Member Article

Contracts ? get it in writing

With Watson Burton LLP Law Firm

Contractual obligations, both written and oral, are often the subject of legal disputes and the courts are asked to rule on what was agreed between the parties. The recent case of Brian Royle Maggs (T/A BM Builders) v (1) Guy Anthony Stayner Marsh (2) Marsh Jewellery Co Ltd, Court of Appeal, 7 July 2006, concerned a dispute in relation to a contract for building works and highlights the difficulties that can arise when not all of the terms of the contract are reduced to writing.

Mr Marsh engaged a builder, Mr Maggs, to carry out refurbishment works to his property. The builder provided an estimate of costs for the refurbishment works attaching a list describing the items of work to be carried out. After some discussion, the estimate was orally agreed by Mr Marsh. However, during the course of the works Mr Marsh requested further items of work to be completed by the builder. The builder completed the additional items but did not provide further estimates.

The builder provided interim invoices, including on one occasion a further list of some of the additional works. The sum claimed in the final invoice far exceeded the original estimate. Mr Marsh disputed the amount owed and the builder brought a legal action in the County Court for the amount allegedly owed.

The County Court had to consider what had been agreed by the original contact, which had been partly written and partly oral. The Judge therefore had to consider not only the original written estimate, but also heard lengthy evidence from the parties about what had been said at the time of, and prior to, agreeing the estimate when the contract was formed. The Judge ruled that he could not take into account what the parties had said or done subsequent to the formation of the contract. The Judge found the witness evidence of the builder more credible and ordered Mr Marsh to pay a specified sum.

Mr Marsh appealed on the basis that the Judge should have considered subsequent conduct to help determine the parties’ original intentions. The Court of Appeal allowed the appeal finding that where a contract is partly oral and partly written then the parties’ subsequent conduct could be examined. This was on the basis that things said or done after the contract was formed may help the court establish what the parties had originally intended. However, if a contract is entirely in writing then the intentions of the parties are ascertainable from the contract. The matter was ordered to be reheard and the court expressed disapproval at the parties having not already attempted to settle the matter as the costs of the litigation outweighed the sum in issue.

This case serves as a reminder to businesses and individuals of the importance of recording in writing all of the terms of an agreement. A written contract will remove the risk of lengthy and costly disputes about oral terms of the contract. Further, it is important to constantly assess whether the costs of litigation are proportionate to the outcome sought.

If you have any questions on this issue or any other contractual issues, please contact Helen Scott at Watson Burton LLP (e-mail helen.scott@watsonburton.com).

This was posted in Bdaily's Members' News section by Ruth Mitchell .