Are your Terms certain?

21 May 2012

Celia Worthington discusses the importance of certainty of terms in Contract in light of the recent ruling in Simms Construction Limited-v-G.R. Homes Limited

An essential element to any contract is certainty of terms. A recent case in the High Court in Belfast highlighted the risks involved where terms to a contract were not clearly recorded in written documentation between the contracted parties. In the case Simms Construction Limited –v- G.R Homes Limited, Simms Construction Limited, as the building contractor, was claiming £1,226,552.45 in damages allegedly due to breach of contract on the part of the developer, G.R. Homes Limited. The case centred on the contractual terms between the parties in relation to the construction by the Builder of a number of houses between 2004 and 2006.

It seems that the parties did not accurately record the detail of their agreement as to building rates and handling fees in relation to development works, with the Judge remarking that “the most striking feature of the relationship between the plaintiff and the defendant companies is that it continued to exist for approximately 2 ½ years upon an apparently relatively satisfactory and productive basis despite the almost total absence of any formal contractual structure.” However, this satisfactory and productive basis came to an end when the payment rates were varied and the parties disputed the terms of the agreement between them in relation to amended terms. Basically what had been “agreed”? In the absence of any clear written agreement as to the terms of the variation or a written record of site meetings and/or other meetings, the Judge had to make his ruling on the basis of the oral evidence from the representatives from both parties and as to whose evidence he preferred. Whilst the ruling did not include specifics as to the amount to be awarded to the Builder, the Judge’s conclusions did uphold certain parts of the Builder’s claim and reject others.

Lessons need to be learned from a case of this nature. It is clearly risky to assume that because you are on good terms with a contracting party and have a satisfactory and productive working relationship with them, that you don’t need to formally record the terms of your working agreement. If you want to reduce risk and ensure certainty, agree terms and then accurately record in these in writing. You have been warned!

Celia Worthington, senior partner of the Commercial Department of Worthingtons Solicitors Belfast Office.  Celia specialises in commercial property, banking, telecoms and corporate and commercial law. She advises a number of UK wide corporate clients and well known local charities and is currently Chairperson of Abbeyfield (NI) a local housing association.

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