Case notes

Tilting at e-windmills
Email is now a very popular and effective way of communicating in construction. It can carry details like drawings and specifications as well as attached files. It can also be used for enquiry and tender documents to set up the contract.

However, it is a relatively informal communication method and problems can arise when it is used to set up a contract, especially if one party claims the contract was agreed by email.

In Pretty Pictures versus Quixote Films, James Velaise saw the movie Lost in La Mancha at the Berlin Film Festival in February 2002. He was very enthusiastic and wanted to acquire distribution rights for France and other countries.

He met Quixote's agent, Rosa Bosch, at the festival. He kept pressing her by a series of emails to agree to his terms by her faxing him a 'deal memo'. This is a film industry standard document for initially forming a contract. Rosa Bosch had to consult her investors and, on May 7, Bosch emailed Velaise: 'The deal is approved. Apology for the delay. You will be receiving the contract by email before commence tomorrow.'

No contract was sent and subsequently, Quixote met with other distributors at the Cannes festival and closed a deal with them.

When Velaise sued, the court held that the parties has not reached a binding contract as no deal memo had been issued and the form of contract mentioned by Bosch was a much more complex document. Pretty Pictures lost its case.
Moral: Red letter days don't come by email
Case: Pretty Pictures versus Quixote Films Ltd. January 2003

A certified bond
Rupert Morgan Building Services was working on David and Harriott Jervis' cottage. The Jervis family had employed an architect and the parties had signed a standard Architect and Surveying Institute (ASI) form. Rupert Morgan was being paid on interim valuations. For payment, the architect checked the builder's applications and then issued a certificate which the David and Harriott Jervis duly paid. The architect was a brother of one of the builder's directors.

The seventh certificate was for £44,000. David and Harriott Jervis agreed part of that sum but disputed the balance of £27,000 and did not pay in full. The couple hadn't issued a 'Notice of Intention to Withhold Payment' before the prescribed period before the final date for payment, so Rupert Morgan argued that David and Harriott Jervis could not withhold payment.

David and Harriott Jervis said they could withhold payment if they could prove that items of work were not done at all, or were duplicates of items already paid for, or were charged as extras whether they were under the original contract - or, indeed, represented 'snagging' for work already done and paid for.

The Court of Appeal held that in the ASI contract, the sum is determined by the certificate and that certificate determined the sum due under the contract, therefore David and Harriott Jervis had to pay.

The situation should be corrected by the architect issuing a corrected Final Certificate, rather than by litigation.
Moral: A certificate can be worth gold
Case: Rupert Morgan Building Services versus David Jervis and Harriott Jervis

Cash out of hand
Sometimes things go wrong even when they go right. That's what happened to the Honourable Michael Knatchbull. He wanted to sell No 1 Harbury Mews in Notting Hill, London in June 2001.

Mr Maloney of John D Wood estate agents advised an asking price of £1.5m and Knatchbull instructed Mr. Maloney to proceed.

Mr Levantiz was interested in the house and subsequently made three offers for it. The final offer for £1.5m, made on July 26, 2001, was accepted subject to contract.

Unknown to both parties, however, a similar property, No 4 Harbury Mews, had gone on the market (with a different agent) with an initial asking price of £1.95m.

John D Wood heard about this on August 13, 2001, after Levantiz's offer had been accepted.

Knatchbull found out on August 24 - which also happened to be the day an offer of £1.8m was made for No 4, and which was subsequently accepted. Naturally, Knatchbull was miffed about losing the £300,000 difference. He didn't pay John D Wood's commission of £44,062. John D Wood sued.

The court held that Maloney had not been negligent in advising that £1.5m was a reasonable asking price in June 2001.

However, John D Wood had failed in its duty to excercise reasonable care by not informing Knatchbull of the information concerning No 4. The court awarded Knatchbull £129,000 in damages.
Moral: You can have a duty to tell all
Case: John D Wood & Co (Residential and Agricultural) versus Knatchbull (2002). EWHC 2822

Make me hole again
In the June 2003 issue of CM, 'Case Notes' discussed a case where Transco was billed £115,000 for six incidents of failing to complete work in time under the Street Works (Charges for Unreasonably Prolonged Occupation of the Highway [England]) Regulations 2001.

Paragraph 5(b) of Section 72(3) of the Act said that works were deemed to have been completed when a 'Works Clear Notice' or 'Works Closed Notice' had been given by the contractor. If these notices were not given or if they were late, the works were deemed to be continuing even if the hole had been filled in and the tarmac replaced. As a result, the contractor could be charged.

In Transco's case, Leicestershire County Council (LCC) agreed that the works had been completed but argued that it did not have the staff to check on all street works, so it was fair to base the charges on just the paperwork.

Although the lower court had agreed with LCC, the Court of Appeal overturned that decision, holding that both the authority and the contractors could prove that the paperwork was wrong. Otherwise, contractors would have disproportionate financial penalties levied against them for administrative errors.
Moral: You need to prove you do not have to pay the whole cost
Case: Transco plc versus Leicestershire County Council. Court of Appeal, November 4, 2003.