Contracting parties often face tight deadlines to commence work, in order to facilitate this Letters of Intent which include a set of temporary terms and conditions are issued on the understanding that a formal contract will follow shortly thereafter. This does not always happen and in case of Anchor 2020 Ltd v Midas Construction Ltd the Court had to determine whether or not a contract had been entered into following the expiration of the Letters of Intent.
In this case Anchor had employed Midas to design and build a new retirement community. The works commenced under a Letter of Intent. Anchor then issued to Midas an amended JCT Design and Build Contract 2011. Midas signed the Contract and returned the Contract on July 21st 2014 but added to the Contact a risk register which excluded certain items from the Scope of Works. Anchor did not sign the Contract, works on site continued and a dispute arose between the parties as to whether the Risk Register was a Contract Document. Midas concluded that a Contract had not been formed and requested that it be paid on a quantum meruit basis.
Midas had previously insisted that there was an executed contract in place whilst it was carrying out the works and so the Court concluded that it would not have continued working if it did not believe that a Contract had been formed on July 21st 2014. The Court held that it believed that the essential terms and conditions of the contact had been agreed and that a contract was formed on July 21st 2014. It further found that due to this the Risk Register did not amount to a counter offer but rather Midas attempting to vary the Terms of the Contract.
With regards payment the Court concluded that if a contract hadn’t existed Midas would have been entitled to payment based upon quantum meruit principles, however the reasonable sum would have been determined by the wording within the Letter of Intent which referred to the proposed Contract (which had been signed by Midas) and as such there was no reason to alter the method of valuation.
If both parties act as though there is a contract in place it makes it very difficult for one side to prove the contrary. To avoid these situations contracts should be executed prior to commencement of work, where this is not possible provisions should put in place so there can be no doubt as to which terms are in dispute and the temporary measures in place to remedy.
Urban Project Services are highly experienced at reviewing, negotiating and agreeing Contract Terms and Conditions within tight time-frames. Allowing Urban Project Services to assist you in drafting and agreeing the contract offers your project teams more time to concentrate on delivering a successful and profitable project.
This article contains information of general interest about current legal issues and does not provide legal advice. It is prepared for the general information purposes only. This article should not be relied upon in any specific situation without appropriate legal advice