More than a year later, in the Court of Appeal, Lord Justice Ward declared that this was not correct. It was not necessary to have agreement on the entire scope of the work, "provided there is an instruction to do work and an acceptance of that instruction, then there is a contract and the law will imply into it an obligation to pay a reasonable sum for that work".
This issue arose in the case of Clarke & Sons vs ACT Construction. ACT was asked to design and build a depot for Clarke's coach business, but there was little or no discussion about the precise scope of the work and the contract period. ACT denied that there was any discussion about price, either, although Clarke claimed that it was to be capped at £815,000.
As work progressed, Clarke made payments on account in response to applications from ACT. It was the submission of the final account by ACT that precipitated the dispute. Clarke counterclaimed for money that it alleged had been overpaid, for damages for failure to complete the work within a reasonable time and for defective works.
At first instance, Judge Thornton concluded that no contract had come into existence and that ACT was entitled to be paid on a quantum meruit basis, "being a daywork basis for the time and materials employed". However, unpaid invoices and dayworks would be subject to a 15% mark-up to take account of the profit margin on the job. Clarke took the case to the Court of Appeal. There, Clarke accepted that ACT was entitled to be paid a reasonable sum for the work but disputed that ACT was entitled to the cost of labour, plant and materials, plus mark-ups at an average of 20%, all of which it had already paid.
The prospect of reopening amounts on which the 15% uplift is to be attributed is too ghastly to contemplate
After holding that there was a contract to carry out the work, Lord Justice Ward went on to deal with the issue that had become the main focus of the appeal: "No attempt was made to agree … the basis on which ACT were to do the work … The only finding open to the judge was the finding he made, that the work was to be done for a reasonable remuneration."
Therefore ACT's work would be valued on a cost-plus basis; but Lord Justice Ward disagreed with Judge Thornton that the 15% mark-up should only be applied to the final two applications for payment rather than to the 10 preceding applications on which payments had been made. Judge Thornton had held that it was not appropriate to reopen "settled and not previously challenged" invoices. Payments for these invoices had been in the nature of an agreed settlement in relation to the works carried out.
Lord Justice Ward disagreed. The evidence actually suggested that payments had been made on account and therefore the invoices were "guesstimates" of the value of the work. With one exception, none of the applications for payment had been paid in full. Therefore, Lord Justice Ward allowed Clarke's appeal on this point, although he added: "The prospect of reopening the amounts upon which the 15% uplift is to be attributed is too ghastly to contemplate."
But Clarke wanted to go further by challenging the baseline labour costs subject to the 15% uplift. The court rejected this on the basis that the sums claimed for labour were never challenged in the pleadings.
In summary, there was a contract for reasonable remuneration for the work done that reflected the cost of labour, plant and materials, together with a mark-up of 15% applied to all payment applications. An order was agreed that counsel would seek to agree the resulting calculation, failing which Lord Justice Ward would deal with the matter. The case was also to be remitted to Judge Thornton to determine whether the claim for defective workmanship was still alive.
Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group.