Seeing the wood for the trees

Mr. and Mrs. Forrest engaged Fleming Buildings Ltd. (FBL) to construct an extension to their house. The parties fell our and FBL issued a notice of adjudication. An award was made in its favour but the Forrests refused to pay, arguing that the contract had not been with them personally but with their company KWF Homes Ltd.

At the pre-start meeting, the Forrests were referred to as the clients, and there was no reference to KWF at the meeting or in the minutes. However, during informal discussions after the meeting, Mrs. Forrest asked if FBL would be happy if KWF were the client. She also gave FBL’s Mr. Burrows a letter from the Aidrie Savings Bank confirming that it had approved funding to KWF for the construction of a new build property at 17 Fairyknowe Gardens. Mr. Burrows had responded that FBL’s directors would have to consider the suggestion because they were always wary of not being paid; however, it had been clear to him that the Forrests wished to go ahead, and he thought that the request for the change had been to do with funding. FBL had decided against the change, and had carried on as normal.

FBL had sent the Forrests the required health and safety F10 notification form which designated them as clients. No planning supervisor was appointed as would have been required had the works been for a development company such as KWF. This had satisfied FBL that they were contracting with the Forrests and not KWF.

Although payments were made by KWF, the Forrests were designated as employer in the certificates and instruction issued by Gibb Architects. There was no reference to KWF in them. In all the subsequent site meetings, 26 in all, the Forrests were referred to as “client”. There was no reference to KWF in any of them. Similarly, the valuation claim forms issued by Mr. Imrie, their surveyor, referred to the Forrests as the clients, and there was no mention of KWF. Against this background, the Lord Ordinary had found he could not accept that the Forrests, who had experience of building contracts and commercial development projects, had been so naive or disinterested not to raise the matter when they received the certificates and other documents with their names on them rather than KWF. The Forrests maintained that the Lord Ordinary had placed too much weight on the form F10 and covering letter. Taking what was said after the pre-start meeting and the payments which had been made by KWF, they argued that they could not reasonably have been taken to be the contracting parties. As there was no consensus as to the parties, there could be no contract.

The court agreed with the findings of the Lord Ordinary. He had been entitled to treat the letter of 20 December 2005 which Mr. Imrie had sent to FBF accepting their quotation for the “client” “KWH Homes Ltd.”, as being of no real significance. There was no evidence that it had been sent with the Forrests’ authority. It could not be regarded as a counter offer. Taken against the background where there had been no previous mention of KWF, FBL had been reasonably treat entitled to treat it as a mistaken attempt to accept their offer, and they had not been required to acknowledge it.

The main thrust of the Forrests’ submissions was the request at the end of the pre-start meeting that KWF be the contracting party. Nothing was said about the Forrests not being prepared to continue if FBL would not accept KWF as the employer. The Lord Ordinary had been correct in not treating this as a counter offer. FBL had been entitled to consider that their position had been confirmed by the sending of the F10 form, and an indication that the Forrests were prepared to continue with the contracts as individuals. Without any reference to KWF, the Forrests had permitted FBL to commence work, and by their conduct they had accepted FBL’s offer to contract with them. The formation of the contract had been confirmed by the issue of the various certificates and instructions, and the repeated references to the Forrests in the site meeting minutes. As for the payments being made by KWF, it was not unusual for such payments to be made by a third party.

Author: Ann Glacki

Date: February 2010

Commentary

The case does not throw up my significant issues of law rather it applies well established principles of contract formation and evidence.

What it does do however is once again reinforce the important point that it should be clear who the Parties to a Contract are and who they intend to be a Party to the Contract.

For more information please contact Lorne Alway by telephone 01295 275975 or by email on lorne.alway@alway-associates.co.uk

Author: Lorne Alway

Date: February 2010

Lorne Alway

back to index