Barrister, Professor Rudi Klein, looks at a recent case where a subcontractor realised his tendered price was half of what it should be.
Basis of the dispute
This was a case in the Birmingham Technology and Construction Court. It arose out of a sub-contract for the supply and installation of constructional steelwork and roof cladding in connection with certain works at the Birmingham Metropolitan College in Sutton Coldfield. The subcontractor was Traditional Structures Ltd (TS). The main contractor was HW Construction Ltd (HWC).
HWC had invited TS to submit a quotation for the steelwork and roof cladding in accordance with a specification provided by structural engineers. A quotation was duly submitted as follows:
“For the supply and delivery of structural steelwork and
claddings……our budget prices would be:
Steelwork £37,573.43 + VAT
Terms: The above prices are Nett.”
For reasons that were not clearly explained this quotation omitted the price of the ‘claddings’, which were £32,365.83 + VAT. A copy of the tender retained by TS included the price for the roof cladding.
HWC must have thought that it had won the lottery and gladly accepted the quote. Not surprisingly, TS wasn’t so ecstatic when it tried to claim payment for the roof cladding. It was bluntly informed by HWC that the quoted price was for everything including the cladding. Hence the court case.
The problem for HWC was the evidence given by its managing director. He repeatedly claimed that it was his honest belief that the quoted price included the roof cladding. In fact in various emails to TS he had avoided mentioning the price. For example, he sent the following email to TS after he received confirmation of the award of the main contract:
“We would therefore ask you to accept this email as our order to you to supply and fit the steelwork and roof cladding as per your quotation….”.
In a subsequent email exchange he claimed that he had received other prices which were ‘just above’ that submitted by TS. At the trial this claim was found to be wholly untrue.
On the other hand the subcontractor was able to produce its version of the tender and had challenged the main contractor as soon as the mistake had been discovered.
The legal issues
It was plain that TS had made a massive mistake. Both sides accepted that a contract had been concluded. But HWC said that the contract was for both steelwork and roof cladding at the price originally submitted. Legally there were two options available to TS. They could:
- seek rectification of the contract by asking the court to, in effect, amend the contract retrospectively by inserting the price for the cladding or, alternatively;
- claim a reasonable price for the roof cladding.
What did the judge decide?
The judge decided that the sub-contract would be rectified by adding the missing last line – containing the cladding price – to the tender. In the judge’s view it was clear that HWC was fully aware that a mistake had been made by TS. Even if HWC’s MD had no actual knowledge of the mistake it was sufficient either that he had wilfully and recklessly failed to inquire of TS whether the price of £37,573.43 + VAT related to both the structural steelwork and the cladding elements or that he had simply shut his eyes to the obvious – the obvious being that the price quoted could have only been for the structural steel work and not the cladding. Moreover his behaviour was tantamount to sharp practice and went beyond the boundaries of fair dealing.
The alternative approach was to find that there was no express agreement on the price for the cladding work. In the judge’s view – save for an express term for the price of the cladding work – everything had been specified in sufficient detail for the parties to conclude a contract. Section 15(1) of the Supply of Goods and Services Act 1982 required that reasonable sum must be paid where a contract for the supply of work and materials fails to fix the price. The parties agreed that a reasonable price for the cladding work as completed was £34,754.17.
It should not be assumed that in every case where you have made an error in your tender you have a legal right to correct the error. You can, of course, withdraw your tender before acceptance in the event you discover an error in time. But it is perfectly possible for the other person to accept your tender without realising that a mistake had been made. But where it is plain for all to see that a mistake has been made the other party cannot claim to have accepted your tender – because, in reality, it is not your true tender. In this case there would be no concluded contract. In Traditional Structures Ltd v HW Construction Ltd the subcontractor had accepted that there was a concluded contract. Presumably this was based on pragmatism since the work had been completed; it would have been rather more complicated to argue that there was no contract and therefore everything would have to be re-valued to ascertain a reasonable price.