At our recent Construction Breakfast Seminar, our Construction team discussed the case of Anchor 2020 Limited v Midas Construction Limited [2019] EWHC 435 (TCC). This case considered whether a contract can be formed by conduct in the absence of execution by one party.
Background
Anchor 2020 Limited (“Anchor”) engaged Midas Construction Limited (“Midas”) to design and construct a retirement complex at Yateley in Hampshire.
Midas commenced work in October 2013 and achieved practical completion in December 2015.
Between September 2013 and June 2014, the works were carried out under a series of letters of intent. The parties intended to contract pursuant to a and following an initial agreement between the parties, Midas returned a signed copy of the contract to Anchor on 21 July 2014. It also appended a risk register that purported to exclude certain elements from the scope of works. Anchor disagreed with the inclusion of the risk register and did not countersign the contract.
The Dispute
A substantial final account dispute arose between the parties and the court was asked to determine the contractual basis of the parties’ relationship.
Anchor alleged that a binding contract was made on 21 July 2014. Midas, on the other hand, denied that there was a binding contract and argued that it should be paid on a quantum meruit.
The Decision
The court agreed with Anchor and determined that the parties had entered into a binding contract when the contract was signed by Midas in July 2014.
In reaching its conclusion the court undertook an objective assessment of the parties’ communications and conduct and found that they had intended to create legal relations. In doing so, the court applied considerable weight to the fact that Midas had continued to perform the works in accordance with the terms of the contract up to practical completion. The court also found that the evidence put forward by the parties demonstrated that many of the essential terms of the contract had been agreed between the parties.
The parties where therefore held to be bound by the contract on 21 July 2014 and the payment provisions of the JCT applied.
The decision reached by the court meant that there was no need to consider the quantum meruit argument advanced by Midas. Nevertheless, the court provided persuasive guidance on what would have been decided.
The court explained that any quantum meruit claim would still have been decided on the basis of the payment provisions of the JCT, notwithstanding the fact that any quantum meruit analysis necessarily assumed the parties had not agreed that those terms would govern their relationship.
Commentary
It is common practice for parties in the construction industry to undertake work under letters of intent whilst the parties negotiate contract terms. However, letters of intent often form the basis of disputes and their contractual status remains unclear.
This case, however, highlights that even where parties are proceeding on the basis that there are formalities to complete and the contract has to be signed, a contract may be in place.
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