News and Insights

Murray v Camerons Limited [2020] JRC179

This significant construction claim resulted in an important judgment that clarifies the Jersey position on contract law and whether the test of consent is objective or subjective.

The contractual dispute

The Court was tasked with determining whether or not a contract existed between the parties and, if there was a contract, the terms of that contract and the financial consequences which flowed from those terms.

The first phase of the project was governed by a typical JCT construction contract[1] which was entered into by the Plaintiff and Defendant, to enable the Defendant to commence certain identified enabling works (the “Enabling Works”). The second phase would also be governed by a further JCT contract to be entered into once the Enabling Works were concluded. This contract would govern the terms relating to the build of the house (the “Main Works”).

Although it was acknowledged that the parties had intended to enter into the further JCT Standard Contract, no further contract was in fact entered into and without an official agreed contract, the parties disagreed as to which documents set out the terms of agreement between them. 

The Plaintiff relied on a signed letter of intent (the “Letter of Intent”), which the Plaintiff had sent and which he said formed the agreement between the parties in relation to the Main Works. On the other hand, the Defendant claimed the Letter of Intent had been varied by certain variations which had been recorded in several subsequent emails between the parties (the “Emails”). The Defendant argued that the Emails qualified the Letter of Intent so that it was governed by the terms of the JCT Standard Contract and, accordingly, the Plaintiff should be stopped from denying the Defendant’s entitlement to payment in accordance with the terms of a JCT Standard Contract.

Discussion

The Court considered the Letter of Intent and the Emails to determine whether a valid contract had been formed between the parties. In making this decision, the Court took the opportunity to set out the principles to be applied for parties who may be faced with a similar contractual dispute.

These principles can be summarised as follows:-

1. The Letter of Intent was an informal document not prepared by professionals and therefore greater emphasis had to be placed on the factual matrix.
2. The constituent elements of a Jersey contract are well understood and require consent, capacity, an objet[2] and a cause[3].
3. The test for determining contractual consent is an objective test.
4. The objet of a contract is the content of what a party undertakes and it must be sufficiently certain. Neither an agreement to agree nor an agreement to negotiate are enforceable on this basis.
5. The law in relation to Implied Terms of a contract was well established and set out in the Jersey case of Grove and Briscoe v Baker[4].
6. The Defendant argued that if it was not entitled to be compensated in line with the JCT Contract, it should be entitled to claim damages pursuant to quantum merit/unjust enrichment. The court confirmed that for unjust enrichment to apply the test set out in the leading case of Flynn V Reed[5] must be met.

Judgment

After discussion of the above principles, and more importantly applying the objective test, the Court determined that it was clear that the Defendant intended, and the Plaintiff had agreed, to make the arrangements provided for in the Letter of Intent subject to the JCT Standard Contract.

The court found that the Plaintiff, in the light of the changed plans and specifications involved in the project after the Enabling Works, must have understood that the Defendant would not be willing to cap the cost of the Project and that these changes would result in substantial additional costs.

The Court looked at the parties’ actions to establish their intentions and determined that the parties’ acceptance of and adoption of, among other things, architect’s instructions, OHP and interim valuations and certificates meant that there was a contract between the parties on the terms of the JCT Standard Form.

As there was a contract between the parties after the first Contract for the continuation of the Main Works, the Defendant was entitled to be paid for its work on an agreed value basis, with OHP.

Takeaway

It is now clear that if there is ambiguity between the parties on what was contractually agreed, the court will determine matters by looking objectively at the actions of both parties: the subjective view of one party will not assist.

If you or your business have run into difficulties in relation to a contractual dispute, the Viberts Dispute Resolution team would be happy to advise and assist.

[1] Joint Contracts Tribunal (“JCT”) intermediate form of contract

[2] See point 4

[3] Jersey customary term – cause is akin but not identical to the English term of consideration,

[4] [2005] JLR 348

[5] [2012] (1) JLR 370