Hallamshire had entered into a building contract with the local authority, South Holland District Council. It incorporated the JCT Form of Building Contract 1980 Edition Local Authority's version. They agreed that phase two of the project, in respect of fit-out works, would be dealt with by means of a variation instructed by the architect. The instruction provided that the new work would be carried out in accordance with the existing contract and that the prices would be agreed at "fair and reasonable costs" by the quantity surveyor. A dispute arose over the amount to be paid to Hallamshire, which was referred to arbitration.
The arbitrator decided that the instruction had contractual effects. The revised scope of work and the price or mechanism for agreeing the price had been agreed by the parties. It had been accepted during the course of their negotiations and in part by their conduct. Hallamshire challenged that finding on the basis that the instruction merely established a tendering process for agreeing the prices, and secondly, the agreement to "fair and reasonable costs" by the quantity surveyor meant that the parties had not agreed those prices for the work at the outset of phase two and so the arbitrator had erred in law.

Reference

The arbitrator's finding that the architect's instruction had contractual effect was a question of fact that did not raise a question of law. It was only possible to appeal questions of law, and as the arbitrator's finding was one of fact Hallamshire could not appeal the arbitrator's award. In any event, the arbitrator had correctly interpreted the instructions given the facts leading up to the issue of that instruction. There had been agreement as to price, thus satisfying the requirements for a contract; the quantity surveyors were to agree "fair and reasonable costs". This did not require final negotiations for a lump sum contract, but was simply a process of agreeing individual items and their costs. The appeal was therefore dismissed.

*Full case details
Hallamshire Construction Plc vs South Holland District Council, 16 January 2004, TCC

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Postscript

It is only possible to appeal an arbitrator's award in very limited circumstances. The arbitrator must have made an error of law, not of fact. An arbitrator's decision in respect of facts is final. One might have thought that an arbitrator's decision as to whether the parties had legally formed a contract might be a question of law. However, this case confirms that an arbitrator's finding that an instruction issued by an architect amounting to a variation is a question of fact.