Munkenbeck and Marshall & Anor v The Vinyl Factory Ltd & Ors

An agreement may contain separate offers, some capable of acceptance and others amounting only to invitations to negotiate. Whether a contract was formed, and on what terms, is determined objectively from the parties’ communications and conduct. A stated expectation of a future appointment and a fee that would normally be charged may be insufficiently certain to create an enforceable entitlement. Where parties have entered into an effective contract allocating responsibility for payment, a mistake in agreeing its terms does not ordinarily found an unjust enrichment claim. Nor will restitutionary relief normally be available where it would undermine a contractual allocation of obligations involving a third party.

The claimants sought unpaid architectural fees arising from the redevelopment of Marshall Street Baths and an adjacent car park. They relied on a March 2005 letter as creating an agreement for an 8 per cent construction-cost fee and claimed, alternatively, a reasonable fee in unjust enrichment. They also claimed payment for additional work carried out after an appointment had been novated to the contractor, ISG.

The court considered the formation and scope of the alleged initial agreement, subsequent fee arrangements, the effect of the novation, limitation, and whether restitution could be claimed despite the contractual arrangements.

1. Initial agreement. The March 2005 letter contained separate proposals. The offers of fixed sums for feasibility and planning work were capable of acceptance. The proposal concerning a future percentage fee was an invitation to negotiate, not an enforceable offer. Its language expressed an expectation, referred to what would normally be charged, left the scope of any future appointment uncertain, and contemplated further RIBA terms.
2. The parties’ subsequent conduct confirmed that no binding 8 per cent entitlement had been created. They agreed time charges for further planning work, later agreed a lump sum for employers’ requirements, and negotiated the later appointment without asserting an existing 8 per cent obligation. The claimants therefore had no contractual claim for additional fees for the Baths work. Alternatively, any agreement would have entitled them to an 8 per cent fee only for work they were actually appointed to perform, not for work allocated to another architect.
3. The parties’ June 2005 arrangement varied the charging basis for further planning work to time charges. The November 2007 employers’ requirements arrangement was a further agreement, although the distinction from variation was immaterial.
4. Unjust enrichment. The Baths invoices had been paid. The later credit of those sums against fees under the car-park appointment was part of the commercial bargain and was not a basis for restitution. The law of restitution does not correct a mistake made in entering an effective contract unless the contract is set aside or otherwise vitiated. The court also rejected the alleged offer of £100,000 for the Baths work. Any claim would therefore fail.
5. Additional work. After novation, ISG was the contractual counterparty. The novated appointment provided the mechanism for additional services and fees. Work requested by MSRL which was sufficiently related to the appointment had to be dealt with through that contractual regime. In the absence of a separate promise to pay, restitution against MSRL would undermine the parties’ contractual allocation of responsibility.
6. The court made alternative observations that a contractual claim would have accrued by November 2007 and would have been statute-barred, while a restitution claim would have accrued in August 2008. If restitution had succeeded, the reasonable fee would have been £88,187. The claim was dismissed.