Optimus Build Ltd v Southall & Anor

Construction contracts are governed by ordinary contractual principles. Whether a document described as an estimate creates a fixed-price contract, a cost-plus contract, or no binding offer depends on its objective meaning in context. Precise prices, defined work sections, qualifications and payment arrangements may show that an estimate is a fixed-price proposal despite its label.

A contractor has no common-law right to suspend work for non-payment of an interim valuation unless the contract or statute provides one. Nevertheless, wrongful suspension is not automatically repudiatory. The court must assess all the circumstances, including whether the contractor has absolutely refused to perform or remains willing to meet and resolve the dispute. An employer has no general right under a fixed-price building contract to remove work from the contractor’s scope without agreement.

The claimant building contractor sought payment for works carried out at the defendants’ residential property and damages for loss of overheads and profit after the contract ended prematurely. The parties disagreed whether their contract was a fixed-price contract, a cost-plus contract, or an arrangement requiring agreement of monthly work tranches.

The defendants withheld part of an interim valuation and treated the claimant’s conditional suspension of work as repudiatory. The claimant maintained that it remained willing to complete the project and that the defendants later repudiated by refusing to permit its return. The court determined the contractual basis, the effect of the parties’ correspondence, liability for termination, valuation of completed work, loss of overheads and profit, and the defendants’ counterclaim.

1. Contractual basis. The court construed the parties’ communications objectively. The successive “budget estimates” contained precise prices for defined work sections, specific provisional items, qualifications, exclusions and stage-payment proposals. In context, they constituted a fixed-price contract subject to monthly valuation, rather than a cost-plus contract. The label “estimate” had no decisive legal effect.
2. Scope of work. The defendants had no express or implied general right to remove work from the claimant’s scope without consent. The claimant had accommodated selected omissions, but that did not create a wider right to omit structural or programme-critical work. The claimant was entitled to retain the contractual overhead and profit allowance where no misleading representation had been made.
3. Suspension and repudiation. There was no common-law right to suspend for non-payment of an interim valuation. However, the claimant’s conditional suspension was not repudiatory. Its concerns about underpayment, attempted renegotiation and uncertainty about the remaining scope were justified. The claimant sought an early meeting and remained willing to resolve matters and complete the works. The defendants therefore could not accept the claimant’s conduct as repudiation. Their subsequent refusal to meet, demand that the claimant remove its equipment, and insistence that it should not return amounted to repudiatory conduct, which the claimant accepted.
4. Quantum. The claimant recovered £78,467.37 plus VAT for completed work, less payments made, totalling £23,628.36 inclusive of VAT at 5%. It failed to establish a contractual basis for general remeasurement and revaluation of additional steelwork. It proved that it would have recovered 17.5% overheads and profit on the remaining work and recovered £19,422.96, with VAT payable if properly accounted for to HMRC.
5. The defendants’ counterclaim failed. They had not produced sufficient documentary evidence or information to establish the alleged delay-related losses.