Furmans Electrical Contractors v Elecref Ltd

Where parties have a contract for services but have not expressly agreed the price or the number of hours to which a daily rate relates, the absence of express agreement does not mean that no contract exists. The court may assess the contractual price by reference to a reasonable amount of work. A restitutionary quantum meruit arises only where there is no contract. A course of dealing establishes a contractual term only where the invoices or conduct clearly communicate the alleged term and the necessary knowledge and assent are present. Paid invoices require separate consideration from unpaid invoices. Reopening payment requires an established contractual or other legal basis, such as mistake or misrepresentation. A payer who knows or doubts the position and pays nevertheless may assume the risk or waive recovery.

Furmans Electrical Contractors supplied electrical services and materials to Elecref Ltd under daily-rate arrangements. The parties had not agreed the number of hours on which the rates were based. The County Court rejected both parties’ alleged express terms, treated the claim and counterclaim as involving a quantum meruit, and awarded Furmans £7,751.31 after making deductions for alleged overcharging.

Elecref appealed, relying in part on an incomplete counterclaim schedule. Furmans challenged the rejection of a term based on the parties’ course of dealing and the reopening of invoices already paid. The central issues were whether the parties’ contracts required assessment at a reasonable rate, whether the paid invoices could be reopened, and what sum was due on the unpaid invoices.

Furmans’ appeal was allowed and Elecref’s appeal was dismissed. The Court of Appeal, in the lead judgment of Lord Justice Waller, with Lady Justice Arden and Lord Justice Moore-Bick agreeing, held as follows.

1. The absence of an expressly agreed price, or of an express agreement about the number of hours underlying a daily rate, did not prevent the formation of a contract. The parties had entered into contracts, more accurately a series of individual contracts, for the supply of services and materials at a daily rate assessed by reference to a reasonable number of hours. The court distinguished that contractual assessment from a restitutionary quantum meruit, which arises where there is no contract. The reasoning was supported by BSC v Cleveland Bridge Co [1984] 1 All E R 504.
2. The alleged nine-hour term had not been established by a course of dealing. The invoices did not clearly state the hours on which the daily rate was calculated, and the relevant supervisors did not know the contractual basis of the rate. Continuous acceptance of invoices could establish a term only if the invoices clearly communicated that term and the circumstances supported assent.
3. The recorder erred by treating paid and unpaid invoices alike. The unpaid invoices had to be assessed on the contractual basis of a reasonable sum. Elecref had not established the alleged oral agreement for an 11- or 12-hour day, and had pleaded and proved no alternative basis, such as mistake or misrepresentation, for reopening invoices already paid.
4. In any event, Elecref’s checks, its September 2007 doubts about overcharging, and its subsequent substantial payment meant that it was likely to have assumed the risk of any mistake and had waived recovery. The Court of Appeal therefore deducted £3,500 from the unpaid claim, subject to written submissions on the arithmetic, and directed judgment for the appropriate balance.

• Court of Appeal (Civil Division): On 10 March 2009, allowed Furmans’ appeal and dismissed Elecref’s appeal. [2009] EWCA Civ 170.
• Great Grimsby County Court: Mr Recorder Burrell QC gave judgment on 18 July 2008 for Furmans in the sum of £7,751.31 and ordered Elecref to pay the costs.