You are on page 1of 20

Arbrix Construction Group

Spring 2009 Conference


Saturday 21 March 2009

Estoppel, Variation and Waiver

John Marrin QC
Keating Chambers

THE ARTICLES

AND PAPERS PUBLISHED BY KEATING CHAMBERS ARE FOR THE PURPOSE OF RAISING
GENERAL AWARENESS OF ISSUES AND STIMULATING DISCUSSION. THE CONTENTS MUST NOT BE RELIED UPON
OR APPLIED IN ANY GIVEN SITUATION. THERE IS NO SUBSTITUTE FOR TAKING APPROPRIATE PROFESSIONAL
ADVICE

I.

Estoppel
A.

Introduction
Discussion will focus on:

B.

Estoppel by representation

Estoppel by convention

Estoppel by deed, and

Promissory estoppel

Estoppel by Representation
If a party makes a representation with the intention and effect of inducing
another party to alter his position to his detriment in reliance on the
representation, the party making the representation may be estopped from
relying on facts which are at variance with the representation. (Keating 11002)
To establish a valid estoppel by representation of fact (Wilken para. 9.02):

Must be a representation of fact or an existing state of mind of belief


and not a future promise;

In making the representation, A (the representor) must have intended


or knew that it was likely to be acted upon;

B (the representee), believing the representation must act to its


detriment in reliance on the representation;

A must subsequently deny the truth of the representation;

No defence to the estoppel can be raised by A.

Kaliszewska v John Clague and Partners (1984) Const LJ 137.


Defendant builders designed a bungalow for the claimant at Herne Bay, Kent
in 1970. In 1974, when internal cracking appeared, the defendant returned to
inspect the property and gave reassuring advice as a result of which no further
works were done on the cracks other than filling them in. In late 1976, further
cracking appeared and the floors subsided.

In 1978 the claimant took

independent expert advice and discovered that the foundations were


inadequate. The claimant claimed, inter alia, that the defendants advice in
1974 gave rise to an estoppel.
The defendant accepted that there had been a representation, but argued that
the claimant had not altered her position to her detriment as a result of the
representation. The Judge rejected this argument, noting that:
The test is, has the representee been materially prejudiced by acting upon the
representation?...If the limitation period had begun to run in 1974, although
she still has two years left, she was deprived of two-thirds of the statutory
period Parliament had allowed her for the action to be brought. I would not,
particularly in this type of case, have been prepared to hold that she had not
as a result been materially prejudiced.
Whittal Builders Co Ltd v Chester-le-Street District Council 40 BLR 82
In 1972 the claimants contracted with the defendants predecessors in title to
carry out modernisation work to an estate. The parties had contemplated that
the work would be carried out under seal, but the Council had by inadvertence
omitted to seal their copy. The claimants handed over the last completed
dwelling in March 1974. In May 1980 the claimants made for the first time a
claim that the Council were in breach of contract in failing to give them
possession of the dwellings on the estate, but instead providing possession on
a piecemeal basis. The Council claimed that the claim was statute barred but

the claimants argued, inter alia, that the Council were estopped from denying
that the agreement had been executed under seal.
Regarding estoppel by representation, HHJ Fox-Andrews stated (at p. 88):
I find that there was a representation by the RDC that the contract would be
under sealThe vital question, however, is whether Whittal altered their
position so that they suffered detriment in reliance on that representation.
The test of detriment is whether it appears unjust or inequitable that the
defendants should now be allowed to resile from the RDCs representation,
having regard to what Whittal have done or have refrained from doing in
reliance on that representationMr White had not satisfied me that but for
the fact Whittal believed the contract was under seal Whittal would have
commenced this action within the six year period.
C.

Estoppel by Convention
Arises where:

The parties have established, by their construction of their agreement or


a common apprehension as to its legal effect, a convention basis;

Assumption must be shared. The notion of a shared assumption


carries with it two elements. First, one party must have acted so
that across the line between it and the other party, a belief or
expectation is created in the mind of the other party. Second, the
conduct required for there to be a crossing of the line is
mutually manifest conduct which although not a contract must be
something very close to it, albeit that estoppel by convention can
arise out of conduct or silence. (Wilken para. 10.08)

On that basis the parties have regulated their subsequent dealings;

One party would suffer detriment if the other were to be permitted to


resile from that convention. (Wilken, para. 10.01)

For the plea to succeed, it must be unjust or unconscionable to


allow one party to resile from the common assumptiontwo
points should be noted.

First, the party seeking to establish

detriment must show it acted on the basis that the shared


assumption was correct. Second, provided that the party seeking to
establish the estoppel has so acted, detriment will be suffered by
the mere fact that there has been a change from the presumed
position.
Republic of India v India Steamship (No 2) [1998] A.C. 878
In June 1987 a cargo of munitions was laden on board the defendants vessel
in Sweden for carriage to India and delivery to the claimants. A fire occurred
during the voyage and was extinguished with water, with some of the cargo
jettisoned. The claimant notified claims in personam to the defendants, and
were awarded judgment in a court in Cochin, India of damages of 7,200 for
the jettisoned cargo. The claimants then issued another claim in rem in
England in respect of all the cargo in the fire-damaged hold of 2.5 million.
The defendant argued that the claimants were estopped from bringing the
second claim by the first claim.
The House of Lords found that in order to establish an estoppel by
convention the plaintiffs had to prove that the defendants evinced by their
conduct that they were content that the taking of a judgment in Cochin would
not prejudice the resolution of other proceedings on their merits, that is, in the
future proceedings no plea or defence on the basis of a judgment in Cochin
would be raised whatever the outcome of the proceedings in Cochin. It was
held that the evidence falls markedly short of establishing a common
assumption, manifested by the exchanged between the parties, that no plea

arising from the fact of a judgment would be taken in the English


proceedings. (per Lord Steyn, p. 914 - 915)
Whittal Buildings v Chester-le-Street 40 BLR 82
As described above, the Judge in this case rejected the argument based on
estoppel by representation for lack of reliance. However, the Judge then
turned to consider estoppel by convention, setting out Spencer Bower and
Turner on the Law Relating to Estoppel by Representation 3rd Edn (1977), p.
157:
"This form of estoppel is founded, not on a representation of fact made by a
representor and believed by a representee, but on an agreed statement of facts
the truth of which has been assumed, by the convention of the parties, as a
basis of a transaction into which they are about to enter. [I emphasise these
words]. When the parties have acted in their transaction upon the agreed
assumption that a given state of facts is to be accepted between them as true,
then as regards that transaction each will be estopped against the other from
questioning the truth of the statement of facts so assumed."
The Judge held that the parties to the contract did assume that any contract
entered into between them in respect of the modernisation of the ninety houses
would be under seal.

Whittal completed the signing and sealing of the

contract on this assumption.

I find that this constituted an estoppel by

convention and the RDC defendants are estopped from denying that the
contract was under seal.

D.

Estoppel by Deed
In contrast to the estoppels discussed above, estoppel by deed is a rule of
evidence which binds parties by the solemn and unambiguous statements in
a deed that they have executed.

The doctrine is sometimes viewed as

antiquated, however, it still forms part of the modern law, as shown by the
Court of Appeal decision in First National Bank v Thompson [1996] 1 All ER
144 (prior to which, as noted in Wilken, 12.03 fn 8, the leading case was
Greer v Kettle [1938] AC 156, decided in 1937).
However, it may be argued, as is set out in Wilken para 12.07 12.12 that
there seems to be no situation where estoppel by deed will operate where
either estoppel by convention or representation will not also apply.
The elements necessary for A to be able to raise an estoppel by deed against B
are:

B executes a formally valid deed to which A is named as a party;

The deed contains a statement of fact, intended by the parties to be


attributed either to both A and B or to B alone;

The statement forms the basis on which the parties contract;

B seeks to deny that statement of fact in an action on the deed by any


party to it;

No defence to the estoppel can be raised, in particular the deed is neither


void, voidable nor rectifiable. (Wilken para 12.14)

E.

Promissory Estoppel
The doctrine of promissory estoppel originates from the cases of Hughes v
Metropolitan Railway and Central London Property Trust v High Trees
House.
Hughes v Metropolitan Railway (1877) 2 App Cas 439
Landlord gave his tenant notice requiring him to do repairs within six months.
During six months he began to negotiate with the tenant for purchase of his
lease. When negotiations broke down, he immediately claimed to forfeit the

lease on the ground that the tenant had not done the repairs. The claim was
rejected.
Lord Cairns stated it is the first principle upon which all Courts of Equity
proceed, that if parties who have entered into definite and distinct terms
involving certain legal rights certain penalties or legal forfeiture
afterwards by their won act or with their own consent enter upon a course of
negotiation which had the effect of leading one of the parties to suppose that
the strict rights arising under the contract will not be enforced, or will be kept
in suspense, or held in abeyance, the person who otherwise might have
enforced those rights will not be allowed to enforce them where it would be
inequitable having regard to the dealings which have thus taken place
between the parties. (per Lord Cairns, p. 448)
Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130
The claimants granted to the defendants a tenancy of a block of flats at a rent
of 2500l per year in September 1937. During the war, it became clear that the
defendants could not afford the rent and an arrangement was made between
the parties reducing the rent to 1,250l per annum. The defendants paid the
reduced rent.

The claimants in September 1945 claimed the difference

between the rents. The defendants claimed the claimants were estopped from
demanding rent at the higher rate or had waived their right to do so up until
their letter in September 1945.
Denning J first considered whether the case may be a variation. He found that
That equitable doctrine, however, could hardly apply in the present case
because the variation here might be said to have been made without
consideration.
With regard to estoppel by representation, Denning J stated: the
representation made in relation to reducing the rent, was not a representation
of an existing fact. It was a representation, in effect, as to the future, namely,

that payment of the rent would not be enforced at the full rate but only at the
reduced rate.

Such representation would not give rise to an estoppel,

because, as was said in Jorden v Money, a representation as to the future


must be embodied as a contract or be nothing.
Denning J then explored cases in which a promise was made which was
intended to create legal relations and which, to the knowledge of the person
making the promise, was going to be acted on by the person to whom it was
made and which was in fact so acted onthey are not cases of estoppel in the
strict sense. They are really promisesThe courts have not gone so far as to
give a cause of action in damages for the breach of such a promise, but they
have refused to allow the party making it to act inconsistently with it. It is in
that sense, and that sense only, that such a promise gives rise to an estoppel.
Rees & Kirby v Swansea [1985] 30 BLR 1
The claimant contractors entered into a fixed price contract with the defendant
to construct a housing estate. The works were completed a year late in July
1974 and the contractors claimed compound interest on the sum certified by
the Architect as properly reimbursable losses and expenses. The sum was
ascertained in 1979, and the contractors claimed interest from the date of
practical completion until September 1979. The trial judge gave judgment for
the full amount on the basis that it was part of the reimbursable direct loss and
expense. The Council appealed, contending that, inter alia, the contractors
claim failed because they had not given the requisite notice within a
reasonable time of the loss and expense having been incurred.
The Court of Appeal rejected this argument because in so far as the loss or
expense in question consists of the primary loss or expense incurred by the
relevant variations or delayed instructions, it appears to me that the
appellants are estopped from enforcing their strict legal right to have such a
notice given within a reasonable time of such loss or expense having been
incurredThe present case seems to me to be a classic example of parties

entering upon a course of negotiation which has the effect of leading one of
the parties to suppose that the strict rights arising under the contract will not
be enforced. Here, as soon as the respondents raised the question of a claim
under either clause 11(6) or clause 24(1)(a), the parties entered into the
negotiations for an ex gratia settlement, negotiations which lasted over a
period of years. Even after those negotiations had come to an end, appellants
expressed no objection to the respondents instructing their own quantity
surveyors to prepare their claim, not did they give any notice to the effect that
they intended to resume their right under either clause to require a written
application within any particular period of time.

Furthermore, once the

respondents has submitted their claimthey had given what I regard to be a


sufficient intimation of the fact that they were out of pocket by reason of delay
in payment of their claims under the two clauses, and they continued
periodically thereafter to give further intimations of that fact almost up to the
date of the issue of the final interim certificate. (per Robert Goff LJ, at p. 21)
F.

Entire Agreement Clauses


Inntrepreneur Pub Co v East Crown Ltd [2000] 2 Lloyds Rep 611
The purpose of an entire agreement clause is to preclude a party to a written
agreement from threshing through the undergrowth and finding in the course
of negotiations some (chance) remark or statement (often long forgotten or
difficult to recall or explain) on which to found a claim such as the present to
the existence of a collateral warranty. The entire agreement clause obviates
the occasion for any such search and the peril to the contracting parties posed
by the need which may arise in its absence to conduct such a search. For such
a clause constitutes a binding agreement between the parties that the full
contractual terms are to be found in the document containing the clause and
not elsewhere, and that accordingly any promises or assurances made in the
course of the negotiations (which in the absence of such a clause might have
effect as a collateral warranty) shall have no contractual force, save insofar

10

as they are reflected and given effect in that document. (per Lightman J at
para. 7).
G.

Estoppel in Construction Cases


Wilken (para 19.19) notes that there are two particular difficulties in
establishing an estoppel in construction law cases:

The nature of contruction projects means the works are ongoing and
defects in those works may not be immediately noticeable, therefore it is
unlikely they will be drawn to the attention of the architect, enabling him
to represent that they have been approved.

It will be relatively difficult for the contractor to argue that it acted to its
detriment.

Generally on where there is alleged defective work the

contractor will either have done nothing or will have continued to


provide defective work. In the former case, there is no detriment, in the
latter case, the only detriment is that the contractor continues to act in
breach of its contractual obligations.

II.

Waiver
A.

Introduction and Definition


Waiver is closely linked to estoppel: A party to a contract may act so as to
show that he does not intend to enforce a contractual right or require
performance of a contractual obligation. By so acting, he may be waiver lose
the right or cease to be entitled to the performance either temporarily or
permanently. It is always open to a party to waive a condition which is
inserted for his benefit. (Keating 11-005)
However, the precise definition of a doctrine of waiver is unclear:

11

Depending on the context we use the term waiver to mean the permanent
abandonment of a right or its temporary suspension or the acceptance of a
different performance of a right or its temporary suspension or the acceptance
of a different performance from that which was originally promised or which
the opposing party was obliged to provide. But the use of the tem by itself
tells one nothing about the reason why the party in question will be held to
have abandoned or suspended a right or is bound to accept a different
performance. (Spencer Bower, Estoppel by Representation, 4th edition p.
369)
The doctrine [of equitable forbearance or promissory estoppel] has closer
affinities with the common law rules of waiver, in the sense of forbearance:
both are based on promises, or representations of intention; both are
suspensive (rather than extinctive) in nature and both are concerned with the
legal effects of promises rather than with proof of disputed facts. The main
difference between them is that the equitable doctrine avoids the difficulties
encountered at common law in distinguishing between a variation and a
forbearance.
There is now much judicial support for these submissions. Thus Lord Pearson
in Woodhouse AC Israel Cocoa Ltd v Nigerian Produce Marketing Co Ltd
[[1972] AC 741, 762] said that promissory estoppel was far removed from
the familiar estoppel by representation of fact and seems, at any rate in a case
of this kind, to be more like a waiver of contractual rights. In a number of
later cases waiver and promissory estoppel (or the rule in Hughes v
Metropolitan Ry) are treated as substantially similar doctrines. (Chitty (30th
edition) 3-104 3-105).
B.

Cases on Waiver
Glencore Grain Ltd v Flacker Shipping (the Happy Day) [2002] 2 All ER
(Comm) 896

12

Broadly speaking there are two types of waiver strictly so-called: unilateral
waiver and waiver by election. Unilateral waiver arises where X alone has
the benefit of a particular clause in a contract and decided unilaterally not to
exercise the right to or forego the benefit conferred by that particular
clauseWaiver by election on the other hand is concerned with the reaction
of X when faced with conduct by Y, or a particular factual situation which has
arisen, which entitles X to exercise or refrain from exercising a particular
right to the prejudice of Y. (per Potter LJ, para. 64).
Scarf v Jardine (1882) 7 App Case 345:
The principle, I take it, running through all the cases as to what is an
election is this, that where a party in his own mind has thought that he would
choose one of two remedies, even though he has written it down on a
memorandum or has indicated it in some other way, that alone will not bind
him; but so soon as he has not only determined to follow one of his remedies
but has communicated it to the other side in such a way as to lead the opposite
party to believe that he has made that choice, he has completed his election
and can go no further; and whether he intended it or not, if he has done an
unequivocal actI mean an act which would be justifiable if he had elected
one way and would not be justifiable if he had elected the other waythe fact
of his having done that unequivocal act to the knowledge of the persons
concerned is an election. (per Lord Blackburn at 360-1)
Charles Rickards Ltd v Oppenhaim [1950] KB 616
The defendant ordered from the claimants a Rolls Royce Silver Wraith chassis
which was duly delivered. The defendant wanted to build a body on the
chassis and the claimants obtained an estimate from a third party of six or
seven months at the most. On the date for delivery the work was not
completed. The defendant did not cancel the contract but pressed for delivery
of the completed car and so waived the provision as to delivery within at most
seven months. The defendant sent a notice requiring completion by a later

13

date, upon being informed that the car would not be ready by that date, the
defendant bought another care and claimed the sum from the claimants that he
paid for the chassis.
Denning LJ stated that:
If the defendant, as he did, led the plaintiffs to believe that he would not
insist on the stipulation as to the time against them, Whether it be called
waiver or estoppel on his part, or an agreed variation or substituted
performance, it does not matter. It is a kind of estoppel. By his conduct he
evinced an intention to affect their legal relations. He made, in effect, a
promise not to insist on his strict legal rights. That promise was intended to
be acted on, and was in fact acted on. He cannot afterwards go back on it.
C.

Pure Waiver
Reinwood Ltd v L Brown & Sons Ltd [2008] CLC 422
The JCT contract between the two parties for construction work in
Manchester provided for monthly interim payments on the seventh day of
each month. The work related partly to residential accommodation, under
which the supplies of goods and services would be zero-rated, and partly to
commercial accommodation, which would be chargeable to VAT at the
standard rate.

In April 2005 the contractor raised a first provisional

assessment and the employer did not pay the VAT.

In May 2005 the

contractor gave notice of a specified default for non-payment. Later the


parties agreed an amount (smaller than that provisionally assessed in April) as
being due for VAT and the employer paid that amount. In January 2006 the
contractor gave another notice specifying a default, as the employer chose to
withhold an amount on liquidated and ascertained damages when paying the
sum due on interim certificate no. 29. In June 2006, the employer failed to
pay the sum due under interim certificate no. 34 and the contractor served

14

notice of termination the following month, expressly relying on the January


2006 notice and not referring to the May 2005 notice.
The House of Lords held that the employer was entitled to make the deduction
it did from interim certificate no. 29 and so it was not in default therefore the
January 2006 notice was not valid.
In the meantime, the Court of Appeal remitted to the trial judge whether the
contractors notice of determination was valid. The trial judge held it was and
the employer appealed on the basis that if the notice default in May 2005 was
valid, the contractor had waived its right to rely on it either (i) by giving
notice specifying a default in January 2006, rather than giving notice to
determine the contract on the basis that the default in January was a repeat of
the earlier specified default; or (ii) by referring in the July 2006 notice to the
January default and not to the May 2005 default.
Lloyd LJ for the Court of Appeal rejected (i) above, holding that there was
nothing to prevent a contractor using the default procedure cumulatively. As
regards (ii) above, Lloyd LJ characterised the argument as one of pure
waiver.

He held that nothingsuggests to me that pure waiver could

operate so as to preclude Brown from relying on the earlier notice of default


despite not having mentioned it in the notice of determination. The examples
given of pure waiver are all concerned with prospective operation,
discharging a party from future performance of the obligation waived. They
do not relate to waiver of the consequences of past conduct.
Wilken describes pure waiver as the unilateral divesture of certain rights;
The only distinction between pure waiver and waiver by election is that X
had not been put to its election. Therefore, X can expressly or by its conduct
suggest that Y need no longer perform its obligations under the contract.
There is no need for Y to have acted in breach of the contract. Put another,
way, waiver by election is retrospective and pure waiver is prospective.
(Wilken 4.28)

15

D.

Non-waiver clauses
Enterprise Managed Services Ltd v East Midland Contracting Ltd [2007]
EWHC 727 (TCC)
The claimant sought a declaration that the court had no jurisdiction to decide a
claim by the respondent contractor or an order striking out the claim as
disclosing no cause of action or an order for summary judgment as. The
defendant countered that a condition precedent to commencing proceedings
other than adjudication had not been satisfied since there had not yet been
certification of the works. The claimant argued, inter alia, that although there
may not have been certification as strictly required by the contract,
nonetheless, by virtue of the practice adopted by the employerthen as
between the employer and the main contractor any strict requirement for the
issue of a certificate ahs in effect been waived, so that for the purposes of the
main contract there had been certification. (para. 45).
HHJ Stephen Davies stated, obiter: If necessary, I would also have been
prepared to find that the evidence before me demonstrates to a sufficient
standard that both employer and main contractor had mutually waived any
need for the physical issue of a document embodying a certificate in relation
to each project, so that: (i) for the purposes of the main contract each
individual project had been certified practically complete; (ii) for the
purposes of clause 15 of the sub-contract, the same applied. I would have
reached this conclusion notwithstanding the terms of clause 1.1.5 of the main
contract, because: (a) I am not convinced that as a matter of interpretation of
the main contract what has happened here amounts to a waiver of the
Contract, in whole in part; (b) even if it has, by at the latest the date of
the deed of variation of 14 June 2005 there had been an agreed waiver, which
was in writing and which was permitted under clause 1.1.1, either by the
adoption of the General Requirements from the outset, or by their inclusion as
a contract document by that date, or in any event in relation to each project

16

by payment against authorised track sheets under the remittance, credit and
payments report; (c) I consider that on the evidence the employer would be
estopped from relying on clause 1.1.5 if he sought to rely on his own failure to
procure the issue of a certificate in such circumstances.
III. Variation
A.

Variation to the Contract


Variation of a contract is the alteration of the obligations assumed under that
contract. (Wilken, 2.01)
Historically, variation has been analysed as similar to entry into a new
contract, and therefore requirements offer, acceptance and consideration
imposed. Three requirements for a valid variation emerge:

A valid and subsisting contract between the parties

Some form of consensus between the parties as to the obligations which


are to be altered

Parties having acted in some way to their benefit or detriment in either


agreeing the variation or as a result of the variation.

B.

Academic Debate on Classification of Variations in Construction Law


Two categories of obligation may be identified in construction contracts.
The contractor accepts a general obligation to carry out the works in a
given period and to a given standard. This obligation will usually be set out
in the main body of the contract and will be subject to the standard process of
agreement between the contractor and the employer.

The contractor is

further subject to an obligation to carry out the works in a particular way or


using particular materials[the] differences between alteration of the main
contract and alteration of the specification have led some commentators to
suggest that the modification of the two categories of obligation is to be

17

treated differently with only modification of [the specification] being treated


as a variation within the true meaning of the term. (Wilken 19-03)
Wilken suggests this distinction is incorrect since:

Both sets of obligations will be contractually binding, the contractor


being liable for breach if, for example, he delivers late or he does not
carry out the works as per the specification;

The requirements for modification of either obligation match those for a


variation;

The distinction is in fact between variation of a particular element of the


contract, an item of specification, said variation being governed by the
terms of the contract, and a variation of the terms of the contract for
which no advance contractual provision has been made.

C.

Requirements for Variation


(1)

The variation must later the obligations of the parties. Therefore, where
the scope of the works is concerned, the variation must increase or
decrease the actual or implied obligations of the contractor to carry out
the works.

(2)

The work should have been at the employers request.

(3)

The contractor should have agreed to carry out the work, i.e. accepted
the request;

(4)

Consideration should be provided for the work. That consideration can


take two forms either an express of implied acceptance by the
contractor that it will carry out the work and an express or implied
acceptance by the employer that it will pay for the work, or the receipt of
a benefit by one of the parties.

18

(Wilken para 19.05)


D.

Cases on Variation
Williams v Roffey Bros [1991] 1 QB 1
The claimant subcontractor contracted to carry out carpentry work in a block
of 27 flats for 20,000. The claimant got into financial difficulty as the agreed
price was too low and the defendants made an oral agreement o pay the
claimant an additional sum of 10,300 at a rate of 575 for each completed
flat. The claimant completed eight more flats, but the defendant had made
only one further payment. The claimant claimed for the sums promised.
The Court of Appeal upheld the judgment at first instance that the claimant
could recover the sums promised. The main issue in the case concerned
whether the variation was a new contract enforceable by good consideration
(i.e., Roffey Bros had received something of value in return for the extra
money they promised). The court held that Consideration there must still be
but, in my judgment, the courts nowadays should be more ready to find its
existence so as to reflect the intention of the parties to the contract where the
bargaining powers are not unequal and where the finding of consideration
reflect the true intention of the partieswhere, as in this case, a party
undertakes to make a payment because by so doing it will gain an advantage
arising out of the continuing relationship with the promise the new bargain
will not fail for want of consideration. (per Russell LJ, pp.18 19)

E.

Difference with extras work outside the contract in Keating


Extra work is classed as work outside the contract if it is carried out after
completion of the original contract work or is not within the scope of the
variation clause. Extra work outside the contract is not governed by the terms
of the contract, and need not therefore be ordered in writing. The employer is
liable to pay a reasonable price for such work carried out at his request, but
may exceptionally not be so liable if the original contract is not expressly or
19

by implication replaced by a new contract and if there is no other basis for


liability as, for example, an implied promise to pay. In order to make a
person liable on a quantum meruit there has to be a necessary implication
that the person liable is agreeing to pay. It is unlikely to be sufficient for a
contract to claim after the works are completed that extra work is outside the
terms of the contract. (Keating 4-048)

20