Sarah Lidgett

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Is my contract binding?

Construction / 24 May 2019

A question we have been asked by many a client over the years, often when they are trying to find a way to get out of it!

In the recent case of Anchor 2020 Ltd v Midas Construction Ltd [2019] EWHC 435 (TCC), Midas were trying to do exactly that, in order to avoid the payment provisions of the JCT Design and Build Contract 2011 they had been negotiating with Anchor, in favour of a claim for payment of a reasonable sum for the works undertaken, often referred to by lawyers as a ‘quantum meruit’ claim.

Unfortunately for Midas, they had already signed the JCT contract and performed under its terms until practical completion.  The issue was that Anchor had not countersigned the JCT contract, as they didn’t agree with the terms of the risk register that Midas had added in at the last minute, which therefore left the question open as to whether the JCT contract could be binding if only signed by one of the parties.

The Technology and Construction Court (TCC) held that it could.  The TCC decided the evidence showed that the majority of the terms of the JCT contract had been agreed, the only outstanding issue being that of the risk register, and so it was clear on an objective assessment that the parties had intended to be bound by its basic terms from the date it was signed by Midas.  A lack of execution therefore didn’t necessarily mean a lack of a binding contract, especially where the parties had been performing under it.

Additional difficulties were caused by the numerous letters of intent the parties had entered into at the outset, as they were unable to reach agreement of the contract terms before commencing the works.  The last letter of intent expired a month before Midas signed the JCT contract, instigating somewhat of a contractual void and ripe ground for disputes concerning which set of terms should apply in the interim.

Notwithstanding the usual perils and pitfalls of proceeding on the basis of a letter of intent, and as suggested by the TCC in this case, parties that do not have a contract in place could nevertheless find themselves bound by the very terms they had failed to agree.

It is worth noting that for the JCT contract to have been binding as a deed, which would extend the contractual liability period, there would have been more stringent signing requirements.  However this case related to a simple, non-deed contract.

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