Hatmet Ltd v Herbert (t/a LMS Lift Consultancy) [2005] EWHC 3529 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

The construction contract must be made in writing, by exchange of communications in writing or evidenced in writing for the statutory provisions relating to adjudication to apply (s.107 HGCRA).  In this case, the court held that even a simple contract that did not spell out terms regarding methodology or design specification could meet this requirement.  This was so even though the court also found it necessary/appropriate to imply a term that the employer would pay a reasonable price because the parties had not agreed a revised price following changes to the specification for the works. 

Her Honour Judge Kirkham – Queen’s Bench Division, Technology and Construction Court

Background

Bouygues was the main contractor on a construction project for the Home Office.  Hatmet was engaged by Bouygues to install ceilings in the building, whereas LMS was concerned with the installation of 18 lifts.  It was thought desirable for the ceilings in the lifts to match those in the building generally, therefore LMS asked Hatmet to quote a price for supplying and installing ceilings for the lifts.  Hatmet gave a quote, which was approved. 

Hatmet sent LMS a purchase order for the lift ceilings, which detailed the number of lifts, delivery date and price only.  A further exchange of communications ensued, during the course of which changes were made to the design and Hatmet was instructed to proceed with the manufacturing of the lift ceilings.

After the installations had commenced, Hatmet sent a letter to LMS requesting approval of its revised price (resulting from the changes in the specification), of the mock-up installed in the scenic lift and a deposit of 50% of the contract value.  The terms of this letter were never agreed.

A dispute was referred to adjudication and the adjudicator ordered Hatmet to pay £18,600 (plus VAT and interest) in respect of the supply and installation of the lift ceilings.  Hatmet applied for enforcement of the adjudicator’s decision and LMS brought an application to defeat LMS’ claim.

Issues

LMS argued that there was no construction contract within the meaning of s.107 of the HGCRA and therefore that the adjudicator had no jurisdiction.  In particular, LMS argued that the contract was concluded orally and while many terms had been recorded in writing, there was no written evidence of the revised specification for the work to be undertaken and no agreement on pricing.

Decision

HHJ Kirkham found that the various documents contained a sufficient definition of the work to be undertaken, the price and the time period in which the work was to be carried out.  It was a simple contract, but the elements that the parties had discussed were present.  There was no need and no requirement for the documents to spell out terms as to methodology or design of the installation methods.

In terms of the revised price, the judge found that s.15 of the Sale of Goods Act 1979 provided an appropriate mechanism by which the price could be determined: where a contract for the supply of service does not determine the consideration payable for the service, there is an implied term that the party contracting with the supplier will pay a reasonable charge. 

In short, the court concluded that there was an agreement in writing and that the adjudicator did have jurisdiction to reach his decision.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

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