Hayes & Anor (t/a Orchard Construction) v Gallant

In the absence of an agreed price, a contractor is entitled to a reasonable price for work carried out. Contract formation is assessed objectively. Silence may amount to acceptance only where the parties’ course of dealing reasonably supports that conclusion, and acceptance may occur by conduct.

Repudiation requires either an applicable contractual provision or a breach which deprives the innocent party of substantially the whole benefit of the contract. The court must assess the commercial significance of the breach. Delay, defects, poor workmanship or accounting shortcomings will not ordinarily justify termination where the contractor can complete within a reasonable time and is willing to remedy defects.

The claim arose from two related construction projects at Higham House: refurbishment of the Old House and construction of a pool complex. The parties had no written contracts. The claimants sought payment for work completed and damages for lost profit after the defendant instructed them to leave site on 17 September 2004.

The defendant disputed the alleged agreed prices, contending that the work was payable on a cost-plus basis, and counterclaimed for defective flooring, plumbing and electrical work. The central issues were whether the parties had agreed the prices in the statements of account, whether the defendant had lawfully terminated the contracts, and whether the counterclaim was established.

1. Contract price. The formation of a contract and the existence of agreement on price were to be assessed objectively. Although acceptance may occur by conduct, silence ordinarily does not constitute acceptance unless the parties’ course of dealing reasonably supports that inference. The earlier estimates had been agreed, but the later statements of account had not been reviewed or agreed by the defendant. The claimants therefore failed on their primary case that the invoiced sums were contractually binding. They were entitled instead to a reasonable price assessed on a cost-plus basis.
2. Repudiation. Applying Heyman v Darwins [1942] AC 356, Photo Products v Securicor [1980] AC 827 and Federal Commerce v Molena Alpha [1997] AC 757, termination required an applicable contractual provision or a fundamental breach going to the root of the contract and depriving the innocent party of substantially the whole contractual benefit. Repudiation required acceptance, which could be shown by conduct, consistent with Vitol SA v Norelf Ltd [1996] AC 800.
3. The defendant’s allegations of delay, overcharging, non-payment of suppliers, incompetent management, defects and inadequate accounts did not establish a repudiatory breach. Time had not been made of the essence, the completion dates had been affected by continuing design changes and uncertainty over project management, and the claimants had increased resources to accelerate the works. The alleged defects did not go to the root of the contracts. The defendant’s ejection of the claimants from site before completion was therefore unjustified and amounted to repudiation, which the claimants accepted. They were entitled to lost profit on instructed but uncompleted work.
4. The defects counterclaim failed. The defendant had not proved that the flooring, plumbing or electrical work caused the losses claimed. The claimants had been willing to remedy any defects for which they were responsible, and the evidence did not establish the costs of reasonable remedial work.
5. Judgment was entered for the claimants for £201,185, comprising sums for completed work and lost profit. The defects counterclaim was dismissed. Interest was reserved for further argument.