Agree terms before starting construction work

With time pressures on project delivery, getting the contract agreed before works start is a recurring issue in the construction industry. In the recent case of Balfour Beatty Regional Construction Limited v Van Elle Ltd [2021] EWHC 794, the Technology and Construction Court (TCC) held that works carried out by a sub-contractor before a sub-contract was executed were still subject to the terms of that sub-contract.

In the case, the main contractor (Balfour Beatty) engaged a sub-contractor (Van Elle) to perform pilling works. One section of the piling works was carried out by Van Elle prior to the parties signing a sub-contract.

After the piling works were completed, defects were discovered which required Balfour Beatty to carry out remediation works. Balfour Beatty claimed damages for breach of contract against Van Elle.

Van Elle argued that the completed piling works were not covered by the executed sub-contract but where instead governed by a contract based on its own standard terms and conditions included in the written quotation that Van Elle had previously issued to Balfour Beatty. Van Elle claimed that Balfour Beatty accepted Van Elle’s own standard terms and conditions by allowing Van Elle to commence the piling work.

The TCC had to decide whether the piling works were governed by the executed sub-contract or by Van Elle’s own standard terms and conditions.

Based on an assessment of the documentary evidence, it was concluded that the parties had intended for there to be only one contract. Significantly, on several occasions Van Elle requested a letter of intent and was not content to proceed with the works based on the quotation, a quotation which they later argued formed the basis of a contract.

The TCC held that the sub-contract governed the piling works, even the  piling works carried out before the parties signed the sub-contract.

Following this decision, contractors, sub-contractors and consultants should determine at the beginning of a construction project the terms upon which work is to be carried out.

For employers who need to commence works under a letter of intent before a contract is finalised, an interim contract such as a companies own standard terms and conditions is likely to be superseded by any executed contract.