Cases - Cunningham v Collett & Farmer

Record details

Cunningham v Collett & Farmer
EWHC 1771 (TCC)
Tendering and procurement

The claimants, the owners, alleged that the defendant architects had been negligent in advising the use of the then current edition of the JCT Minor Works (MW) contract for use on the refurbishment of a large Georgian mansion. The JCT guidance notes suggested that the MW form was suitable (in 2002) for works with a value up to £100,000, whereas the owners' budget was £500,000 and the lowest tender over £600,000. The judge held that there was 'nothing intrinsically wrong with the choice of MW 98 for the project' and that he had 'always regarded the comparative brevity of the Minor Works form, and the clarity of its terms, as giving it a major advantage over a number of other, rather more prolix standard forms of building contract issued by the JCT'. Overall:

'The recommendation of which standard form of building contract should be used for a particular project will usually come down to the consultant's personal preference and his previous experience. Such a subjective basis for choice seems to me to be entirely reasonable: if, as a contract administrator, a professional person likes and understands the way a particular standard form works, then, unless there is a very good reason why he should not use it in a particular instance, it seems to be to everybody's advantage if he recommends that form for use on his projects.'

The judge also rejected the claimant's criticism that there were insufficient tenderers: in the circumstances 'the defendants acted quite properly in seeking five, and ending up with three, prospective tenderers'.

The claimants had also alleged that the defendant architects had been negligent in utilising a letter of intent. HH Judge Coulson distinguished between two types of letter of intent. The first type, the letter of intent 'properly so-called, is a document which expresses an intention on the part of party A to enter into a contract in the future with party B, but creates no liability in regard to that future contract. It is expressly designed to have no binding effect whatsoever'. By contrast, the second type, the commonest in the modern construction industry, are 'expressly designed to give rise to some, albeit limited, reciprocal rights and liabilities'.

It was the second type which had been utilised in this case. The judge saw the main problem with such letters of intent as a practical one:

'... once they have been sent, and the contractor has started work pursuant to that letter of intent, all those involved, including the professional team, can easily take their eye off the ball and forget about the importance of ensuring that the full contract documents are signed as quickly as possible. ... very often, something goes wrong on site and, in the absence of a full contract to regulate the parties' rights and obligations in such circumstances, the result is confusion and acrimony.'

He criticised the use of the letters of intent 'issued in the hope that, once the work is underway, potentially difficult contract issues will somehow resolve themselves. They are plainly not appropriate in such circumstances'.

However, he did not agree that the letters of intent are, as a matter of principle, almost always inappropriate: 'There will be times when a letter of intent is the best way of ensuring that the works can start promptly, with a clear timetable both for the finalisation of the contract formalities, and for the carrying out of the works themselves.'

The judge gave guidance on when a letter of intent might properly be used, i.e. where:

  1. the contract workscope and the price are either agreed or there is a clear mechanism for their agreement;
  2. the contract terms are, or are very likely to be, agreed;
  3. the start and finish dates and contract programme are broadly agreed;
  4. there are good reasons to start work in advance of the finalisation of all contract documents.

In the result, the use of the letter of intent was not negligent on the part of the defendant architects.