J L Builders & Son v Naylor & Naylor

A contractual agent’s authority is confined to functions expressly assigned, reasonably understood from the instructions, or reasonably incidental to them. Authority to negotiate or agree valuation figures does not, without more, include authority to receive contractual notices, particularly a notice capable of making time of the essence or terminating the contract for repudiatory breach. Such a notice must be served on the contracting party or an agent authorised to receive it. The clarity of a notice is a separate issue from the authority of its recipient.

The parties had entered into a building contract containing brief and imprecise terms. A dispute arose over payment for alleged additional works. The contractor stopped work, but the county court found that this did not terminate the contract because it had not been accepted as repudiatory.

The parties later agreed that their quantity surveyors would exchange supporting information and seek to agree the amount due. After the information was not provided, the defendants instructed another contractor and purported to determine the contract. The county court held that the contract remained subsisting and that the defendants had repudiated it by their notice, which the contractor accepted.

The appeal and an application concerning a previously omitted fax raised whether the fax, sent to the contractor’s quantity surveyor, was effective notice and whether its terms were sufficiently clear.

1. Disposition. The appeal was dismissed. The county court was right that the contract continued until the defendants’ notice of 18 August, which was an effective repudiation accepted by the contractor.
2. Further evidence. The Court of Appeal considered the 9 August fax. It did not decide whether formal permission was required, since the fax had been referred to in the county court judgment and it would have been unjust to exclude material on which the judge’s reasoning had partly proceeded.
3. Clarity of the notice. The fax sufficiently identified the required financial information and the relevant timescale. Its wording would not have been a good ground for challenging its validity as a notice making time of the essence.
4. Authority to receive contractual notices. The decisive question was whether the contractor’s quantity surveyor was authorised to receive a notice with contractual effect. The parties had given the surveyors authority to review information, advise on figures and seek to agree the amount due. That authority did not extend to receiving contractual notices or notices alleging repudiatory breach or terminating the contract. An agent’s contractual functions are not extended beyond what the agent was expressly told to do, reasonably understood to do, or what was reasonably incidental to those functions.
5. The principles concerning the limited authority of construction professionals discussed in GPN Limited (In Receivership) v O2 (UK) Ltd [2004] EWHC 2494 TCC applied equally to the quantity surveyor. The possibility that agreement between the surveyors might have resulted in the contract ending did not establish authority to receive a unilateral termination notice. Because the fax was never passed to the contractor and the surveyor lacked the necessary authority, it was ineffective. The later notice served on the contractor therefore brought the contract to an end by repudiatory breach.

• Court of Appeal (Civil Division): considered the further fax evidence and dismissed the appeal.
• Telford County Court: HHJ Mitchell held that the contract remained subsisting until the defendants’ notice, which repudiated the contract and was accepted by the contractor.