Friendly agreement fails to stand up in court

CASE: Richard J Thompson (T/A Richard J Thompson International) v James K Charlesworth - Feb 2009

At the house he was building, Chauffeur’s Cottage, Mr Charlesworth wanted to install a complex electrical system.

In autumn 2001, he spent time making plans on his laptop, and discussed his developing ideas on several occasions with Mr Thompson. Part of the work included a dimming system. In October this had been a 12-circuit rack costing £3,335 but by 3 December 2001 this had expanded to 17 circuits at £4,095.

At some stage Mr Charlesworth had also produced a handwritten plan which included electrically operated curtains and interior lighting in the wardrobe. A price of £15,000 was mentioned for the work.

Mr Thompson argued that this was only an estimate while Mr Charlesworth held the £15,000 was a fixed price and if there were extras he wanted Mr Thompson to tell him.

In court earlier this year, Mr Charlesworth claimed that at the time, he had stated:

‘I want you to do this job for me. We’ve got an agreement.’

On 25 February 2002 Mr Thompson issued his invoice marking the end of the first fix. This stated: ‘Before a second fix is carried out we will send a full job costing so that we don’t go over budget.’

Mr Charlesworth argued that this supported the idea of a fixed price. However, Mr Thompson claimed his invoice indicated he was working to a budget estimate and would prepare a full job costing to know where he stood. If there had been a fixed price, there would be no need for the full job costing.

On 10 September 2002 Mr Charlesworth wrote to Mr Thompson referring to ‘the budget price of £15,000 that was agreed upon’. Mr Thompson’s reply on 16 September stated: ‘As you can appreciate on a job this size variations over the estimated cost are going to occur and have.’

In court Mr Thompson said he had not contradicted the expression ‘budget price of £15,000’ and said it was obvious that variations over the estimated cost can and do occur.

Mr Charlesworth also pointed out that Mr Thompson had only given a figure of £15,000. There were no rates or mark-ups on which this price was based. The absence of such rates indicated that £15,000 was a fixed price.

Mr Thompson responded that he had worked before for Mr Charlesworth’s family firm with a verbal order on a quantum meruit basis and on preferential rates. In contrast, had also partially dealt with the Chauffeur’s Cottage work as a fixed price contract with variations. For example, he had priced up the underfloor heating as a variation.

The judge noted that the two men were on social friendly terms at that time. In April 2002 Mr Charlesworth had even invited Mr Thompson to his wedding. Therefore he did not look at the events as if they had been dealing on a normal commercial basis. He even thought Mr Charlesworth’s use of phrases such as ‘reaffirmed when the order was placed’ and ‘I want you to do this job for me. We’ve got an agreement’ were more words Mr Charlesworth wished he had said, rather than what he had actually said seven years earlier.

As a result the judge held that the work had been done on the basis of a budget estimate only and judgement was awarded to Mr Thompson.