Thompson (t/a R J Thompson International) v Charlesworth

Whether a construction contract is for a fixed price or for reasonable remuneration depends on the parties’ agreement, objectively assessed in its factual and documentary context. A figure described or understood as a budget estimate does not become a fixed price merely because the work was later performed with attention to that budget.

Where the scope of work develops after the estimate, the court may find an oral contract for work and materials at reasonable cost, subject to the requirement that the contractor perform the work as close to the budget as reasonably possible in the circumstances.

The claimant carried out extensive electrical work at the defendant’s house. The parties agreed that a contract existed, but disputed its terms. The claimant said that £15,000 was a budget estimate under a contract for work and materials at reasonable remuneration. The defendant said that £15,000 was a fixed price for work within an agreed specification, with only subsequent extras payable separately.

The dispute required detailed consideration of the parties’ discussions, changing specifications, quotations, contemporaneous documents and the valuation of disputed items. The central issue was whether the parties had reached a fixed-price agreement before work began.

1. Contractual basis. The court found that there was no agreement for a fixed price of £15,000. The figure was a budget estimate based on the information available when it was given. The scope of the electrical work subsequently increased.
2. Construction of the agreement. The parties’ discussions had to be assessed in context, including their friendship, the changing requirements, the absence of a written fixed-price agreement and the contemporaneous invoice referring to a full costing being prepared so that the work would not go over budget. Those matters were more consistent with a budget estimate than with a fixed-price contract.
3. Remuneration. The oral contract was for work and materials for which the claimant was entitled to reasonable remuneration. The reasonable cost was to be kept as close to the original budget as reasonably possible, having regard to the additional requirements. The court accepted that the claimant had achieved that result.
4. Alternative issues. Issues arising only on the defendant’s fixed-price case did not require determination. The judge nevertheless addressed them proportionately because evidence had been heard, accepting or rejecting individual disputed items and applying the single joint expert’s evidence where appropriate.
5. Disposition. Judgment was entered for the claimant in the sum of £15,500. Consequential matters were left to be dealt with at a short telephone hearing.