy in the House of Lords. 

Here the House discussed the nature of contracts and the intentions of those involved before referring to Prenn v Simmonds in which it had held that:

It is only the final document which records a consensus.”

Before noting that in order to achieve a clear outcome the parties must seek rectification of the contract as defined in Swainland Builders Ltd v Freehold Properties Ltd in which the Court of Appeal had also held that:

“The party seeking rectification must show that: (1) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; (2) there was an outward expression of accord; (3) the intention continued at the time of the execution of the instrument sought to be rectified; (4) by mistake, the instrument did not reflect that common intention”

However on this occasion the respondents were adamant that the calculation formulae was correct despite obvious contention by the appellants, and so the House upheld the appeal on grounds that an objective application of the formulae through the eyes of a reasonable man showed that while the respondents were content to pursue the terms of sch.6 under a clear misapprehension, sufficient reasoning and supporting evidence reflected the views of both the House and laymen besides, while also reminding the parties that:

“When the language used in an instrument gives rise to difficulties of construction, the process of interpretation does not require one to formulate some alternative form of words which approximates as closely as possible to that of the parties. It is to decide what a reasonable person would have understood the parties to have meant by using a language which they did.”

Central London Property Trust Ltd v High Trees House Ltd [1947]

English Contract Law

Central London Property Trust Ltd v High Trees House Ltd [1947]
‘Crescent of Houses’ by Egon Schiele

‘Equity regards as done that which ought to be done’ while in this instance the maxim is perfectly suited to the exploitative coloration of a business agreement, when in September 1937 a parent company and subsidiary entered into a written lease agreement concerning a newly built block of flats.

Shortly after the outbreak of World War II the buildings became partially occupied due to the risk of bombing, and so in order to keep the relationship profitable and fair the claimants agreed to reduce the rent from 2500l to 1250l per annum, yet while the rent reduction was put in writing it failed to express the end of the revision despite the original lease agreement running for a period of ninety-nine years.

Although the defendants enjoyed the reduced rent up to December 1945 despite the buildings now enjoying full occupancy with many tenants now paying higher rents than those initially agreed, however the death of the parent company’s owner revealed the oversight, whereupon the claimant and surviving business partner sought to recover rent arrears to the sum of 625l for the period between 29 September 1945 and 25 December 1945, while the defendants argued that the letter containing the reduced rent constituted a legally binding and thus enforceable contract for the remainder of the lease.

Referring to the binding effects of a promise, the court of the King’s Bench quickly balanced the probability of a breach where an agreement to reduce rents was challenged, however on this occasion the court upheld the claim on grounds that when agreeing to the reduce the rent it had been undertaken with mind to the onset of war, therefore no reasonable person would have entered into an arrangement where one party would unlawfully profit at the expense of another, while further reminding the parties that:

“[A] promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply.”

Bristol and West Building Society v Mothew [1998]

English Contract Law

Bristol and West Building Society v Mothew  [1998]
‘Two Lawyers Conversing’ by Honore Daumier

Breach of contract, negligence and breach of fiduciary duty prove central to a solicitor’s misgivings when for atypical reasons a lender sought recovery of their loss through equitable principles after other options failed.

In the late 1980s the respondents entered into a mortgage arrangement with a couple looking to secure a second property for £73,000, however due to market instability the respondents expressed that the £59,000 loaned was subject to the mortgagors paying the balance of the property from existing capital in order to reduce the risk of default, after which the acting appellant solicitor knowingly agreed to undertake the conveyance and provide a full report as contained in their contract. 

Prior to completion of the purchase the mortgagors took out a small charge against their existing property for £3,350 in order to raise the funds needed to secure the mortgage, and aware that the debt would be later secured against the new house, and yet the appellant continued with the purchase without reporting the change in financial circumstances to the respondents.

Following a successful transaction the mortgagors honoured only a handful of repayments before lapsing into default, whereupon the new house was sold as part of the repossession process, however the property crash had diminished the property’s value short of satisfying the debt by £6,000, thus the respondents sought equitable damages from the solicitor on grounds of breach of fiduciary duty through non-disclosure of the loan terms.

In this instance the court ruled in favour of the respondents and awarded damages to the effect of £59,000, less the funds raised from the sale, whereupon the appellant challenged the judgment in the Court of Appeal, who upheld the appeal on grounds that appellant’s oversight did not constitute a breach of fiduciary duty to either the mortgagees or the respondents, as the appellants had been consciously acting in good faith toward both parries throughout the disposition, therefore any lapse of skill or appreciation was accidental and not premeditated as required under the rules of equity, while the Court also reminded the parties that:

“[I]f a fiduciary is properly acting for two principals with potentially conflicting interests he must act in good faith in the interests of each and must not act with the intention of furthering the interests of one principal to the prejudice of those of the other…”

Prest v Petrodel Resources Ltd (2013)

English Family Law

 

Prest
‘City Buildings’ by Jose Trujillo

‘Piercing the corporate veil’ and the lawful applicability of s.24(1)(a) of Part II of the Matrimonial Causes Act 1973 are uneasily paired to establish liability in this post-matrimonial conflict of property transition, while the extensive evaluation of this mis-applied doctrine in cases of reminiscent yet distinguishable natures gives rise to ponder its continued relevance.

Following the lengthy divorce of a shrewd businessman and his estranged wife, the order of the court to transfer title of a number of properties to the appellant was met with continued evasion and somewhat aggressive objection when the ex-husband consistently went to great lengths in order to frustrate proceedings, and through his refusal to permit the submission of evidence in order to expedite the legal obligation put before him.

First developed in Re Barcelona Traction Light and Power Co Ltd the intended effect of ‘piercing the corporate veil’ was to stymie the deliberate and fraudulent actions of those parties holding controlling shares of limited companies for the sole purpose of self-interest and avoidance of legal duties, while s.24(1)(a) of the 1973 Act provides that:

“[A]n order that a party to the marriage shall transfer to the other party, to any child of the family or to such person as may be specified in the order for the benefit of such a child such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion…”

However on this occasion there were a number of other properties acquired by the respondent through his established companies, while the majority of the funds used were alleged to have been sourced individually. 

While it was accepted that the matrimonial home would be handed over, the time wasted by the respondent in clarifying his legal and beneficial entitlement to the remaining seven properties led the High Court of Justice to rely upon the above principle in order to establish precise liability and enforce the transfer on grounds that:

“[A]ll the assets held within the companies are effectively the husband’s property. He is able to procure their disposal as he may direct based again on his being the controller of the companies and the only beneficial owner.”

Thus when challenged in the Court of Appeal the appellant argued against the piercing of the corporate veil on grounds that the narrowness of the principle’s design prevented it from such arbitrary application, whereupon the Court upheld the appeal while holding that:

“[T]he only entity with the power to deal with assets held by it is the company.”

Whereupon the case was finally presented before the UK Supreme Court, who took the time to examine previous judicial exercise of this rigid and yet shoe-horned legal moral before upholding the appeal on grounds that transfer of title could take effect through statute, while reminding the parties that:

“[T]he corporate veil may be pierced only to prevent the abuse of corporate legal personality.”