| Date | 7 May 2008 |
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| Judgment | Safe Safe Homes Limited -v- Mr and Mrs Massingham (TCC) 2007 |
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| The Issue | The extent of a contractor’s liability under an entire contract. |
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| Implication | Entire contracts place extensive liabilities upon contractors, rendering them liable for matters for which they would otherwise have no liability under the more commonly encountered standard forms of contract. |
print| Discussion Disputes concerning the nature and extent of the obligations and liabilities between contracting parties are not uncommon. Such matters were in issue in the case of Safe Safe Homes Limited -v- Mr and Mrs Massingham. Safe Safe Homes Limited (“Safe Homes”) claimed that its work had been subject to variations and delay, entitling it to additional payment and extensions of time. The Massinghams disagreed and determined the contract upon the basis of, amongst other matters, Safe Homes’ failure to complete its work within the agreed timescale. The Massinghams claimed for the cost of having the work completed by others. This case is of particular interest as the Judge, in determining the dispute, explained certain overriding principles that affect parties to a construction contract. Those overriding principles related to: (i) variations and scope of work (ii) entitlement to payment (iii) time for completing the work. The contract The Massinghams wished to extend their large detached bungalow, based upon plans that had been produced by their architect. Subsequently, the Massinghams met Mr Dale,SafeHomes’ managing director who advised them to demolish the house and build a new one. He offered, without qualification, to construct the new house for the lump sum of £130,000.00 and to complete it within 17 weeks. A payment schedule with seven defined instalments was agreed, providing for an advance payment and for the remaining payments to be made upon completion of each stage. Mr Dale stated that the plans previously prepared for the conversion were sufficient for use in his proposed construction of a completely new house, and he undertook responsibility for coordinating the work and resolving all planning and other design related matters. The Massinghams accepted Mr Dale’s advice and offer to construct a new house. Consequently, Safe Homes had entered into what is known as an entire contract. Variations & scope of work Safe Homes claimed that it had undertaken additional/varied work owing to: (i) provisional or inadequately defined work (ii) necessary but ill-defined work (iii) compliance with building regulations and other statutory requirements. In rejecting these claims, the Judge stated that an entire lump sum construction contract is subject to two overriding principles which are applicable unless varied or excluded by the express terms of the contract. These principles are that a contractor must without additional payment: (i) carry out all work necessary to enable the overall scope of work even if that work has not been defined in the contract documents (ii) undertake all work needed to overcome any obstruction or unforeseen eventuality that must be overcome to complete its work. The Judge noted that the additional/varied work formed part of Safe Homes’ obligation to complete and did not qualify for additional payment as a result of the unqualified lump sum nature of the works. Payment provisions Safe Homes repeatedly demanded payment for work stages before they had been completed. The Massinghams refused to make the final stage payment as the work was not complete. The contract was an entire contract, providing for the payment of a lump sum in seven defined stages each payable as soon as a particular section of the work was substantially completed. An entire contract is one where the contractor is not entitled to any payment until it has achieved substantial completion of the work. The instalment provisions of this contract turned it into a contract with seven separate entire stages. The Judge stated that any payment for any stage would only be required to be made when that stage was substantially complete, and, if any stage was never substantially completed, no payment towards the relevant stage would become due. Safe Homes was not entitled to the payments which it had demanded until the work had been substantially completed; to demand money earlier than that was a serious breach of contract. Timescale for completion The contract period was 17 weeks. The work was required to be completed by 30 September 2005. The contract contained no provision for an extension of time for matters under or outside the control of the Massinghams. Safe Homes claimed that delays had been caused by the need to await planning permission, inclement weather and work not planned for but required by the instructions of the building inspector. In rejecting Safe Homes’ claims, the Judge stated that such matters did not entitle Safe Homes to extensions of time as its overriding obligation was to complete the works within 17 weeks, and that it would be a breach of contract on the part of Safe Homes if it took longer than 17 weeks. The nature of the contract placed upon Safe Homes the risk of all delays for which the Massinghams were not responsible. Additionally, the Judge noted that if the Massinghams had altered or varied the work, then such delay would not be a breach and, in the absence of extension of time provisions in the contract, would have resulted in the obligation to complete on 30 September 2005 being replaced by one to complete within a reasonable time. Abusive behaviour Another feature of this case was Mr Dale’s aggressive and threatening behaviour toward the Massinghams. The Judge noted that such intemperate and abusive behaviour constituted a breach of contract, and that such conduct was clear evidence that Mr Dale did not intend to co-operate with the Massinghams or comply with the contract. Summary The entire contract meant that Safe Homes was: (i) liable for the cost of variations/additional work and the delays caused by them and the inclement weather (ii) not entitled to received any payment until it had substantially completed each stage of the works (there was no right to interim payments based upon the valued of the work executed). To avoid such extensive obligations and liabilities, a contractor should qualify the contract or use a standard form containing express provisions for dealing with such matters. The Massinghams were entitled to determine the contract and recover the sum of £47,000.00, which represented the additional costs of having the work completed by others.
CJ-0818
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