BBF Consultancy Group (A Firm) v Barratt Homes Ltd

Contract formation is determined objectively from the parties’ words and conduct, rather than by a purely subjective inquiry into actual intention. An absence of agreement on remuneration is not necessarily fatal to formation where the law supplies a mechanism for assessing reasonable remuneration. However, a finding that a contract was formed must be consistent with the surrounding circumstances and subsequent correspondence. Where those matters contradict the alleged agreement, the appellate court may set aside the finding, notwithstanding the trial judge’s advantage in assessing oral evidence.

BBF, a firm of architects, claimed that Barratt had orally contracted with it at a meeting on 29 June 1998 to provide architectural services for a residential development. The trial judge found that a contract had been formed, although the parties had not agreed the remuneration, and directed that payment be assessed on a quantum meruit basis.

Barratt appealed, contending that the evidence did not establish any contract. The central issue was whether the parties’ words and conduct, viewed objectively and in the light of the subsequent correspondence, established a contractual commitment.

The appeal was allowed and the trial judge’s order was set aside. Judgment was entered for Barratt, and BBF was ordered to pay Barratt’s costs of the action and the appeal.

1. Objective formation. The existence of a contract is assessed objectively from the circumstances, rather than by asking whether a party subjectively intended to contract. The principle in Smith v Hughes [1871] LR 6 QB 597 could properly be relied upon in determining whether a contract existed, even though that case involved a different type of mistake.
2. Remuneration. The lack of agreement on specific remuneration was not, as a matter of law, fatal to contract formation. Section 15(1) of the Supply of Goods and Services Act 1982 supplied a basis for reasonable remuneration. Nevertheless, the absence of agreed fees was a significant circumstance when deciding whether Barratt had objectively undertaken a contractual commitment.
3. Assessment of the evidence. The words “we will run with you” were ambiguous and had to be understood in context, including Barratt’s request for fee proposals and the later request for sketch proposals. The subsequent correspondence, particularly BBF’s description of its appointment as not yet confirmed and its request for reimbursement, was inconsistent with an already concluded contract for detailed planning work.
4. The trial judge’s finding was therefore wholly inconsistent with the correspondence. Although the Court of Appeal recognised the trial judge’s advantage in evaluating oral evidence, it was driven to conclude that no contract had been formed.

The caution that unusual findings of this kind require considerable care was supported by Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195.

• Court of Appeal (Civil Division): Allowed Barratt’s appeal, set aside the order made on 3 March 2000, dismissed BBF’s claim and entered judgment for Barratt.
• Queen’s Bench Division: HHJ William Crawford QC, sitting as a deputy High Court judge, found that an oral contract had been formed and directed assessment of remuneration on a quantum meruit basis.