Starting works without a contract
In Mears Limited v Shoreline Housing Partnership Limited  EWHC 1396(TCC) a social landlord contracted with Mears to provide repairs and…
In Mears Limited v Shoreline Housing Partnership Limited  EWHC 1396(TCC) a social landlord contracted with Mears to provide repairs and maintenance services to its housing stock. The parties were to contract under an NEC3 Term Service Contract Option C which provided for a specified pricing mechanism. Before the contract was signed Mears, with Shoreline’s agreement, began delivering services to Shoreline. It did so for six months with over 12,000 small jobs undertaken but operating a different pricing mechanism to that provided for in the NEC3 contract.
When the contract was signed it had retrospective effect. It also contained an entire agreement clause which was intended to make clear that all areas of agreement between the parties were contained in the contract and no other form of agreement could be relied on. Shoreline realised at this point that the pre-contract pricing mechanism had not enabled it to achieve the costs savings it thought it would when agreeing to contract with Mears. It therefore looked to deduct £300,000 from future payment requests. Its reasoning was that Mears had not complied with the pricing mechanism under the NEC3 contract.
The Court held that Shoreline could not make the deduction. This was because there had been detailed discussions as to how to price the works prior to signing the contract. Both parties knew that what was being agreed did not reflect what would be in the final contract. On that basis, the Court held it would be unfair for Shoreline to go back on the agreement and to apply the deduction. The Court reached this conclusion despite the fact that the signed contract had an entire agreement clause. That is an interesting development as many will assume that having such a clause would prevent exactly this scenario from arising.
The decision shows that, whilst not always easy in practice, parties should not begin to work together until the contract is signed. If they decide to do so, then any alternative or interim method of working should be clearly agreed and documented. If this is not done then there will be uncertainty and potentially unwelcome consequences.