Carillion Construction Limited (t/a Crown House Engineering) v Ballast Plc

A letter of intent does not necessarily conclude the parties’ final contract. The court must determine objectively whether the parties intended an immediate final agreement or an interim arrangement pending further contractual steps. Where a fixed-price subcontract is based on an identified specification, a wider obligation to perform all requirements under a main contract will not be inferred without clear agreement. The scope of the subcontract is determined from the documents, the parties’ conduct and the evidence, read in context. A change in the date on which the contract was concluded does not prevent an appellate court from upholding the lower court’s conclusion on the substantive scope of the works.

Ballast engaged Crown House to design and install mechanical and electrical services for a football stadium. No formal subcontract was signed. Crown House relied on a revised specification and claimed payment for work beyond it. Ballast contended that the subcontract was concluded at a later meeting and required Crown House to perform all mechanical and electrical work required by the main contract.

The deputy judge held that the subcontract was concluded on 22 October 1996, that Crown House’s obligations extended only to the works tendered for, and that the main contract terms were not incorporated. Ballast appealed, principally challenging the contract date and the scope of the works.

1. Appeal dismissed. The order below was varied as to the date of contract, but the conclusion on the essential issue—the scope of Crown House’s obligations—was upheld. Costs were awarded here and below.
2. The letter of 22 October 1996 was an interim arrangement. Its language referred to an intention to enter into a subcontract and to the subcontract when placed. Crown House’s response and its internal minutes showed that the parties understood that further contractual steps remained. Their continuing efforts to resolve discrepancies between the revised specification and the employer’s requirements supported that conclusion.
3. The subcontract was therefore concluded at the meeting of 8 November 1996. Lady Justice Hale considered that it was unnecessary to decide between 22 October and 8 November, because the substantive issue was unaffected.
4. Crown House agreed to perform only the works described in the revised specification dated 12 August 1996, subject to the stated exclusions. It did not warrant that the specification covered the employer’s requirements in full, nor agree to undertake all such requirements for the quoted price. The meeting minutes did not clearly record either a warranty or a radical change in the scope of work.
5. The judge was entitled to prefer Crown House’s evidence. It was improbable that experienced contractors would abandon a carefully priced specification and accept materially wider obligations without a corresponding alteration or recalculation of the price. The employer’s requirements governed the agreed works as to the required standard, but did not enlarge the agreed extent of those works.
6. The first-instance judgment had not given sufficient reasons, as discussed in Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377. However, the judge had supplied further reasons and the Court of Appeal had heard full argument, so no further order was required on that issue.

• Court of Appeal (Civil Division): [2001] EWCA Civ 1098 — appeal dismissed with costs here and below. The date of contract was held to be 8 November 1996, but the finding that the subcontract covered only the works in the revised specification was upheld.
• Queen’s Bench Division, His Honour Judge Faulks QC sitting as a deputy judge — held that the subcontract was concluded on 22 October 1996 and that Crown House was obliged to comply with the employer’s requirements only for the works included in its tendered specification.