No written contract? Contractors' liability to complete works in a reasonable time

In the recent case of Barkby Real Estate Developments Limited v Cornerstone Telecommunications Infrastructure Limited [2022], the Technology Construction Court (TCC) held a contractor liable to its employer for its failure to complete works within a "reasonable time" pursuant to section 14 of the Supply of Goods and Service Act 1982.

The case is an important reminder that, even without entering into a formal written contract, contractors are still likely to be under an implied obligation to complete works within a reasonable time.

Background

The claimant, Barkby Real Estate Developments Limited ("Barkby"), had enlisted the defendant ("Cornerstone") to assist with the removal, replacement, and eventual relocation of a mobile telephone mast at a development site on Bexhill Road, Hastings. 

Ultimately, the purpose was to improve the visibility for vehicles leaving the development site as the mast was considered an obstruction. However, there was no formal written contract between the two parties. 

Cornerstone finalised its original foundation blueprints for the mast relocation at the end of March 2019, but required a redesign due to inadequate ground conditions discovered after works had commenced - resulting in a delay to the completion of around five months. 

The works were completed on 7 August 2020, with practical completion of the development taking place on the same date. Such delays were said to be incurred by Barkby due to inadequate ground conditions. 

Barkby claimed that without delay in the completion of works on Cornerstone's part, the development would have been completed and, thus, handed over to the purchaser by June 2020. 

As a result, Barkby then went forward with the recovery of finance costs and other losses that were said to be a result of the delay in the handover of the development. 

Terms of contract

Even though there was no formal written contract between the parties, the court found there to be a binding agreement existing which had been formed on 5 September 2019. 

This occurred when Cornerstone acknowledged receipt of Barkby's payment following its acceptance of a quote and follows the simple principles of English contract law. 

At paragraph 76 of the judgment, it was further held that in the absence of any express terms as to when performance should occur, there is to be implied into the contract, by operation of section 14 of the Supply of Goods and Services Act 1982, a term that the "supplier will carry out the service within a reasonable time".

"(76)(1) Where, under a [relevant contract for the supply of a service] by a supplier acting in the course of a business, the time for the service to be carried out is not fixed by the contract, left to be fixed in a manner agreed by the contract or determined by the course of dealing between the parties, there is an implied term that the supplier will carry out the service within a reasonable time."

Reasonable time

The court examined events that occurred during the build phase of the works. It concluded that but for the five-month delay, which was attributable to inadequate ground conditions, Cornerstone would have completed its work by the end of March 2020 as initially expected, rather than on 7 August 2020.

As to responsibility for the ground conditions, the court held that the original design of the foundations was inadequate. Having heard expert opinion evidence, it agreed that the designer should have arranged for a geotechnical survey to be carried out before finalising the design. 

A geotechnical survey consists of gathering information about the physical characteristics of the soils and rocks that make up the land. Cornerstone did not do this, so it had to redesign the foundations, which delayed the works. 

In support of its ruling that the contractor had failed to carry out its works within a reasonable time, the court also highlighted:

• Cornerstone gave no explanation as to why it took an extra five months to resolve the issues that had been identified with the initial design.
   
• The delays were compounded further. For example, when ordering a replacement mast, Cornerstone allowed this to be used on another site, preventing the site from being connected to power. 
   
• Cornerstone had also allowed a contract for fibre supply to lapse, creating a further delay.
   
• Cornerstone had 50 different contracts on the go at the time of contract and had failed to prioritise this project appropriately.

Damages and the remoteness of damages

It was held that Cornerstone was responsible for the approximate 5-month delay in completing its works, which was critical in impacting the date for handover from Barkby to the developments purchaser. 

Cornerstone had also been made aware by Barkby of the time constraints surrounding the build contract and that the works regarding the mobile telephone mast had a direct impact upon them achieving completion as a whole. 

Barkby claimed that the delayed sale of the development meant that the company was unable to redeem a loan within the timeframe, resulting in the company incurring additional fees and interest on the said loan. It was also claimed that Barkby also incurred additional management costs that were never envisaged. 

Having adjudged that Cornerstone was responsible for the delays, the judge also held that the developer was entitled to recover most of its additional financing costs and all the additional management costs. Had it not been for the contractor's delayed completion, these costs would not have been incurred. 

Cornerstone did try to argue that the losses were too remote to be recoverable. Such submission was rejected in that knowledge on the part of the defendants of the exact details surrounding the claimants financial arrangements was not deemed necessary. 

It was enough, in the eyes of the court, that there was the likelihood that Barkby would cease to have the ability to pay off the financing that was connected to the completion and, in turn, sale of the development. 

Concluding remarks

In the absence of a formal written contract, contractors should be aware and reminded that they are still likely to be under an implied obligation to complete works within a reasonable time. 

This case illustrates the importance of works being progressed efficiently and quickly to meet their employers' objectives. It should also be noted that where issues are identified, contractors should work with reasonable expedition to resolve them and ensure no delays occur. 

Should the employers not meet their objectives, then, as this case shows, there is likely to be found a level of responsibility on the contractor's part. 

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