Lessons from Failure: Have a Contract Strategy

On a simple house refurbishment project in Putney, London, Mr & Mrs West ended up with an extended house with no proper waterproofing, serious defects in the plumbing and all the newly installed M&E services needing replacing. Disaster!

When planning and creating their contracts that the clients were failed by both their architects who should have done more to create simple effective appointments.

Appointment 1: unsigned

A childhood friend initially advised the Wests about how to refurbish their newly-bought property. His estimates of the likely cost of the work involved, which the Wests relied on when buying the house, were woefully inadequate. More than six months’ after his first involvement with the project, the Wests decided against continuing to use his firm’s services.. “By this time the Wests had still not received terms of engagement from Foundation Architecture...”

No signed contract? No agreed terms? No agreed fees? Definitely a recipe for an unhappy client.

Appointment 2: unclear

The Wests were then introduced to Mr Finlay and emphasised their priorities again which were “the fundamental damp, structural and services work which would only make sense to do “once” as part of this major renovation“.

3 months later the Wests and Mr Finlay signed a formal engagement. It limited the architect’s liability to £1m, 6 years from completion and to his net contribution.

A signed contract! Agreed terms! Agreed fees! Unfortunately, the TCC judgment records:

Mr Finlay took no steps to explain what this paragraph meant, if, indeed, he understood it himself… he said that he did not think that this was a clause limiting his liability, although when it was pointed out to him that the £1 million limit was not much over half the cost of the house, he accepted that there could be circumstances in which the clause might limit his liability to his client. Mr West said in his witness statement that he and his wife did not consider this clause at the time and therefore did not appreciate its effect…”

What on earth is the use of a contract that neither of them have read or understood? Mr Finlay accepted that ‘there were no material circumstances in which the [net contribution clause] could operate for the benefit of the Wests.’ The architect has created a monster!

Contracts Fit for Their Purpose

Properly written, contracts safeguard your business without annoying your client (or the court). They also build trust:

In the context of a domestic building contract, the emotional commitment of the employer is invariably high and so the demands on the contractor and architect are correspondingly increased: the maintenance of good relations between employer, architect and builder is therefore crucial.

What should you do?

Sign simple effective appointments.

Case: West & Anor v Ian Finlay & Associates (a firm) [2014] EWCA Civ 316 (27 March 2014). See also West & Anor v Ian Finlay & Associates (A Firm) [2013] EWHC 868 (TCC). If you want to see whether I think standard contracts are fit for their purpose, see my article in CICES Annual Law Review.

 

 

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