The Facts

The Defendants, Charles Julian Crispin and Zhang Ya Yu (“Mr & Mrs Crispin”), were based in China, but prepared to relocate to the UK by purchasing the property in 2009 in Sevenoaks, Kent. Mr & Mrs Crispin planned to carry out substantial works to the property (including a multi-storey extension, a loft conversation and the addition of a patio and driveway) and, following a tender process, entered into negotiations with Malcolm Charles Contracts Limited (“MCC”), which had tendered for £518,739.25.

Mr & Mrs Crispin appointed Mr Richard Elliott (“Mr Elliott”), an architect who acted as project administrator, and instructed him to seek out opportunities for savings and agree a reduction in MCC’s scope of work. After further discussions, a revised price schedule in the sum of £369,861 was prepared and submitted by MCC.

Mr Elliott sent a blank copy of the proposed contract, JCT Standard Form of Building Contract for a Home Owner/Occupier Who has appointed a Consultant to Oversee the Work, 2005 (“JCT HOO”), and described it to Mr Crispin as “the proposed contract as agreed”.

At a pre-contract meeting was held on 9 August 2011 and attended by Mr and Mrs Crispin, MCC and Mr Elliott. Minutes of the meeting recorded that the parties agreed a contract on the basis of the JCT HOO at a price of the £369,861 with a commencement date of 9 September 2011 (which was moved to 12 September 2011) for a contract duration of 33 weeks. The minutes were circulated to Mr and Mrs Crispin on 11 August 2011 but they did not challenge the accuracy of what was recorded.

Mr Elliott sent corrected version of the contract document, including the completed JCT HOO, to Mr and Mrs Crispin on 30 August 2011. There followed on-going discussions between the parties on the start date of the works (12 September 2011) which culminated in the delivery of the house keys to MCC on 7 September 2011 at a pre-start meeting.

On 8 September 2011, MCC attended the site to survey structural steelwork and during the weekend of 9-11 September 2011, MCC undertook temporary plumbing works and deliver plants and materials to site.

On 11 September 2011, due to changes in their financial situation, Mr Crispin notified MCC and Mr Elliott that various contractual details were yet to be ironed out and that they did not wish to proceed with the works.

The adjudication

On 2 September 2012, MCC claimed for breach of contract and its abortive costs but Mr and Mrs Crispin made no payment. MCC referred the dispute to adjudication. The adjudicator determined that MCC was entitled to damages of £104,852.88, representing costs thrown away and lost profit as a result of the cancellation of the building contract.

Mr and Mrs Crispin failed to pay the sum awarded in the Adjudicator’s decision and 18 July 2014, MCC commenced enforcement proceedings in the TCC, which eventually went to full trial.

The Arguments

At trial, Mr and Mrs Crispin argued that the adjudicator lacked jurisdiction and contended that they had never entered into a contract, meaning the contractual adjudication scheme did not apply and, given that statutory adjudication does not apply in the case of a contract with a residential occupier, there was no basis for adjudication. Mr and Mrs Crispin argued, amongst other arguments, that the minutes of meeting held on 9 August 2011 did not accurately record the discussions between the parties and that since there was still on-going negotiations between the parties on the contract sum, the price was not agreed, no contract was entered between the parties.

The Judgment

Carr J reviewed the law on the formation of contract and quoted the following passage from the Supreme Court decision in RTS v Molkerei Alois [2010] BLR 337, which provide that the court must apply the “objective” test:

"The Principles

45. The general principles are not in doubt. Whether there is a binding contract between the parties and if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement."

Carr J concluded that when looked at objectively, the words and conduct of the parties at the pre-contractual meeting on 9 August 2011 resulted in a binding contractual agreement, the terms of which were accurately evidenced by the minutes of the meeting. The Judge held that the recorded minutes contained the essential terms of the contract which included the scope, commencement and completion dates, contract sum and payment mechanism. The Judge also noted that Mr and Mrs Crispin’s failure to challenge the accuracy of the minutes at the material time.

The court acknowledged that since the parties carried out lengthy negotiations the court must “look at the whole correspondence and decide whether, on its true construction, the parties had agreed to the same terms” and that if the court was wrong on the above conclusion, then, in the alternative, a binding agreement on the JCT HOO terms was concluded upon the handing over of keys to MCC on 7 September 2011. Accordingly, the court held that adjudicator had jurisdiction and his decision was upheld.

Furthermore, the Judge pointed out that “there may be circumstances where the parties make it clear that, although they have agreed all the terms necessary for the making of a binding agreement, they do not intend their agreement to become binding until they have gone one step further, and embodied it in a formal document” and that at no stage did Mr and Mrs Crispin use the phrase “subject to contract” in the ensuing negotiations to make their position clear.