So sang Stevie Wonder. Although, in truth, not about contract law. Not that this song would have been particularly helpful to the parties in the instant case…
A recent case in the Technology and Construction Court once again highlights the importance of making sure that all those niggling little formalities the legal folks keep harping on about when getting the contract in place, such as being sure which party you are in fact contracting with (quite important you may think?), are completed diligently.
In Liberty Mercian Ltd v Cuddy Civil Engineering Ltd and Anor  EWHC 2688 (TCC), Ramsey J had to consider several simple, but fundamental, questions on the formation and construction of a NEC3 contract, including whether or not there was a contract, when that contract was formed, who the parties were and, as a consequence, whether the Defendant remained obligated to provide certain guarantees under the contract. The Claimant sought several declarations from the court on these and other matters of the contract construction.
The Contract was an amended NEC3 form for the construction of a new “retail plateau” for the future construction of a supermarket. The second Defendant had completed the tender. However, following an internet search by the Claimant’s solicitors, a similarly titled company with the same shareholders and directors had been found, i.e. the first Defendant. A warranty with the supermarket was executed in the name of the first Defendant. However, the second Defendant continued to work on site, present invoices and be paid. Ultimately the contract was executed with the first Defendant as the contracting party. Thereafter, problems arose and the Claimant sought to terminate.
Ramsey J held that the Claimant had failed to enter into a contract with the second Defendant prior to the execution of the Contract with the first Defendant. The evidence, although suggesting the second Defendant was the intended contracting party, did not amount to mistake despite the second Defendant being the party who in fact carried out the works. Interestingly, but not revelatory, was that the obligation to provide certain bonds and guarantees survived after termination as it was procedural and ancillary to the primary obligation to provide the works.
The case highlights the care that should always be taken in observing contract formalities. Remember:
- Carry out appropriate checks on the party you intend to contract with. Simple checks with Companies House are quick and cheap if not free;
- Understand your own requirements, and for the legal folk your client’s needs, ahead of executing the contract. This in itself will help guide the contractual process; and, ultimately
- If in doubt ask. Perhaps obvious, but for the time and cost of one phone call a great deal of expensive litigation may be avoided. Taking the opportunity to engage and build a rapport with the other party will undoubtedly pay dividends as the project progresses.