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Building and construction – contract – damages

Construction contracts: variation: architects: contract price: JCT standard form: instructions; contract terms: meaning of variation instruction issued by architect: tendering process: arbitrators: contract formation: quantity surveyors: fees

No appeal lay against an arbitrator’s finding that a variation instruction issued by the architect supervising a building project had contractual effect; furthermore, the arbitrator had been correct to find that the requirements of that instruction as to the agreeing of the contract price had been complied with.

Hallamshire Construction PLC -v- South Holland District Council (2004)

Technology and Construction Court (HH Judge Thornton QC) 16/1/2004

The appellant contractor (H) appealed against the arbitrator’s findings that a variation instruction issued by a project architect (S) had contractual effect and that the requirements of the instruction as to the agreement of the contract price had been complied with. H had entered into a building contract with the local authority, which incorporated the 1980 local authorities with quantities JCT form of building contract. The parties agreed that phase 2 of the project, which concerned fitting-out works, would be dealt with by means of a variation instruction issued by S. The instruction provided, inter alia, that all terms and conditions would be in accordance with the existing contact and that “all costs in connection with this variation [were] to be agreed at fair and reasonable costs” by the quantity surveyors nominated under the contract. A dispute of H’s fees arose, and the matter was referred to arbitration. The arbitrator found that S’s instruction had contractual effect and that a revised scope of work and contract price for that work had been agreed by the parties, in part by a process of offer and acceptance, in part by negotiation and in part by conduct. H argued that (1) the effect of S’s instruction had merely been to set up a tendering process whereby the parties would attempt to agree a concluded contract for the phase 2 works, with the result that the arbitrator had erred in finding that the instruction had contractual effect; (2) the process of agreement required by S’s instruction was one involving the bills as a whole, with the result that the arbitrator had erred in finding, as he had, that the bills had been open to piecemeal negotiation and agreement.

HELD: (1) The arbitrator’s finding that S’s instruction had contractual effect did not raise a question of law and was therefore unappealable. (2) In the light of the wording of S’s instruction, taken against the factual background, it was clear that the arbitrator had correctly interpreted the relevant words of the instruction. The process of agreement required of the quantity surveyors was one that involved the agreement of individual work items and their cost; it was not one that involved the negotiation and finalisation of an entire contract or a composite set of bills of quantities. It followed that there had been an agreement as to the cost of the works. No offer had been needed and the absence of an acceptance, using the concepts of “offer” and “acceptance” as they were used in the law relating to contract formation, was immaterial.

Appeal dismissed.


“Lawtel”: 16.3.04