Construction Contract between Gregor and Finn

Construction Contract between Gregor and Finn

This contract entered into by Gregor and Finn is a well-established contract but certain issues seem to arise within the contract. Firstly, Finn had received another lucrative opportunity to construct a swimming pool elsewhere. He had already constructed the foundation and laid the first brick of the wall and decided to attend the other opportunity for some extra money by putting Gregor’s work on hold. However, the construction of the swimming pool took longer than expected and he returns a week later to continue working on the wall. Finn continued working and made considerable progress on the wall but as per the agreement Gregor knew the work wouldn’t be completed within the agreed period of time and on the ninth day, Gregor decided to fire him. However, Gregor’s urgent need to construct the wall from preventing the rugby players to peer or trespass in his garden, he managed to finish the rest of the work within his desired period of time. Even though the incomplete work was completed by Gregor, the foundation of the wall was not sturdy leading to the collapse of the wall. This wall would take about £8000 to rebuild including the replacement cost of the foundation.

At this point the issues at stake are:

Breach of contract due to delay in completion of the contract

The question of delay in construction contracts are not essentially the only important criteria to evaluate a breach but in cases where the time is specified by the employer /owner and the contractor/builder agrees to the stipulated time period, a breach may arise. As per the English law, “time” is not criteria but such can be challenged in case of express agreements, where Gregor has entered into an expressed agreement and communicated with Finn the importance of the stipulated time period as it hinders his privacy due to the rugby players peering in his garden as well as interferes with his private time which he requires for his occupation, therefore, there was an expressed rush to built the wall. The facts have also implied the fact that time is of essence for Gregor and defaults would cause of him loss. Despite this, Finn could not resist his urge to earn some extra income through the wealthy project that came his way and kept Gregor’s work on hold. This, independently shows that

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1. Lombard North Central plc -v- Butterworth [1987] QB 527 CA.

Finn had not given enough importance to the contract entered with Gregor and the fact that Finn was unable to return back to constructing Gregor’s work on time could be considered sufficient material breach of the contract.

If the delays are excusable which are generally created by Force Majeure, damages may be avoided or extension can be claimed but Finn cannot claim an excusable delay since the delay was not unavoidable, rather called upon by Finn. The claim against delay can be brough forward provided there is sufficient proof of the same and if the wrongful delay is established , Gregor even has the opportunity to claim additional cost that forced him to continue the work by himself.

Breach of contract due to defective workmanship of Finn

The contract entered into by Gregor with Finn, ensures that Finn is responsible in building a sturdy wall that shall allow Gregor to maintain his privacy but due to his extreme delay, Gregor was forced to complete the construction by himself, however, the foundation was already constructed by Finn along with a few more days progress on the wall that ensured a sturdy base by Finn. To Gregor’s surprise, the foundation was extremely weak and served no purpose, which led to the crumbling of the wall which wouldn’t have happened otherwise. In order to build back the wall which includes the foundational cost as well, Gregor is meant to pay an amount of £8000. This entire liability would not arise if Finn would have constructed the wall as per the contract entered into. In this scenario, Gregor can sue Finn for the defective workmanship executed as the any construction defects may be latent in nature, that lead to an understrength and deficient wall. This latent defect could also be visible in future as well. Thus, the contractor or the local builder should take liability of the workmanship and compensate for the damages occurred.

In the case of Bellgrove v. Elridge, the court discussed the case of a breach of contract in construction between the Plaintiff Bellgrove and Defendant Elridge, who had hired the plaintiff to build a two-storey house. The plaintiff had progress with the construction and received £3100

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2. Ashurst, (2019), “Terminating contracts under English Law”, < https://www.ashurst.com/en/news-and-insights/legal-updates/terminating-contracts-under-english-law/#:~:text=If%20the%20contract%20stipulates%20that,will%20be%20a%20repudiatory%20breach. > accessed on 24th March, 2021
3. Bellgrove v Eldridge [1954] 90 CLR 613

payment but the defendant deducted £400 for defective work. This deducted amount of money was challenged and plaintiff sued to recover the amount but Elridge (defendant) found defective work in the concrete foundation. The court upheld that the defendant with a sum of £4950 for reconstruction and all the damages suffered by him due to the defective workmanship and the plaintiff’s case was dismissed. This stance had been to be used in the case of Radford v. De Froberville wherein a breach of contract was held for a defective construction of wall and damages incurred by the plaintiff. Many cases were held as breach of contract where the construction was not performed as per the contract and specificiation entered into by the owner and the contractor especially in the case of Ruxley Electronics and Construction Ltd v Forsyth (1996) and D Galambos & Son Pty Ltd v McIntyre (1974). Thus, applying the same principle as in the case of Bellgrove v. Elridge, we may come to the conclusion that there was sufficient reason to claim defective workmanship on Finn’s part and thus this shall constitute a breach of contract.

Damages for breach of Contract

In cases of a construction contract, if there is a possible breach then damages can be claimed if the workmanship of the contractor is defective in nature or the contractor has failed to keep the promises entered into through the contract. The ultimate aim is to rectify the position of the aggrieved party by upholding the “expectation” the aggrieved parties initially placed if the contract had been performed completely which is known as the “expectation interest” allowing the injured party to have the benefit of the bargain. This is intended to recover the actual loss suffered as in the case of Whitaker v. Brunner, The case of Hadley v. Baxendale upheld that the

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4. Radford v de Froberville [1978] 1 All ER 33
5. Ruxley Electronics and Construction Ltd v Forsyth [1995] UKHL
6. D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10
7. Goolesby v. Koch Farms, LLC, So. 2d, 2006 WL 29232
8. https://www.lawcjb.com/breach-of-contract-claims-in-construction-cases-2/#:~:text=In%20construction%20cases%2C%20breach%20of,general%20principles%20of%20contract%20law.
9. 814 N.E.2d 288, 296 (Ind. Ct. App. 2004).

damages are to be calculated on the principles of Foreseeability and reasonability which allows the breaches to be covered that arise naturally and backed by “probative evidence”

The damages therefore should be calculated as per the loss in value that have risen naturally through the defective workmanship as direct form of damages wherein Gregor can recover the final value of the product if it had been constructed without defects and the real construction created and the cost that Gregor would require to invest in repairing the entire wall to rectify the foundational defects as held in Sanborn Electric Company v. Bloomington Athletic Club, 433 N.E.2nd 81, 87 (Ind. Ct. App. 1982). Thus, as Oliver Wendell Holmes. Jr. Claimed that irrespective of the reason of the breach, the damages should be measured according to the cost of breach.

It has been established that Finn breached his duty of care towards Gregor and he must be compensated for the foundational cost, replacement and demolition cost for a construction from scratch. Secondly, the crumbling of the wall also led to tremendous personal loss for Gregor has his privacy was at stake which resulted him to lose an employment opportunity and his reputation was under attack. Hence, this makes the builder all the more liable for such work. In the case of Lyons v Jandon Constructions (1998), the court held that damages were to be paid for the defective work but mostly the damage were to be calculated for the entire damages for reconstruction as the entire building has a risk of collapsing in the future.

In the case of Belgrove v. Elridge, it was also upheld by the judge that the calculation of the damages would also be done in consonance with the prior value and whether such has been properly constructed as per the plans and specification as entered into, this could create a difference in the value of the damages to be awarded. Even though, the plaintiff had brought forward arguments whether the rectification of the work was necessary or reasonable, which was

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10. CJB Attorneys, 2012, “ Breach of Contract claims in construction cases” < https://www.lawcjb.com/breach-of-contract-claims-in-construction-cases-2/#:~:text=In%20construction%20cases%2C%20breach%20of,general%20principles%20of%20contract%20law. > accessed on 25th March, 2021
11. Ibid
12. Farnsworth, E. Allan (Edward Allan), 1928-2005. Farnsworth On Contracts. New York :Aspen Law & Business, 1998.
13. Supra 11
14. Lyons v Jandon Constructions (1998) WASC 224

upheld by the judge claiming the defect was such that the entire demolition was a must and thus held reasonable as well as necessary.

However, applying the same principles in the position of Gregor, it must be remembered that the defect in work is reasonable to be rectified through the calculation of the damages as a way of restoring the position of the aggrieved party. For construction industry many legislations have been drafted like the Home building Act, 1989 as S.106 of the Housing, Grants, Construction and Regeneration Act, 1996 does not accommodate “residential occupiers”, thus the breach in contract for such contracts may either be governed by negligence or the English Contract Law.

Question 2:

The position of Frankie exhibits that he had contracted with Ascot car services to avail their chauffeur-driven premium car services to attend the horse racing event held by Royal Ascort. He had advanced £150 for the service as well which determines the consideration for the contract. Unfortunately, due to the rise in covid cases, the event was cancelled but the car service denied to refund back the advance made by Frankie as per the contract.

Meanwhile, Eugenie contacts ‘Mad hatter’, a hat designer, for a custom-made designer which she paid Euro 2500 in advance. Prior to a day to the Royal Ascot Event, the organizers announced the cancellation of the event informing that there was a rise in the number of coronavirus cases and it would not be feasible of the safety of public to gather at a place.

The Ascot service car as was according to the agreement, arrived to receive Frankie, despite the cancellation, where Frankie asked for refunding and the driver rejected. On the other hand Eugenie learned about the cancellation of the event and dialed up the Mad-hatter to cancel the making of her customized hat, to which they answered that it was too late to cancel the order.

Thus, In this case, Frankie does not need the car services any longer due to the intervention of a pandemic which was not premeditated neither was his individual choice, neither does Eugenie requires the designer hat any longer as the intended purpose becomes impractical. Thus, both Frankie and Eugenie can avoid the liability by claiming the Act of God defense or Force Majeure since both their contracts were breached as it was impossible for them to perform their obligations from their end.

An act of God can be considered to an extent that may lead to the frustration of a contract if the event becomes impossible to be conducted, preventing the party from performing their part of the obligation or hinders the party or causes sufficient delay to frustrate the contract. However, in this case, the “Impossibility” of the parties to uphold their part of the contract that ultimately “prevented” them from fulfilling their contracts.

However, the liability can be avoided since the breaches were controlled by an external factor and the contract may be considered frustrated under Law Reform (Frustrated Contracts) Act 1943 (Act). More so, because the intervention of Covid has made the contract impossible to be performed by both Frankie and Eugenie, thus discharging both of them from performing their duty. Thus, the money paid by Frankie as an advance must be refunded by Ascot car services as per S.1(2) of Law Reform (Frustrated Contracts) Act 1943 (Act) and conversely, following the same law, Eugenie is free from paying the contracted amount, as the contract is rendered frustrated.

Both Frankie and Eugenie can be considered that they were prevented from fulfilling their obligation in the light of the Act of God as was upheld in the case of I Tenants (Lancashire) Ltd v G.S. Wilson & Co. Ltd [1917] AC 495, the word ‘Prevent’ was aimed to explain such an unfulfillment of the contract. It was said that if ‘prevent’ was to prove by a party to the contract, the relevant party must intend to prove the impossibility of the act legally and physically and not mere non-profitability. As well as in, Seadrill Ghana Offshore Ltd v Tullow Ghana Ltd [2018] EWHC 1640, the court held that to prove the causation as force majeure, it should be the sole reason for such a prevention.



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15. Waide, A & Eikhhoff , C , ( 2020) Alston & Bird, “Litigation Advisory: Is the COVID-19 Outbreak an “Act of God”? Why It May Matter for Your Contracts, < https://www.alston.com/en/insights/publications/2020/03/is-the-covid-19-outbreak-an-act-of-god/ > accessed on 25th March, 2021
16. Jones, P, Farrer & Co., “ Coronavirus: Contracts, Cancellations, Chaos”, < https://www.farrer.co.uk/news-and-insights/coronavirus-contracts-cancellations-chaos/# > accessed on 25th March, 2021

Take a deeper dive into Analyzing the Doctrine of Frustration with our additional resources.

REFERENCES

Internet sources

• Ashurst, (2019), “Terminating contracts under English Law”, < https://www.ashurst.com/en/news-and-insights/legal-updates/terminating-contracts-under-english law/#:~:text=If%20the%20contract%20stipulates%20that,will%20be%20a%20repudiatory%20breach. >accessed on 24th March, 2021
• CJB Attorneys, 2012, “ Breach of Contract claims in construction cases” < https://www.lawcjb.com/breach-of-contract-claims-in-construction-cases-2/#:~:text=In%20construction%20cases%2C%20breach%20of,general%20principles%20of%20contract%20law. > accessed on 25th March, 2021
• Waide, A & Eikhhoff , C , ( 2020) Alston & Bird, “Litigation Advisory: Is the COVID-19 Outbreak an “Act of God”? Why It May Matter for Your Contracts, < https://www.alston.com/en/insights/publications/2020/03/is-the-covid-19-outbreak-an-act-of-god/ > accessed on 25th March, 2021
• Jones, P, Farrer & Co., “ Coronavirus: Contracts, Cancellations, Chaos”, < https://www.farrer.co.uk/news-and-insights/coronavirus-contracts-cancellations-chaos/# > accessed on 25th March, 2021

Book

• Farnsworth, E. Allan (Edward Allan), 1928-2005. Farnsworth On Contracts. New York :Aspen Law & Business, 1998

Cases

• Lombard North Central plc -v- Butterworth [1987] QB 527 CA.
• Bellgrove v Eldridge [1954] 90 CLR 613
• Radford v de Froberville [1978] 1 All ER 3
• Ruxley Electronics and Construction Ltd v Forsyth [1995] UKHL
• D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10
• Lyons v Jandon Constructions (1998) WASC 224
• Goolesby v. Koch Farms, LLC, So. 2d, 2006 WL 292327
• Whitaker v. Brunner 814 N.E.2d 288, 296 (Ind. Ct. App. 2004).

Introduction

Equity intervenes when payment of damages does not serve as adequate remedy in case of breach of a contract. Such intervention is in the form of a court order of specific performance against the defendant to perform their contractual obligations. Such order will also be made to confer benefits on a third party. This essay will explore the circumstances under which a court makes this order.

How Courts grant specific performance?

An order of specific performance is granted only when it is the only option that could deliver justice. The power to issue the order of specific performance is discretion exercised by the court to do justice in absence of an adequate remedy at common law. The order of specific performance is rarely granted and under unique circumstances. It will not be granted where a more appropriate remedy, which may be damages, is available.

There are certain situations where specific performance is the only appropriate remedy. Specific performance is not generally available as a remedy for breach of contract. Special circumstances or reason will call for the order of specific performance. For instance, in the sale of land, order of specific performance may be granted as land is deemed unique and there cannot be an identical market alternative. In Sudbrook Trading Estate Ltd v Eggleton, an option was granted to purchase reversion conferred on lessees under certain leases. On this contention Lord Diplock ruled that damages was not wholly inadequate. Since it would be unjust remedy, the appropriate remedy is a decree of specific performance. Specific performance has, therefore, been suited for contract for sale of land, as damages even if substantial, cannot offer the same market value attached to a single piece of land. However, this may not mean that it is always appropriate. This is supported by the case of Wroth v Tyler, where the court refused specific performance of contract for sale of land as it considered unreasonable in the circumstances. In this case, the contract price was 6,000 pound, at the date of the breach it was 7,500 pounds, and at the date of the order it was 11,500 pounds. Megarry J ruled that the court could award such damages, which extended to 5,500 pounds, to put the plaintiffs into as good a position as if the sale contract had been performed. This resonated with the purpose of specific performance.

Take a deeper dive into Analyzing the Doctrine of Frustration with our additional resources.

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1. Hutton v Watling [1948] Ch 26; affd [1948] Ch 398
2. Beswick v Beswick [1968] AC 58.
3. Wilson v Northampton and Banbury Junction Rly Co. (1872) LR 14 Eq 477; (1874) LR 9 Ch App 279.
4. Co-operative Insurance v Argyll Stores [1997] 3 All ER 297 at 301.
5. Christian Twigg-Flesner, The Europeanisation of Contract Law: Current Controversies in Law (Taylor & Francis 2013).
6. Open University, Chapter 23: Specific performance (Oxford University Press, 2020).
7. Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444, at 478.
8. Ibid.
9. Terence Ingman, The English Legal Process (Oxford University Press 2011).
10. Wroth v Tyler (1974] Ch 30.

The question regarding the order of specific performance is to determine the circumstances that make a remedy adequate or inadequate. There are different circumstances, where the court has issued the order. For instance, in case of inability of the defendant to pay damages, difficulty to prove loss, or of statutory right, for example Landlord and Tenant Act 1985, s 17 requiting landlord to repair. The issue of order of specific performance, as it appears, is not only confined to substituting inadequate damages. It has an economic reason attached with principle of justice or notion of convenience. As for economic reason, the case of RVB Investments Ltd v Bibby is a good example where the court issued the order of specific performance requiring the insolvent surety to complete a lease. In this case, the local authority was pursuing claimant landlord for non-domestic rates. Howver, it would pursue the surety instead if it took the lease. As for justice, the case of Wroth v Tyler mentioned above is a good example where the order would not have been appropriate in these circumstances. As for convenience, the case of Airport Industrial GP Ltd v Heathrow Airport Ltd is a good example where convenience seems to have driven the order of specific performance. In this case, the order was pleaded in anticipation of a contractual breach to secure performance. Claimant anticipated the tenant would not complete the contracted multi-storey car park within the deadline, which would cause significant reduction in its financial return and maybe insolvency. The court while determining specific performance conducts a balancing act considering the circumstance of the case. Such a balancing act could be seen in cases where its constant supervision is required. Thus, in case of contractual term, which is continuing in nature, as occurred in Ryan v Mutual Tontine Westminster Chambers Association, where lessor was need to appoint a porter who would be constantly present, the court would order damages instead. However, later judgments ruled otherwise and sited that difficulty in supervising cannot be the reason to reject the order. As such, the change in the ruling of the court suggests the determining the order is subject to the current circumstances, which may be economic, convenience, justice and not just inadequate damages. It is a standard principle that in presence of a more appropriate remedy, order of specific performance will not be granted. Thus, in case an inferior remedy does justice, a superior remedy will not be granted. Thus, if the goods are ordinary items, which can be compensated with damages, the order is not needed. However, if they are unique or rare, the order may be granted. Thus, in Sky Petroleum Ltd V VIP Petroleum Ltd, the court passed an interlocutory injunction to prevent the defendant from cutting off the supplies of petrol to a garage when there was no other alternative.

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11. Evans Marshall & Co v Bertola SA [1973] 1 All ER 992.
12. Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361.
13. RVB Investments Ltd v Bibby [2013] EWHC 65 (Ch).
14. Ryan v Mutual Tontine Westminster Chambers Association [1893] 1 Ch 116, CA.
15. Terence Ingman, The English Legal Process (Oxford University Press 2011).
16. Ibid.
17. Sky Petroleum Ltd V VIP Petroleum Ltd [1974] 1 All ER 954.
The order of specific performance is an equitable remedy. This means “he who seeks equity must do equity” and “he who comes to equity must come with clean hands”. Thus, the claimant must act equitably if they seek of specific performance. In Walters v Morgan, the order was refused as the claimant took advantage of defendant’s ignorance of the value of property.

Conclusion

Adequate remedy in respect specific performance is beyond merely performing the contractual obligation. It is determined by the facts and circumstances surrounding the case. The notion of justice and economic and administrative convenience has expanded the concept of adequate remedy. Thus, specific performance could be stated to be drive by the maxim that if the claimant seeks equity, he must do equity and come with clean hands.

18. Richard Stone, The Modern Law of Contract (Cavendish 2005).
19. Walters v Morgan (1861) 3 DF & J 718

Bibliography

Books

Ingman T, The English Legal Process (Oxford University Press 2011)

Open University, Chapter 23: Specific performance (Oxford University Press, 2020)

Stone R, The Modern Law of Contract (Cavendish 2005)

Twigg-Flesner C, The Europeanisation of Contract Law: Current Controversies in Law (Taylor & Francis 2013)