Management

Garry Winter's Case notes

13 October 2010

Traditional Structures v H W Construction

Technology and Construction Court, May 2010

H W Construction was tendering as main contractor for a business development centre. Part of the project required steelwork and cladding and Traditional Structures was invited to quote for the work.

Traditional supplied a quote in time for H W to submit its tender for the project. However, the copy sent to H W varied slightly, but significantly, from the quote Traditional retained on file. The fax sent to H W should have quoted £37,573.43 for the steelwork and £32,365.83 for the roof cladding. Instead, it only provided the price for the steelwork and Traditional was unaware of this omission.

After a fortnight H W wrote to Traditional to ask how long the quotation of “£37,573.43 plus VAT for the floor support beams and the roof structure” remained valid for. A few days later, H W informed Traditional it had been awarded the main contract and accepted Traditional’s quote for the “steelwork and roof cladding”.

When Traditional was asked to price some small variations to the works, it sent the revised prices to H W in the following terms: “Steelwork £41,873.00 + VAT, Roof Cladding £34,815 + VAT.”

H W responded that it couldn’t be right that costs had doubled. Traditional said the original quote was for a combined price of £69,939.26, and sent a copy of the quotation from its file. H W replied that its copy had one price and Traditional’s copy had two and stated it was not responsible for Traditional’s errors.

Traditional undertook both steelwork and cladding, with both parties reserving their rights to bring an action, and with H W limiting the order to the original steelwork price. Accordingly, Traditional sought rectification of the contract by inserting the missing price.

The judge found in favour of Traditional, as the facts of the case matched those required for rectification to be made: namely that Traditional erroneously believed the contract to include the price for the roof cladding; that H W was aware of this omission; and knowing that it was due to a mistake H W had not drawn Traditional’s attention to it which was to the benefit of H W.

Crucially, the judge found that on the proper construction of Traditional’s quote, it was clear that it referred to more than one price and so should have prompted an enquiry from H W. Furthermore, the judge found that the inconsistency in the terminology used when asking how long the price would remain open for was deliberate — H W’s request appeared to relate only to the steelwork not the cladding.

Similarly, the judge found that in accepting Traditional’s quote, H W specifically did not refer to the contract sum, yet the other six sub-contracts it placed all included such detail.

 

Garry Winter’s analysis

Most people believe that where commercial parties enter into a contract they are bound by it, no matter what. This is generally true. But where it can be shown that the facts exist to invoke rectification, the court will make good the contract as though it did not contain the error.

The most difficult part is to prove that a party was aware of the omission. In this case there was incontrovertible evidence that not only was H W aware of the omission, but it also had knowledge that it was due to a mistake by Traditional.

Not all cases will be so clear cut. Estimators and contractors’ quantity surveyors frequently receive quotes containing errors or omissions. Such errors are more easily noticed where elements of work are itemised or where the rates and prices appear far too low. However, there is a fine line between what may be seen as an error and a deliberate tendering tactic. Other cases have shown that where companies have taken a risk and priced items low in the hope that they will not be required, they will be bound by the price.

Unsurprisingly, in this case, the judge concluded H W’s behaviour was unconscionable.

This case shows that where the relevant circumstances exist, the court will not tolerate sharp practice or the deliberate shutting of eyes to the obvious. However tempting that cheap quote looks, check it — it may be cheaper to play fair.

 

Garry Winter is a senior consultant at Knowles, a Hill International company. He can be contacted on 01928 756 600 or 07900 277890


Comments

Although the judge ruled in their favour, that was a significant error by Traditional and should be tolerated, full stop.

Caroline Gordon, 30 October 2010

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