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Fri October 23 2020

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Jean Shaw v James Scott Builders Co.

28 May 10 A contractor's failure to respond to the proposed contract e-mailed to him meant that he had tacitly accepted it and its conditions.

A contractor's failure to respond to the proposed contract e-mailed to him meant that he had tacitly accepted it and its conditions.” Jean Shaw v James Scott Builders & Co., [2010] CSOH 68

The Shaws employed Mr. Peter White, an architect, to design and build a house. The defendant contractor, Scott, was engaged to build the house using a timber frame kit. Ultimately, there were problems with the project, and these were multiplied because of the informal contractual relationship between the parties. There were issues as to whether the contract was governed by a document which had been produced in November 2005, or an informal contract in December 2004. There were also disputes as to the nature and scope of the works and whether Mr. Scott was barred from asserting to the contrary because of personal bar or acquiescence. Mr. Scott made claims in respect of a number of variations to the works for which he had not been paid.

On 14 September 2004, Scott had submitted a price of £598,000 for the construction of the house which did not include painting or decorating, windows, doors, bathroom suites central heating, power supply, kitchen units or other services. The Shaws and Mr. White met to discuss the quotation and there were further discussions between all three parties. Mr., White wrote to Mr. Scott intimating that a formal contract was going to be formalised for the works. Mr. White stated that he considered that they were currently going through a negotiation period to establish a cost for the works and a programme of interim payments.

The parties agreed that in December 2004, they had entered into an informal contract for works comprised in the 14 September quotation. At a meeting on 1 December, Mr. Shaw had asked Mr. Scott if he was comfortable with the arrangements that had been made and had sufficient information to proceed. Mr. Scott assured him that he was and they had shaken hands on the arrangement. Mr. White gave evidence that he had intended to produce a formal contract, but had not done so as he understood that the Shaws were prepared to go ahead on the basis of the handshake. Since this "informal contract" made no provision for the duration of the works or the quality of the workmanship, the works were to be completed within a reasonable time and to a standard to be reasonably expected of builders of ordinary competence. The judge also added that the price of the contract works must also be a reasonable price. The figure of £598,000 had only been a guide price, and Mr. Scott was not going to depart from that sum unless there were variations or particular items had been costed as a provisional sum. The onus was on Mr. Scott to justify any departure from this guideline price by showing that there had been a variation or that he had only given a provisional cost for an item which turned out to be more expensive.

Work commenced in January 2005. In the following months, Mr. White changed parts of the design and issued revised drawings. Mr. and Mrs. Shaw visited the site, but did not discuss the contract terms or price with Mr. Scott. Mr. White paid Mr. Scott a monthly sum as an interim payment, taking the quotation of £598,000 and dividing it by 8. When it became clear that construction would be delayed, he reduced the monthly sum to about £65,000 to take account of this. Mr. White, however, was having personal difficulties which he did not tell the Shaws about. When he failed to attend a site meeting on 1 August 2005, the Shaws discovered that he had been imprisoned. Needing a replacement architect, the Shaws appointed Mr. Grime. Mr. Grime struggled to find out what had been going on because there were no contractual documents and the lack of paperwork. Neither Mr. White nor the Shaws had kept copies of the original drawings, and there was no building warrant for the foundations. In addition, Mr. White had failed to produce drawings for some of the facilities including the drainage so that Mr. Scott had had to leave gaps for the drainage to be installed once it had been designed.

Given the circumstances, Mr. Grime tried to introduce a bit more certainty into the project. He obtained the Shaws’ permission to engage a quantity surveyor, Mr. Percy, to negotiate a contract with Mr. Scott. Mr. Scott explained about the problems he had had with Mr. White not providing information or providing it late. Mr. Percy wrongly told the Shaws that there was no contract; however, he rightly said that Mr. Scott’s letter of 14 September 2004 had only been an indicative cost and not an offer to carry out the works for a fixed price. He recommended that the Scottish Building Contract Committee Standard Form of Building Contract (Without Quantities) be used, and that the Shaws should make interim payments whilst he investigated the basis for the contract. Later it was suggested that the Scottish Building Contract Without Quantities, Contractor’s Designed Portion (April 1998 Revision) should be used.

On 23 November 2005, Mr. Percy sent an e-mail to the Shaws, with a copy to Mr. Grime and Mr. Scott, attaching the final draft of the contract preliminaries and appendices which he had prepared. He stated that there was still uncertainty about identifying the drawings which had been used to price the works. He asked all the parties if they had any objection or disagreement and to let him know by close of business on 28 November. If there were no changes, he would issue a notice confirming both parties’ agreement to the document.

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The Shaws accepted the document, but Mr. Scott did not respond. It was unclear whether he saw the document before the deadline. He was uncomfortable about using e-mail and preferred meetings or the mobile phone. He rarely responded to e-mails. Mr. Percy wrote to the Shaws confirming that the document represented the contract between them and Mr. Scott.

The Shaws, Mr. Percy and Mr. Grime all believed that a formal agreement was in place by the end of November, and acted in that belief. The works continued until January 2007 when the disagreements began, and Mrs. Shaw wrote to Mr. Scott instructing him to stop work. Mr. Scott took professional advice about the dispute and submitted a loss and expense claim. It was only when the Shaws sought to refer the matter to adjudication and Mr. Scott challenged the jurisdiction of the adjudicator that they became aware that Mr. Scott was denying that a contract existed.

FORMATION OF THE CONTRACT

From August 2005, it had been Mr. Percy’s and Mr. Grime’s remit to put the contract on a formal footing, and Mr. Scott must have been aware of it. There had been discussions, and both Mr. Percy and Mr. Grime had spoken to Mr. Scott to see if he was satisfied with the outcome. Mr. Percy had e-mailed Mr. Scott after discussing the proposed terms and agreed to send him a final version of the document. Mr. Scott’s silence had to be considered against that background.

As a general rule, a party’s silence does not imply consent to an offer. However, the surrounding circumstances might lead a court to infer that a party’s silence is acceptance, particularly where parties have had dealings. In the present case, the parties had already been in a contractual relationship, there had been discussions about a formal contract and an understanding that Mr. Scott had agreed to the terms. The parties by their conduct, including Mr. Scott’s silence, should be treated as having agreed the terms of Mr. Percy’s e-mail of 23 November 2005.

It did not matter that there was no signed contract. Mr. Percy’s contract document had expanded on the parties’ pre-existing agreement, and he was trying to back-date the provisions of the formal contract so as to impose the completion date and design liability for certain of the subcontractors on Mr. Scott. . The judge found that the clauses relating to the completion date could not be strictly applied. Mr. Percy could not properly determine the correct amount of loss and expense because he was not aware of what had happened under Mr. White’s watch. The parties should adopt a broad brush approach to their claims. The 23 November document also did not have the effect of imposing design liability for the subcontractors. Mr. Scott had made it clear in discussions that he would not be held responsible for their work.

A contractor's failure to respond to the proposed contract e-mailed to him meant that he had tacitly accepted it and its conditions.” Jean Shaw v James Scott Builders & Co., [2010] CSOH 68

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