Sydenhams (Timber Engineering) Ltd. v CHG Holdings Ltd.

A construction contract may arise where the documents identify the parties, work scope and price, and objectively show an intention to create legal relations. A payment schedule is not necessarily essential to formation. A later agreement changing the payment mechanism does not, without clear language, novate the original contract or create a subcontract with another party. Specific agreements prevail over inconsistent standard-form provisions. Where parties expressly agree that an employer will pay a subcontractor directly, that promise is enforceable and cannot be avoided by relying on the later insolvency or administration of an intermediary contractor.

Sydenhams carried out timber-frame, joinery and related work on a hotel development for CHG. CHG argued that Sydenhams were subcontractors to Rybarn, the main contractor, and that CHG therefore had no direct liability. Sydenhams relied on an order-for-manufacture document dated 3 October 2003, a tripartite payment agreement dated 18 December 2003 and a further agreement dated 20 April 2004.

The court determined whether those documents created or preserved contractual obligations between CHG and Sydenhams, whether the warranty affected that position, and whether CHG was liable for unpaid window and retention sums.

1. Formation. The documents of 3 October 2003 identified the parties, work scope, price and delivery period. They incorporated Sydenhams’ standard terms and contained an express instruction to proceed with manufacture. Objectively construed, they created a binding direct contract between CHG and Sydenhams. The absence of an agreed payment schedule did not prevent formation.
2. December variation. The tripartite letter of 18 December 2003 varied the payment mechanism for specified packages. It did not cancel or novate the October contract. Packages excluded from the payment arrangement, including the windows, remained subject to CHG’s direct obligation. The letter did not create a conventional subcontract between Rybarn and Sydenhams.
3. April agreement. The correspondence of 20 April 2004 constituted a binding, freestanding agreement under which CHG promised to make future payments directly to Sydenhams. The wording was a promise, not merely a reservation of power. CHG’s failure to pay the window sum was a breach. The administration of Rybarn did not provide a defence, particularly because the direct-payment agreement predated it and CHG had made direct payments afterwards.
4. Warranty. The incomplete warranty did not estop Sydenhams from denying a subcontract. Its reference to a subcontract was ambiguous, the action was not brought to enforce rights under the warranty, and there was no evidence of reliance or detriment. The warranty’s standard substitution provisions did not displace the specific April agreement. The principle in Homburg Houtimport BV v Agrosin Private Limited [2003] 2 WR 711 supported the priority of the specific agreement.
5. Relief. CHG was liable for £105,750 in respect of the windows and £22,636.38 for retention, with interest at 8 per cent over base from the dates specified. The additional-calculations and trade-account claims failed. The agreed £35,000 defects settlement was to be deducted after calculation of interest to 9 February 2007.