SWI Ltd entered into a subcontract with P&I Data Services Ltd for building works. SWI’s and P&I’s subcontract specified that a price would be paid for works listed on the tender documents. It was common ground that if P&I required works to be performed that were not the subject of the tenders or purchase orders: SWI was asked to tender for these works and P&I then accepted these tenders.
SWI brought proceedings against P&I for £51,114.66 due pursuant to six invoices. P&I’s defence was that SWI had not performed all the work for which they had charged and, in fact, SWI owed monies to P&I. At first instance, the judge found for SWI for the full amount. The judge also held that the subcontracts were fixed price contracts and SWI had substantially completed the works. A joint expert had measured and valued the work done and concluded that SWI had underperformed the works to the extent of £40,000. P&I appealed.
On appeal P&I argued that the way in which the subcontracts operated, with interim payments based on measurements and valuations of work done, supported P&I’s argument that the subcontracts were unit priced contracts, or had become unit priced contracts. Alternatively SWI must have been aware that the employer could vary the works in its contract with P&I so that it was necessary to imply a term into the subcontracts between P&I and SWI that P&I would be entitled to vary the works and reduce the price quoted to take account of that variation, or that SWI had performed substantially less than had been tendered for.
1. Was the subcontract(s) fixed price contracts?
2. Was the judge right to reject the join expert’s view?
3. Was there a term, either express or implied, dealing with variations and the consequences thereof?
Reference
Although payments were made following monthly measurements, these could not have applied any unit rates as the subcontract did not contain such rates. All that could have been calculated was the amount of work that had been done and what proportion of the price quoted for 100% was by that time due. Some of the invoices rendered supported that this was in fact being done. It was therefore clear that the subcontract(s) were all fixed price contracts.
Even if some term was to be implied to allow P&I to insist on some variation of the works where their employer had so insisted, it does not follow that it was necessary to imply a term under which the fixed price was to be altered with any variation. A term relating to a reduction in price simply cannot be implied.
P&I did not suggest that SWI failed to do things that they were required to do. If they had performed less than they quoted for, that was because the employer had altered the specification and P&I asked SWI to do less. SWI simply did what they were asked. It was not necessary to imply a further term that the price would necessarily be reduced if the contract was substantially the same as the one quoted for.
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Postscript
Subcontracts are frequently performed on the basis of an accepted quotation to perform a scope of works set out in drawings. Documentation is not always comprehensive and may not include a written contract that would allow for variations and accordingly a reduction in price on the basis of variations. In this case, the contract terms did not allow for variations and, as the subcontractor had performed all the works requested by the contractor, they were entitled to full payment of the quoted sums. However, if the subcontractor had not performed every item requested by the employer set out in the scope of works, a reduction would have been made for the work not performed, or performed defectively.
