| Date | 6 May 1999 |
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| Judgment | Birse Construction Limited -v- St David Limited, TCC 12 February 1999 |
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| The Issue | Impact of partnering arrangements upon formal contract undertakings. |
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| Implication |
The existence of a partnering Charter may influence decisions as to whether essential terms are present for the formation of a contract and may further influence an arbitrator or court in determining whether performance has met the requirements of the contract. |
printThe use of partnering arrangements are now widespread in the construction industry. It is generally thought that partnering agreements do not in themselves constitute contract obligations. The partnering objectives are more in the nature of management ideals and therefore sit alongside the formal contract undertakings. Nevertheless the extent to which a partnering agreement might modify the contract obligations of the parties is an area which causes considerable doubt. These issues were examined in the recent case between Birse Construction Limited and St David Limited in the Technology and Construction Court on 12 February 1999. Birse were contractors for shell and core works for the construction of luxury apartments at Adventurers Quay, Cardiff Bay. Before commencing works all parties had attended a "Team Building Seminar". At the end of that seminar a Charter had been drawn up and signed by the parties which read: "Adventures Quay, Cardiff Bay Charter. To produce an exceptional quality development within the agreed time frame, at least cost, enhancing our reputations through mutual co-operation and trust. Quality · To inspire, design and construct an award winning flagship development · To enhance the reputation of the Team · To work towards zero defects Time · To complete all aspects of the scheme within the agreed programme Commercial · To maximise profit for all parties · To preserve the budget, minimise waste, promote buildability and economic design Relationships · To promote an environment of trust, integrity, honesty and openness · To enrol subcontractors, suppliers and specialists into the Team ethos · To promote clear and effective communication Safety · To work to the agreed safety plan · To work within the safety policy of the Principal Contractor General · To build within legal and statutory obligations · To provide a bespoke service to purchasers · To complete the entire project by mutual support · To enhance the ethos of Partnering · To build long term profitable relationships with all parties". Despite these lofty, and some would say nebulous ideals, the project ran into difficulty. Completion of the first phase of the works was approximately eight months late by which stage St Davids had become unhappy with Birse's performance and had decided not to give it subsequent phases of the work. On completion Birse left site maintaining that no contract existed between the parties. St David's treated this action as an abandonment under the terms of the JCT contract which they considered applied. Mutual co-operation and trust having long since evaporated the parties ended up in court. Birse argued that no contract had been concluded and sought to recover payment for works done upon a quantum meruit. St David's argued that a contract in the JCT form had been made containing an arbitration agreement. Accordingly proceedings should be stayed in accordance with section 9 of the 1996 Arbitration Act. His Honour Judge Lloyd QC carefully examined the history of dealings between the parties. He agreed with the analysis in Keating on Building Contracts that the principles to be applied were to ask whether: (a) in the relevant period of negotiation did the parties intend to contract? (b) at the time when they are alleged to have contracted had they agreed with sufficient certainty upon the terms which they then regarded as being required in order that a contract should come into existence? (c) did those terms include all the terms which, even though the parties did not realise it, were in fact essential to be agreed if the contract was to be legally enforceable and commercially workable? (d) was there a sufficient indication of acceptance by the offeree of the offer as then made, to comply with any stipulation in the offer itself as to the manner of acceptance? Judge Lloyd added that it is somewhat artificial to analyse the parties' action in terms of a distinct offer or acceptance, since the parties were converging by stages on an agreed package just as a jigsaw would be put together. He concluded that a contract had indeed been formed between the parties even though the documents had not been formally executed. Accordingly the proceedings should be stayed in accordance with the arbitration agreement contained within that contract. It is clear however that Judge Lloyd felt that the partnering Charter required to be taken into account in arriving at this decision. In one telling comment he said "People who have agreed to proceed on the basis of mutual co-operation and trust, are hardly likely at the same time to adopt a rigid attitude as to the formation of a contract". As to how the Charter might be used in interpreting the contract Judge Lloyd noted that Birse was trying to capitalise on the lack of a formal written contract to extricate itself from the apparent absence of relevant events for extensions of time. He commented "this is particularly surprising since these days one would not expect, where the parties had made mutual commitments such as those in the Charter, either to be concerned about compliance with contractual procedures if otherwise there had been true compliance with the letter or the spirit of the Charter". Companies who enter into partnering Charters of the type examined in this case will be particularly interested in the final comment from Judge Lloyd, "even though the terms of the Charter would not alter or affect the terms of the contract (where they are not incorporated or referred to in the contract or are not binding in law in their own right), an arbitrator (or court) would undoubtedly take such adherence to the Charter into account in exercising the wide discretion to open up, review and revise which is given under the JCT conditions".
CJ-9918
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