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B.Sc.

(Hons) Commercial Management (Quantity Surveying)

Construction Contract Law


Level 5
Seminar 2- Contract Agreement & Terms and Representations in Contract

By

Dinesh Gunasena B.Sc (hons) Q.S, Attorney at Law (Sri Lanka)

Contract Agreement:

Letter of Intent, Agreements to negotiate and agreements to agree. Curing an incomplete contract-
implying a term or duty to act in good faith, Contracts made by tender, the process of tendering and
costs, Subject to contract arrangements, Quantum Meruit

Relevant Cases:
1. Courtney & Fairburn Ltd v Tolaini Brothers [1975] 1 WLR 297:
2. Walford v Miles [1992] 2 AC at p. 138.
3. Coal Cliff Collieries Sijehama Pty Ltd 1991 24 NSWLR 1 at p. 22F and p. 26E and p. 27C
4. William Lacey (Hounslow) v Davis [1957] 2 All ER 712
5. Marston Construction v Kigrass (1989) 48 BLR 109
6. Harvela Investment Ltd v Royal Trust Co of Canada [1986] AC 207
7. RegalianProperties plc v London Dockyard Development Corporation [1995] 1 WLR 212;
[1995] 1 All ER 1005; 45 Con LR 37; 11 Const LJ 127
8. Blackpool and Fylde Aero Club v Blackpool BC [1990] 3 All ER 25
9. Harmon v The Corporate Officer of the House of Commons (2000) 67 Con LR 1 (TCC)
10. Cook Islands Shipping Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422
11. Pratt Contractors Ltd v Transit New Zealand (New Zealand) [2003] UKPC 83
12. British Steel Corporation v Cleveland Bridge (1981) 24 BLR 94
13. Turriff Construction Ltd and Turriff Ltd v Regalian Knitting Mills (1971) 9 BLR 20
14. G. Percy Trentham Ltd v ArchitalLuxfer(1992) 63 BLR 44
15. Jarvis Interiors Ltd v Gilliard Homes Ltd (2001) BLR
16. Butler Machine Tool Co. Ltd v Ex-cell-O Corporation (England) [1979] 1 All ER 963

Terms and Representations in Contract:


Express and Implied terms –and representations, Contract documents, Priority of documents,
Interpretation of documents, Exemption Clauses, Incorporation by Reference, Collateral Warranties and
third party legislation
Relevant Legislation and Cases:
1. Unfair Contract Terms Act 1977
2. Supply of goods and Services Act 1982 as amended by the Sale and Supply of Goods Act 1994
3. MJ Gleeson (Contractors) Ltd) v Hillingdon London Borough (1970) 215 EG 165
4. John Mowlem& Co Ltd v British Insulated Callenders Pension Trust Ltd (977) 3 con LR 64
5. Trollope &Colls Ltd v North West MetrolopolitanRegiona Hospital Board
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 Courtney & Fairburn Ltd v Tolaini Brothers [1975] 1 WLR 297:


Acceptance must be certain and unambiguous

In order to create a contract, a party’s acceptance must unequivocally relate to the other party’s offer.
Further, the resulting agreement must be certain in all its essential terms. If these requirements are not
met, there will be no contract. The claimant builders of this case agreed that they would introduce a
source of finance for the defendants’ proposed motel development, provided that they were then
employed on the project and that the defendants instructed their quantity surveyor ‘to negotiate fair
and reasonable sums in respect of ... the projects ... based upon agreed estimates of net cost and
general overheads with a margin for profit of 5%’. The defendants agreed to these terms, and the
claimants duly arranged the finance, but they were not then given the work. On these facts it was held
by the Court of Appeal that, in the absence of agreement on the sum payable, or the provision of a
method of ascertaining it, there was no contract between the parties.

 Walford v Miles [1992] 2 AC at p. 138.


The need for certainty
In addition to the elements of offer, acceptance, consideration, and an intention to be legally bound,
there must be certainty: the courts will not enforce any contract unless it is sufficiently clear and
complete.

Two groups negotiating over the sale of a business agreed that so long as AA provided a bankers' letter
by a certain date RR would not negotiate with any third party, and would continue to negotiate with
AA in good faith. The House of Lords said the agreement was unenforceable for lack of certainty. AA
claimed the obligation to negotiate only with them continued until such time as RR had "a good
reason" to break off, giving the necessary certainty, but the Court said this was inherently repugnant to
the essentially adversarial position of parties in negotiation. Each side had the right to pursue its own
best interests, and the right to withdraw from further negotiation was an essential bargaining tool. An
agreement to "use best endeavours" to negotiate might be enforceable since it set an objective
standard, but "good faith" was too subjective a concept for the courts to enforce. Similarly, an
agreement not to negotiate with any other party during a fixed period was prima facie enforceable, but
an agreement to negotiate only with AA "for a reasonable period" was too vague, and could not in any
case impose a positive duty to negotiate.

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 Coal Cliff Collieries Sijehama Pty Ltd 1991 24 NSWLR 1 at p. 22F and p. 26E and p. 27C
Parties entered into a ‘heads of agreement’ to jointly develop mining rights. The agreement
anticipated execution of a joint venture in the future. However, they failed to reach final agreement
and few years later negotiations were terminated. Sijehama alleged breach of ‘heads of agreement’
and claimed damages. It succeeded at trial.

A contract to contract is not binding, but this was not a contract to contract - it was an agreement to
negotiate in good faith which he considered was enforceable; he was influenced by the doctrine of
freedom of contract and the fact that the two organisations had intended the agreement to be binding.

 William Lacey (Hounslow) v Davis [1957] 2 All ER 712


The adoption of a suitable tendering procedure will no doubt help to reduce if not to eliminate the
potential waste of time, effort and money. Nevertheless, there remain certain difficulties inherent in
the way that the law analyses tenders.

Conventional legal analysis regards an employer’s request for tenders as an invitation to treat, and the
tenders themselves as offers. It follows that, as a general principle, the employer is under no legal
obligation to accept the lowest (or, indeed, any) tender submitted. In practice, this protection of the
employer’s position is frequently (though unnecessarily) made explicit when tenders are invited, by a
statement that the employer does not undertake to accept the lowest tender.

The consequence of this contractual framework is that the costs of tendering (which may be
considerable, especially where substantial design work is required) are to be borne by the contractor.
Of course, these costs can be reflected in the tender price and thus recouped by the successful bidder,
but the unsuccessful competitors must in normal circumstances bear their own costs, unless a promise
to pay on the part of the employer can be implied. Such a promise might be implied where the
preliminary work goes beyond what would normally be expected, or where the employer can make
some profitable use of it.

An example of what will suffice to justify departing from the basic rule is provided by William Lacey
(Hounslow) Ltd v Davis, in which the claimants, who had tendered for the job of reconstructing certain
war-damaged premises owned by the defendant, were led by the defendant to believe that they would
be given the contract. At the defendant’s request, the claimants prepared various calculations,
schedules and estimates, which the defendant used to negotiate a claim for compensation from the War

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Damage Commission (a government body). The defendant then sold the property to a third party, at a
price which reflected the benefit of the agreed War Damage claim, but without ever having concluded
a formal contract with the claimants. It was held that a promise by the defendant to pay a reasonable
sum for these services could be implied.

The claim of the contractors in the Lacey case was a strong one, since the client had specifically asked
for the work in question to be done and, moreover, had actually made a substantial profit from it.
However, a similar principle has been applied in respect of work that the client had only requested by
implication, and where the client’s profit from that work was still only a potential one. The employer’s
basic unfettered discretion in respect of tenders is subject to the following qualifications:

1. By analogy with cases concerning the advertisement of auctions, a person who invites another to
tender with no intention whatsoever of accepting that tender will be liable for any expenses that the
latter incurs. (Marston Construction v Kigrass (1989) 48 BLR 109)
2. An employer who expressly promises to accept the lowest tender will be bound by that promise,
once a tender that complies with any conditions set has been submitted. (Harvela Investment Ltd v
Royal Trust Co of Canada [1986] AC 207)
3. In at least some situations (possibly only where public bodies are concerned), the employer may be
under an implied obligation to give proper consideration to any tender submitted in accordance with
published conditions (as to time, form, etc.). (Blackpool and Fylde Aero Club v Blackpool BC
[1990] 3 All ER 25)
It should be noted that, where this applies, it only requires that the tender be considered, not
necessarily that it be accepted.

4. Local authorities are required by the Local Government Act 1972 to have and to publicize formal
contracting procedures, normally involving competitive tendering. They are further required by the
Local Government Act 1988 to give reasons for their procurement decisions and are generally
prohibited from taking into account non-commercial considerations in reaching those decisions.
5. In relation to the procurement of public sector work, legislative rules of the European Union seek to
place considerable restrictions upon an employer’s discretion.

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 Regalian Properties plc v London Dockyard Development Corporation [1995] 1


WLR 212; [1995] 1 All ER 1005; 45 Con LR 37; 11 Const LJ 127

In this case, the plaintiffs entered into negotiations with the defendant corporation for the residential
development of former dockland and an offer of 18.5m for a licence to build was accepted subject
[inter alia] to contract. Over the ensuing years considerable delays were encountered during which
time market values fell to the extent that the plaintiffs realised that it would no longer be economic for
them to build on the terms previously agreed. Further negotiations failed and the land was never
developed. The plaintiffs claimed costs amounting to some 3m in respect of expenses incurred by
them in preparation for the intended contract. The court was therefore called upon to
determine whether, where parties to a proposed contract had a mutual understanding that there would
be a contract between them and, pursuant to that understanding, one party incurred expense which
benefited the other party, if the intended contract failed to materialise through no fault of the party
incurring expense, that party could recover his wasted costs from the other.

The Court found as fact that the plaintiff incurred the expenditure during a period in which both it and
the defendant confidently expected that a building lease would be granted by LDDC to Regalian for
the purpose of Regalian's carrying out the proposed development.

Further, by the deliberate use of the words subject to contract with the admitted intention that they
should have the usual effect, the parties had each accepted that if there was no resultant contract, they
loss should lie where it fell. The costs incurred were not as a result of the accelerated performance of
the anticipated contract but rather in respect of works in preparation for it. The breakdown of
negotiations was not as a result of the unilateral decision of either party. Accordingly it was held that
where parties entered into negotiations with the intention of including a contract but on express terms
that either party was free to withdraw from the negotiations at any time, pending the conclusion of a
binding contract, any costs incurred by one of the parties in preparation for the contract would not be
recoverable against the other in the event that the contract was not concluded.

 Jarvis Interiors Ltd v Gilliard Homes Ltd (2001) BLR


Galliard were developing Old Sun Wharf into 36 flats. On 11 January 1995 Galliard sent Jarvis an
invitation to tender. The invitation included a document titled “Contract Preliminaries”. The
Preliminaries provided inter alia that the contract would incorporate the JCT conditions as amended

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and that “The Contract will be executed as a deed under seal”. After further negotiations on 14 March
1995 Galliard issued a letter of intent which provided “In the event that we do not enter into a formal
contract with you through no fault of Jarvis Interiors, you will be reimbursed all fair and reasonable
costs incurred and these will be assessed on a quantum meruit basis”.

Further discussions took place during March to November 19995 during which period Jarvis carried
out and completed work to some of the flats. On 1 December 1995 the parties shook hands on a price
of £1.325 million. On 8 December 1995 Galliard wrote to confirm this figure and invited Jarvis to sign
and return the letter. Jarvis did not do so. On 19 March 1996 Galliard’s QS sent to Jarvis articles of
agreement, contract sum analysis, drawings and a specification for signature and proposed a
supplementary agreement to accommodate inter alia the guaranteed maximum price. In June 1996
Galliard purported to terminate the contract under clause 27.2.1.2 of the JCT Conditions. Jarvis said
there was no contract and issued a writ for the work it had done on the alternative bases either that
there was a contractual right to payment pursuant to the letter of intent or on a quantum meruit.
Galliard applied for a stay under s.4 of the Arbitration Act 1980.

Galliard argued that a formal contract incorporating an arbitration clause came into existence when the
provision in the preliminaries that a contract would only eventuate once the parties entered into a deed
was overtaken by the ‘handshake agreement’..

The Court of Appeal disagreed and further having noted the “broad disposition to find a contract if one
can” found

(a) that the effect of the provisions in the preliminaries was that there could be no contract unless and
until there was a deed between the parties – the effect was akin to the phrase ‘subject to contract’ and

(b) that nothing that occurred afterwards overtook that – this included the ‘handshake agreement’
which was itself subject to a formal contract being entered into.

It is important to note, however, that Galliard did not seek to argue that an interim contract came into
existence when Galliard acted on the Letter of Intent. Court clearly thought this argument would have
succeeded.

The Court considered that all agreements to negotiate were unenforceable.

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 Harmon v The Corporate Officer of the House of Commons (2000) 67 Con LR 1 (TCC)
Contractor who has been excluded from tendering or not awarded a contract, and who wishes to
complain about a breach of the regulations, must both notify the employer and commence proceedings
in court within three months. If this is done, the court can order the employer to correct the
infringement, if necessary by suspending the tendering procedure, or may set aside any unlawful
decision (for example by removing a discriminatory specification from the tender documentation).

The court is also empowered to award damages to compensate the contractor for any loss suffered, and
this will be the only available remedy in cases where the offending contract has already been
concluded. Thus in Harmon CFEM Facades (UK) Ltd v Corporate Officer of the House of Commons,
a US-owned company was held entitled to damages covering its cost of tendering where a contract for
fenestration work at the House of Commons was let to another company on the basis of ‘value for
money’. The court held that this was not the same as ‘most economically advantageous’, which meant
that the contract should have been let to the claimants as the lowest tenderer.

 Cook Islands Shipping Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422
Withdrawal of tender

The basic contractual position is that, since a contractor’s tender is merely an offer, it may be validly
revoked at any time before it has been accepted. If this happens in respect of a main contract, the client
may well be disappointed (especially if the tender in question was the lowest), but is unlikely to suffer
any great financial loss as a result. By contrast, the withdrawal of a sub-contractor’s tender may have
a disastrous effect on the main contractor, as is demonstrated by this case, there the defendant
contractors, having obtained a written estimate of transport charges from the claimants, relied on this
in pricing their own tender for a contract. The defendants’ tender was accepted by the client, but the
claimants then announced that they were increasing their prices (which in effect meant that they were
withdrawing their original offer). It was held that, in the absence of a binding contractual obligation,
the claimants were quite entitled to withdraw, which of course left the defendants with a contractual
obligation priced on an unrealistic basis.

 Pratt Contractors Ltd v Transit New Zealand [2003] UKPC 83 Privy Council
The background facts to this case has consisted the situation where a contractor has been unsuccessful
in tendering for a contract, in this case for a highways project, and believes that it has been unfairly

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treated. The contractor learned that its bid had been scored by the Tender Evaluation Team (TET) of
the client (Transit New Zealand) similarly to that of the successful bidder. The decisive factor telling
against Pratt was the TET’s perception of Pratt as more litigious and aggressive than its rival.Pratt
challenged Transit New Zealand’s decision and eventually the appeal came to the Privy Council from
the New Zealand Court of Appeal. Court Says:

“in selecting a particular tenderer, the council is in my view bound by the terms it has itself imposed,
as well as the requirements of fairness and equity which may well have an application”.

 Hughes Aircraft Systems v Air Services Australia [1997] 145 AR1


The duty in cases of preliminary procedural contracts for dealing with tenders is “a manifestation of a
more general obligation to perform any contract fairly and in good faith”.
Court regards these more general notions of fairness as a “somewhat controversial question into which
it is unnecessary for their Lordships to enter because it is accepted that in general terms, such a duty
existed in this case”.
Lord Hoffman’s decision contains three important elements.
First, he acknowledges the existence of the tender contract. This can now be established as settled
law and must, at least arguably, extend into all private sector contracts, although the obligations will
not be the same without the back-drop of the public sector regulatory regime.
Second, the content of the obligation in this case:

 The evaluation ought to reflect the views honestly held by the members of the TET.

 All tenderers should be treated equally.

 Where tenderers’ attributes are the same, they cannot be marked differently.

 It would be bad faith if a TET member sought to reject information which might show his
opinion was wrong.

Third, what would not be included in the obligations of the awarding authority:

 No obligation on TET to give the same mark if it honestly believed the attributes of tenderers
to be different.

 No obligation to appoint to TET only members without views on the individual tenderers.

 No obligation on the TET to act judicially.

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 No obligation to grant a tenderer a hearing to explain or justify itself.

Conclusions

 Tenderers have rights under EU Procurement rules.

 Breach of those rights by awarding authorities can give rise to claims for non-financial or
financial remedies by disappointed tenderers.

 The existence of the tender contract is established at common law irrespective of any public
sector regulatory regime, although the latter may inform the content of the contract.

 The Pratt Contractors case gives the most detailed guidance to date as to what is, and what is
not, required of clients in considering tenders and awarding contracts.

 British Steel Corporation v Cleveland Bridge (1981) 24 BLR 94

Notwithstanding the other possibility, it must be said that a letter of intent in itself does not usually
give rise to any contractual rights or obligations. This is because a court may well take the view that
the letter, by stating that there will or may be a contract in the future, is an indication that there is no
such contract at present. A contractor who carries out work on the basis of such a letter may be
entitled, under a legal doctrine called restitution, to be paid the reasonable value of the work carried
out, but there are no further legal consequences.

An example of this kind of letter of intent is provided by the case of British Steel Corporation v
Cleveland Bridge & Engineering Co Ltd. The defendants there, who had successfully tendered for the
steelwork in a bank in Saudi Arabia, approached the claimants for the manufacture of a variety of steel
nodes, and sent them a ‘letter of intent’ which proposed that the defendants’ own standard-form sub-
contract should be used. The claimants did not agree to this, and there were further disagreements over
price and delivery dates (plus a telex from the defendants stating that the nodes must be manufactured
in a particular order). Nonetheless, the claimants manufactured and delivered the nodes. When the
claimants sued for payment, the defendants counterclaimed damages on the basis that the nodes had
been delivered late and in the wrong sequence. They argued that a contract had come into existence
when the claimants started manufacture.

It was held that, since vital terms of the parties’ arrangement had never been resolved, it was
impossible to say that the delivery and receipt of the steel nodes created a contract through the parties’

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conduct. As a result, the claimants were entitled under the doctrine of restitution to be paid on a
quantum meruit basis for the nodes. However, the defendants’ counterclaim failed for, without a
contract, there could be no obligation to deliver at any particular time or in any particular sequence. It
is also worth noting that, had the point arisen, the absence of a contract

 Turriff Construction Ltd and Turriff Ltd v Regalian Knitting Mills (1971) 9 BLR
20

Although the judge in the British Steel case refused to hold that a contract had been brought into
existence by the commencement of work, he recognized that this could happen in appropriate
circumstances. Indeed, he cited with approval the earlier case of Turriff Construction Ltd v Regalia
Knitting Mills Ltd. In that case the claimants, having tendered for the design and construction of a
factory for the defendants, were told that they were successful, whereupon they asked for ‘an early
letter of intent ... to cover us for the work we will now be undertaking’. Such a letter was sent, stating:
‘the whole to be subject to agreement on an acceptable contract’. The claimants then carried out the
detailed design work necessary to seek planning permission and obtain estimates. When, six months
later, the defendants abandoned the project, it was held that the claimants had made it sufficiently clear
that they wanted an assurance of payment for their preparatory work in any event, and that the letter of
intent constituted that assurance. There was therefore a contract under which the claimants were
entitled to be paid.

Where a court, as in the Turriff case, is prepared to interpret a letter of intent as creating a contract, it
will then have to decide on the precise scope of that contract.

It is possible, although very unlikely, that a bilateral contract for the whole of the project work might
exist. If so, the employer would not only have to pay for whatever work the contractor carried out, but
would also be unable to abandon the project without incurring liability for depriving the contractor of
the opportunity to make a profit on that contract.

 G Percy Trentham v Archital Luxfer Ltd 63 BLR 44 (CA) [1992]

Trentham were main contractors for the construction of industrial units. Archital were the aluminium
walling sub-contractors. Archital submitted a number of quotations and there was then a round of offer
and counter-offer, but a formal sub-contract was never signed. The sub-contract work was fully

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performed, but performed late with the result that the Employer sought and obtained damages from
Trentham, who then sought an indemnity from Archital. Archital denied there was a sub-contract.

The Official Referee found there was a contract and Archital’s appeal to the Court of Appeal failed.

The case is chiefly memorable in the present context because of the dictum of Steyn LJ that where a
transaction has been fully performed, it may be implausible to suggest there was no contract at all.
However, Steyn LJ went on to state that the position might be different where there was an express
provision in a letter that there was to be no contract at all until the occurrence of a particular event,
such as the execution of a formal contract.

 Butler Machine Tool v Ex-Cell-O Corporation [1979] 1 WLR 401 Court of


Appeal
Ex-Cell-O wished to purchase a machine from Butler. Butler sent out a quotation of £75,535 along
with a copy of their standard terms of sale. The terms included a price variation clause and a term that
the seller's terms would prevail over any terms submitted by a purchaser. The machine would be
delivered in 10 months. Ex-Cell-O put in an order for the machine at the stated price and sent a set of
their terms which did not include the price variation clause. The order contained an acknowledgement
slip which required a signature by Butler and was to be returned to Ex-Cell-O. This slip stated that the
contract would be subject to the terms stated overleaf. Butler duly signed the slip and returned it. The
machines were then delivered and Butler sought to enforce the price variation clause and demanded an
extra £2,893. Ex-Cell-O refused to pay.
Held: The offer to sell the machine on terms provided by Butler was destroyed by the counter offer
made by Ex-Cell-O. Therefore the price variation clause was not part of the contract. The contract was
concluded on Ex-Cell-O's terms since Butler signed the acknowledgement slip accepting those terms.
Where there is a battle of the forms whereby each party submits their own terms the last shot rule
applies whereby a contract is concluded on the terms submitted by the party who is the last to
communicate those terms before performance of the contract commences.

As a result of the majority ruling in the Butler Machine Tool case, English law continues to approach
the issue of the battle of forms from the viewpoint of analysing the communication between the parties
to see if it can be discerned into an offer and acceptance.

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An example of a different theoretical approach to resolving the “battle of forms” issue can be found in
Article 19 of the Vienna Convention for the International Sale of Goods, which provides:

1. A reply to an offer which purports to be an acceptance but contains additions, limitations or


other modifications is a rejection of the offer and constitutes a counter-offer.
2. However, a reply to an offer which purports to be an acceptance but contains additional or
different terms which do not materially alter the terms of the offer constitutes an acceptance,
unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice
to that effect. If he does not so object, the terms of the contract are the terms of the offer with
the modifications contained in the acceptance.
3. Additional or different terms relating, among other things, to the price, payment, quality and
quantity of the goods, place and time of delivery, extent of one party's liability to the other or
the settlement of disputes are considered to alter the terms of the offer materially.
Please note: The United Nations Convention on Contracts for the International Sales of Goods has
been ratified by 78 states. United Kingdom is not one of those 78 states.

Terms and Representations in Contract:

The Unfair Contract Terms Act 1977 is an Act of Parliament of the United Kingdom which
regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly
all forms of contract and one of its most important functions is limiting the applicability of
disclaimers of liability. The terms extend to both actual contract terms and notices that are seen to
constitute a contractual obligation.

The Act renders terms excluding or limiting liability ineffective or subject to reasonableness,
depending on the nature of the obligation purported to be excluded and whether the party purporting to
exclude or limit business liability, acting against a consumer.

Negligence. s2(1), liability for negligence occasioning death or personal injury cannot be excluded.

Manufacturers' guarantee. s5(1), loss arising from (a) defective goods or


(b) negligence of distributor; cannot be excluded where goods are "of a type ordinarily supplied for
private use or consumption."

Sale of Goods

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 s6(1), implied terms as to title (Sale of Goods Act 1979 s12) cannot be excluded.
 s6(2), implied terms as to description, quality or sample (Sale of Goods Act 1979 ss13-15) cannot
be excluded against a consumer.
Sale of Goods Act 1979 (as Amended By The Sale and Supply of Goods Act 1994 and The Sale
and Supply of Goods to Consumers Regulations 2002)

The rights of a consumer purchaser are different (stronger) than those of someone who is buying for a
business.

Under the Act a consumer is entitled to expect that any goods bought from a trader are: satisfactory
quality, fit for any particular purpose made known to the seller as described; and that the seller has the
right to sell the goods.

If they are not they may seek a refund, replacement or repair.

"Satisfactory quality" means that the goods would meet the standard a reasonable person would regard as
satisfactory taking into account the description of the goods, the price (if relevant) and all other relevant
circumstances.

The quality of the goods includes their state and condition including their appearance and finish, freedom from
minor defects, safety and durability. They should also be fit for all purposes for which goods of that kind are
commonly supplied. Your rights under this Act are against the person who sold you the goods and not the
manufacturer (but see "the Consumer Protection (NI) Order 1987 " about defects which cause injury).

A customer has no grounds for a complaint if:

 they were told about the fault before they purchased the item (e.g. "seconds");

 examined the item when they bought it and should have seen the fault (e.g. tried on a
garment);

 made a mistake when purchasing the item (e.g. asked for the wrong size);

 simply changed their mind about the item.

Remedies
Under the new rules, if the goods did not conform to the contract of sale at the time of sale ( i.e. one of the 4
rules at the start of this section is breached) the consumer buyer has the right to choose depending on the

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circumstances (within reason) which of the four new remedies of repair, replacement, discount or rescission to
go for.
If the goods are found to be faulty during six months after purchase the new law says they are considered to
have been faulty at the time of sale unless the seller can prove otherwise. After that six month period the
position is the same as it was before 31st March 2003 and the consumer must prove that the goods were faulty
at the time of sale.
If a product which was faulty at the time of sale (as above) is returned to the retailer, a consumer is legally
entitled to one of the following:
a full refund - If a customer has a complaint about something they should tell the seller as soon as
possible - as soon as you discover the defect. This is because if the goods are considered to have been
'accepted' goods the consumer can lose the right to a full refund but still might retain the right to a
partial refund. One way to 'accept' goods is to keep them beyond a reasonable time without rejecting
them;
a reasonable amount of compensation (or "damages") - If a customer has bought faulty goods and
have 'accepted' them you may have to accept an offer to put the goods right or the cost of a repair. If
the fault cannot be put right or the cost of putting it right is unreasonable you may be able to claim
appropriate compensation but you would have to keep this claim to a reasonable minimum;
a repair or replacement - Under the Sale and Supply of Goods to Consumers Regulations 2002, you
will have the right to ask for a repair or a replacement providing that it does not cost more than you
paid for the item. This then should be provided within a reasonable period of time.
Guarantees
Where goods are offered with a consumer guarantee, the consumer can request that the guarantee be made
available in writing and that the terms of the guarantee should be set out in plain language which can be easily
understood. This should be in English if offered in the United Kingdom and should give details of how to make
a claim under the guarantee.
A contract will also be made between the consumer and the guarantor. This means that if the guarantor refuses
to honour the guarantee that the consumer may be able to take legal action.
MJ Gleeson (Contractors) Ltd) v Hillingdon London Borough (1970) 215 EG 165

Priority of documents

On a construction project of any substantial size, the sheer weight of detail found in the contract
documentation gives ample scope for discrepancies and inconsistencies. These may arise within one

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particular document, as where the contract bills contain two inconsistent provisions. They may also
arise between two documents, as where something in the bills conflicts with something in the
conditions.

When called upon to resolve a discrepancy of this kind, the contract administrator should normally act
in accordance with the general principles of law that govern the interpretation of contracts. However,
this is subject to the terms of the contract itself, and it is noticeable that these general principles are
expressly modified by a number of standard form building contracts. For example, one of the common
law rules is that, where there is a conflict, written words prevail over typed words, and typed words in
turn prevail over printed words. That rule is based on the sensible ideas that documents which are
prepared for a specific job, rather than being taken ‘off the shelf’, are more likely to reflect the parties’
true intentions. If it were to be applied to a building contract, it would mean for example that
provisions in bills of quantities would override the printed conditions of contract. In cases dealing with
similar wording in earlier JCT forms of contract, the courts have ruled that the clause can operate to
defeat what is the clear intention of the parties as expressed in the bills. In this case, a contract for the
provision of a large number of houses gave a single completion date of 24 months after the date for
possession. In reality, as the preliminaries bill showed, the parties’ intention was that blocks of houses
were to be handed over at 3-month intervals from 12 months onwards. When the first blocks of houses
were not completed after 12 months, the employer deducted liquidated damages at the contract rate,
but this was held to be invalid. The contract made no provision for sectional completion, and it could
not be varied by the contract bills.

The Gleeson principle has in other cases forced the courts to block the clear intentions of the parties by
ignoring provisions in the contract bills which purported to deal with the contractor’s duty to insure,
the nomination of subcontractors and the early taking of possession by the employer.

 John Mowlem& Co Ltd v British Insulated Callenders Pension Trust Ltd (977) 3 con LR 64
On the credit side, it also enabled a court to hold that, under a contract in which a contractor undertook
merely to construct in accordance with the employer’s design, an obligation to carry out design work
could not be imposed on the contractor by the ‘back door’ method of inserting a performance
specification in the contract bills.

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 Trollope &Colls Ltd v North West MetrolopolitanRegiona Hospital Board

The Hospital Board engaged Trollope to build phase III of a hospital project. The date for the
completion of the contract was stated in the contract to be 30 April 1972. Phase I was 59 weeks late
in being completed and the Hospital Board claimed that the date for the completion of phase III
should be extended to take account of the overrun. Trollope insisted that the date for completion of
phase III remained 30 April 1972.

The issue before the court was whether a term could be implied into the contract so as to extend the
time for the completion of phase III.

In that situation a dispute arose as to the contractual position, and there was a curious reversal of the
usual attitudes in such cases. The appellants were claiming that the express provisions of the contract
were to be read literally and no implied term could be introduced, and so the appellants were not
entitled to any extension of time and were bound to complete phase III by the specified date. They
professed to be able to complete their part of the work by the specified date, and they called on the
respondents to nominate sub-contractors who would enter into sub-contracts conforming to that time
schedule. These respondents were unable to do. The appellants were turning the situation to their
own advantage, because, if the contract could not be carried out, a new arrangement would have to be
made for the work to be done at the prices prevailing in or about 1971, which were considerably
higher than the contract prices. The difference between the contract prices and the prices prevailing
in or about 1971 is said to be in the region of one million pounds.

The respondents, on the other hand, wished to have the work carried out at the contract prices. They
contended that the appellants were entitled to an extension of the time for completion of phase III by
47 weeks. The court will not even improve the contract which the parties have made for themselves,
however desirable the improvement might be. The court's function is to interpret and apply the
contract which the parties have made for themselves. If the express terms are perfectly clear and free
from ambiguity, there is no choice to be made between different possible meanings: the clear terms
must be applied even if the court thinks some other terms would have been more suitable. An
unexpressed term can be implied if and only if the court finds that the parties must have intended that
term to form part of their contract: it is not enough for the court to find that such a term would have
been adopted by the parties as reasonable men if it had been suggested to them: it must have been a
term that went without saying, a term necessary to give business efficacy to the contract, a term
which, although tacit, formed part of the contract which the parties made for themselves. The

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relevant express term is entirely clear and free from ambiguity: the date for completion of phase III is
the date stated in the appendix to conditions 'C', which is 30th April 1972. That term in itself can
have only one meaning.

As to the alleged implied term, the Court by no means convinced that the parties overlooked the
possible effect of an 'overrun' of phase I on the time for completing phase III... The parties were
making the timetable which they considered suitable for the particular case. It is reasonable to
suppose that they knew what they were doing, and that the appellants were taking the risk of
an 'overrun' of phase I curtailing the time for phase III...

Seminar 2 : Contract Agreement & Terms and Representations in Contract