Irvin v Robertson

A construction subcontract is not concluded where the parties remain divided over essential obligations, price, risk allocation or contractual machinery. The court will not imply a contract merely because work has begun, payments have been made, or project documents use contractual language. Where full design responsibility and a guaranteed maximum price are fundamental to the proposed bargain, continuing qualification or negotiation on those matters prevents consensus. A provision for adjudication in tender documents does not, without agreement, create a freestanding adjudication agreement.

This Part 8 claim concerned mechanical and electrical works for a psychiatric hospital PFI project. The claimant contended that the parties had concluded a subcontract, either on a supply-and-install basis with a later option to assume design responsibility, or on the basis of an offer for a guaranteed maximum price. It also alleged a separate agreement to adjudicate disputes under the defendant’s adjudication procedure.

The central questions were whether the parties had reached agreement on the essential terms of the proposed subcontract and whether any freestanding adjudication agreement existed.

1. The court found that no subcontract had been concluded. The claimant’s offer, as evidenced by the correspondence following the 19 November 2004 meeting, was for a guaranteed maximum price of £4.4 million and included full responsibility for mechanical and electrical design and installation. A guaranteed maximum price necessarily involved acceptance of full design responsibility; it was not consistent with the claimant’s proposed fallback of supply and installation subject to a later design bolt-on ([22]–[28]).
2. The parties remained divided over essential matters. These included design responsibility, the price and guaranteed maximum price structure, the scope of builders’ work, the treatment of specialist subcontractors, completion, valuation methodology, novation of the TPS design contract, and contractual terms and conditions. The offer was therefore not accepted and later negotiations did not cure the lack of agreement ([31], [36]–[40]).
3. The commencement of work on site, payment, interim applications and the use of project documentation did not establish a contract. Those matters were compatible with work proceeding while negotiations continued. The court would not imply a contract where matters regarded as essential by the parties remained unresolved ([33]–[34]).
4. The claimant’s alternative case also failed. The inclusion of an adjudication provision in tender documents did not establish a freestanding agreement to adjudicate, and no such agreement could properly be implied ([13], [41]).
5. The declarations sought were refused. There was no concluded subcontract and no agreement, freestanding or implied, requiring the parties to submit their differences to adjudication ([41]).