Remarkably, the builder of the Courts of Justice in the Strand, in London, became insolvent during and as a consequence of the work.
Many Irish builders are now becoming insolvent. That’s inevitable in circumstances where their employers, developers, are now insolvent and heading into NAMA.
Whatever the reason, this kind of difficulty is endemic for builders. In Marlborough v Strong [1721] 1 Bro. (P.C.) 175 the builder of Blenheim Palace was shortchanged by the Duke of Marlborough to the tune of £7,300 (an enormous sum).
The Duke refused to pay the shortfall on the grounds that his alleged agent, the Earl of Godolphin was not his agent. In fact the Duke had engaged the services of the Earl precisely to act for him in relation to the building; to employ people (including the architect, Sir John Vanbrough); and to enter contracts for the purpose. The Duke claimed that the Earl was acting as Lord High Treasurer of England and not as his private personal agent. The court thought otherwise and gave judgment for the builders.
(The Duke resembled some of Ireland’s developers; the Duchess reported him as not bothering, on one occasion, to remove his high riding boots in going to the task of “pleasuring” her.)

The law in Ireland and the law in England and Wales appears to be re-converging on the point (if, in fact, there ever was a divergence) that the existence of a contractual relationship is not incompatible with a duty in tort to avoid inflicting economic loss on someone.

Almost as a matter of course when the phrase “economic loss” appears, it will be with reference to matters pertaining to a building contract.

That was the case in Tesco Stores Ltd, v. Costain Construction Ltd. & Ors. [2003] EWHC

The judge in Tesco stated his finding as follows:

… I find that Costain assumed a duty of care to Tesco to carry out the work which it itself, rather than any sub-contractor, in fact did pursuant to that agreement with the care and skill to be expected of a reasonably competent building contractor. That work potentially included both physical work of construction and the making of decisions as to design, in the sense explained by May LJ in the passage which I have cited from his judgment in the second Bellefield case. I find that that duty did extend to not causing economic loss, for the reasons which I have endeavoured to set out.”

The liability of a builder/designer is contingent on the contract not having excluded a liability for negligence and the remedy for that is to read the terms of any contract to ensure no such liability is excluded.

Of course there are other difficulties for aggrieved property owners as was seen in Irish Equine Foundation Ltd. v. Robinson [1999] IEHC.

Here, the court decided, as a preliminary issue, that the Plaintiff’s claim was statute barred under the Statute of Limitations 1957.

The lesson is this; when the builders leave, carefully examine the work, time is running!

It is common in building agreements for the “employer” to hold back some monies due to the builder/contractor under the contract. This money is known as “retention money”.

The money belongs to the contractor. However, the “employer” is anxious to determine that no defects exist in the works which would allow the employer to deduct the cost of rectifying the defects from money due to the contractor. Until that determination is made the employer “retains” some of the money due to the contractor.

Given the collapse in the Irish construction industry it is now a serious problem to safeguard such retained money. If the money is kept by the employer with its own money it will be very difficult, if not impossible, to prevent the money from being lost in any insolvency of the employer. The remedy for this is to insist that the money be placed in a separate bank account (to the credit of the employer). Trust money (as this is) which is not mixed with the trustee’s money is not lost in an insolvency.

Even if the retention money was not required, under the terms of the contract, to be lodged in such a separate account, there is no reason why it cannot be done belatedly, before any insolvency is triggered.

The builder of the Empire State building in New York, when asked what the most important thing was in its building replied, “Getting the contract”.

What he did not say, but just might have been able to say, is that the “contract” may be subsequent to the commencement of work.

The reason for this lies in a practice common in the construction business, of issuing “letters of intent”. The intended purpose of these is to start the process of negotiation of the terms of the contract (or even to just gain time while the contract is being drafted), but to avoid inhibitions in the commencement of work.

The contract negotiation may be lengthy. Frequently, construction contracts are accompanied by “collateral” contracts intended to benefit third parties, such as the bank that is financing the construction.

Interesting, and profitable (for lawyers) questions arise when the work is completed in the absence of the formal signing of the contract. The correspondence may be replete with the slogan “subject to contract/contract denied”, but it will be difficult to maintain the position that there is no contract in such circumstances.

Depending on the course of the negotiations the planned terms of the contract may be readily discovered; very likely the intended terms were in the form of one of the RIAI contracts or some other model construction/engineering form.

Even if there is no contract, an “employer” is not entitled to deny responsibility for payment for work done. Claims of this kind used to be called “quasi-contract” but are now called “restitutionary”.

However, that circumstance and another where there was no “model” form of contract alluded to, present yet more interesting and profitable (for lawyers) questions as to what the subject matter of the contract was and whether one of the parties (the builder, usually) has complied with its terms.

This can easily arise where what was done was, say, constructing an extension to a house. Ideally, some construction professional (a surveyor, say) will have been engaged to specify the work and oversee its execution. If this has not happened and the work is not satisfactory, the “employer” must, belatedly, discover what are the minimum standards applicable to construction work. If the “employer” is not in business then the “employer” may be a consumer under the Sale of Goods and Supply of Services Act 1980 and some at least of the terms of the contract will be implied under the 1980 Act.

There is no reason, in the case of a small job, for work to commence before the execution of a proper written contract with a specification attached and for arrangements for the work to be supervised by a construction professional.

Litigation lawyers fight. If a lawyer is not generally fighting, he/she is not in litigation. Sometimes the lawyer is fighting for a plaintiff and sometimes the lawyer is fighting for the defendant.

Some lawyers find they invariably fight for plaintiffs and other lawyers find they invariably fight for defendants. The distribution of business in the “legal market for services” explains patterns like this.

Some firms of solicitors have one client only; an insurance company, say. The requirement of an insurance company (or a bank), for legal services, is substantial.

The fighting takes place in the context of legal proceedings.

What is it like to be involved in legal proceedings?

The answer is not straightforward; after all, what is the answer to the question, “What is it like to be in a fight?”.

It invites the reply, “What kind of a fight?”

There is no comparison between a soldier coming in to land on OMAHA BEACH in Normandy, on D-Day 1944, and a brawl in the local pub. Yet both are “fights”.

Or, to take another example, consider Gary Cooper in “HIGH NOON” with his shoot-out on the Main Street and compare it with the reality of the WILD WEST; most shootings consisted of sneak assassinations from darkened laneways.

Perhaps the term “fighting” is wrong; perhaps “contest” is closer to reality, as a description of what the process is like. If so, the phrase “unequal contest” springs to mind. Many legal proceedings are unequal contests.

The reasons for the inequality are many. From a lawyer’s point of view, the problem may be like that of a chess player drafted into the chess game after the game has started. Fatal strategic decisions may have been made and the positions on the CHESS board now reflect that.

By whom have the fatal mistakes been made? Possibly the opponent, possibly the lawyer’s client.

Metaphorically speaking, assume the fatal mistakes have been made by the opponent but the game is underway in a five-star hotel and will last ten days or thereabouts. You have a winning position, but do you have the money to book a room in the HOTEL for ten days?

Whatever about the strategic errors on the board, the opponent will immediately perceive your lack of resources and drag the game out. Like HENRY COOPER, you (metaphorically) have a weak eyebrow. The opponent will punch you there, you will bleed (metaphorically), and the referee will stop the fight, in his favour.

Furthermore, prior to that, being Henry Cooper, you have knocked your opponent down; he pleads, (to gain time and recover), that his gloves are torn, and he needs them replaced!

Reference has been made in this blog to the impracticality of litigants, generally, representing themselves.

In short, a lawyer is generally needed.

The same dictum applies in the conclusion of complex contracts.

In O’Mahony v Patrick O’Connor Builders Ltd. the parties agreed that the defendant do some building work for the plaintiff. When difficulties arose the parties agreed to the preparation of a report by an independent surveyor who would value certain works.

The defendant contended that the outcome of the valuation was binding on the parties.

(The plaintiff was denying that, and was asking the court to revisit the valuation issues).

As the court noted, there was not a clear contract in writing agreed between the parties. (Drawings and specifications were not sufficient to meet the need).

Consequently, through no fault of the valuer he had not executed his task on terms agreed between the parties. In particular, the valuer had made his report final without notifying the parties in advance; advance notice by the valuer before doing so had been a term of the agreement between the parties.

Consequently, the valuation was not binding and the issues, apparently settled by the valuation, were still at large.

A breach of contract does not give rise to an entitlement to compensation for every loss sustained by a Plaintiff.

Some losses are deemed too remote for the Defendant to be held responsible for them.

A good example of this occurred in Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc [1994] CILL 743.

The Plaintiff was constructing a concrete aqueduct over a roadway. It established a batching plant to provide the concrete on site, with the Defendant supplying the power to run the plant. The concrete had to be delivered in one continuous process; a hiatus longer than 30 minutes would prevent a re-start and would ruin the work and materials applied. The Defendant’s power supply failed during the batch run. The work done had to be undone and the Plaintiff had to start again.

The court held that the Defendant was not answerable for the cost of demolition and reconstruction because the Plaintiff had not informed it of the need for a continuous pour.

Supposedly, a new era has dawned in Ireland for standard contracts in the public sector. See one new Construction contract HERE and another HERE.

The major change in these contracts is the shifting of risk from the public authority to the contractor. In general, these forms are intended to bring certainty and security to the State; whether they do so for the contractor is another matter.

That aside, these forms indicate an essential for all contracts; the formation and expression of agreement through offer and acceptance. Either side can make an offer which may be accepted by the other side. (Public servants are not free to accept offers which effectively vary the standard public authority terms but private persons, in their contracts, are completely free to do so). An offer which is met by a counter offer is declined, or not accepted.

Offers, and, by the same token, contracts, may be oral or written. It is common that they are both; the oral element may refer to substantial written terms as in “… I accept those terms”.

When the contract is complex (construction contracts are complex) the offer and the acceptance must refer to all the essential terms, and often all the terms, essential or not; otherwise there is no agreement.

For lawyers there are interesting rules about the time of the making of a contract. They relate to the receipt of offer and the receipt of acceptance. If a party tries to withdraw an offer it will be unable to do so after acceptance is communicated. (To withdraw the “offer” at that point is to breach the new agreement). Sometimes, due to delays in communications, a legitimate withdrawal of an offer (no acceptance having been communicated) becomes ineffective if the acceptance is delivered before your withdrawal is delivered.

Sam Goldwyn (of Metro-Goldwyn-Mayer, the US film producers) said of oral contracts, that they were not worth the paper they were written on. He was right, because of the lack of certainty they embody. Inevitably the two interlocutors making the “oral contract” will have differing recollections of the terms agreed. Litigation on such a contract is an unpredictable gamble.

Communication of offer and acceptance (ignoring EU regulation on the issue) can determine the place of the making of a contract. The place of the making of a contract (ignoring EU regulation on the issue) will determine the applicable law of the contract.

It is a surprising fact that most contracts are concluded without reference to lawyers. It is surprising because of the extent of the law of contract and the effect of getting something wrong in the conclusion of the contract.

Contract law is an essential element of the world of commerce. Buying and selling things is what contract law is about. So, too, is the provision of services.

Most contracts are for small items and small sums; our transactions as we buy our groceries are typical. We do not expect to have to enter written contracts for these items, and we don’t. Nevertheless, these sales are subject to ascertainable conditions and terms, nowadays often emanating from the European Parliament.

If the Government decides to build substantial roadways across the landscape it will, of necessity, enter a contract, or contracts, to achieve that objective; the alternative would be to establish a national workforce in the employment of the State to directly build the roadways. We don’t do that.

Signing a contract for a new roadway (or a new building) is a significant matter. The contract will have to provide for a great number of things, not least the specification for the type or quality of road or building.

A lawyer should not be far removed from this occasion. After all, who drafted the contract? It should have been a lawyer. What if the written terms contain an ambiguity? There is a standard method, or rule, for dealing with that; the contract is interpreted against the person who drafted it.

There is another practical approach; use a standard form of contract. The benefits of such a form are enormous. Any ambiguities will have been eliminated, and the experience of predecessors will have been built into the contract with clauses providing for all the issues and matters that need to be addressed or provided for.

However, these large contracts will often have special conditions to be inserted into them; the facts will require it. It is a general rule that special conditions override general conditions where there is a conflict between them. In that case there is an unavoidable need for a lawyer.

In the construction industry many contracts commence as a consequence of the conclusion of the main contract. The contractor will, of necessity, have to source the skills required to do some of the work, possibly most of it, from specialist sub-contractors. Because of the time consumed in finding the sub-contractors, there may be exchanges of letters of intent or such like. Astonishingly, the result may be that there is no contract between the contractor and the sub-contractor. If the sub-contractor does work in such circumstances, it will still be entitled to be paid. The claim will be in quasi-contract on a “quantum meruit” basis. The work will be valued at market rates and a profit element will then be added. That is what the sub-contractor will be entitled to.

For the contractor, this may be a severe blow. Claims of delay, if any, (there will be such) and consequential, loss will not be enforceable by the contractor.

In construction contracts the payment of liquidated damages is a benefit to the parties. Depending on the circumstances it can benefit the developer by relieving it of the obligation to prove a loss, whereas it can generally benefit the contractor in relieving it from the necessity to resist a [valid] claim and also introduces certainty as to consequences of the contractor’s default. Both parties can avoid expensive disputes in the courts with consequent delay for the project.

However, it is not a carte blanche for the contractor to neglect its obligations in terms of time, say.

In Bath and North East Somerset District Council -v- Mowlem Plc [2004] CA, Mowlem refused to follow an architect’s instruction. The developer council advised Mowlem that if it persisted in its refusal the council would engage another contractor to do the work. Mowlem again refused to do the work and the council instructed another contractor on the matter whereupon Mowlem refused to allow the replacement contractor on the site to do the work.

The council applied for an injunction to effect entry for the replacement contractor. Mowlem, in resisting the application, claimed that the only loss accruing to the council was a loss of time and that was capable of being remedied under the terms of the contract, which fixed liquidated damages for the delay.

The court disagreed and stated:

Mowlem is not entitled to breach its contract. The agreement on liquidated and ascertained damages is not an agreed price to permit Mowlem to do so, and it does not preclude the court granting any other relief that may be appropriate. In my view, the Council’s case is right in principle.”

There was evidence to show that the council’s loss would exceed the liquidated damages and the court affirmed the injunction granted in first instance to the council.