Practical Law

…what should I do?

Unfortunately, if you have simply entered into a bad bargain, the law does not automatically step in to help you.  However, all may not be lost…

The courts may help

In Traditional Structures v HW Construction, the court found that the tendering party had made a unilateral mistake.

To keep the facts as simple as possible, let’s say that:

• The party tendering for two packages of work on a construction project sent a fax that included the pages that related to just one package.
• That package of work was worth about £35,000, with the job overall worth about £70,000.
• The fax was supposed to refer to both packages and supposed to give the overall figure of £70,000 for the whole job.
• Because of the circumstances around the fax (including other correspondence between the parties), the party who received it argued that the parties had a contract for £35,000, to perform both packages of work.

The parties couldn’t agree a way out of their situation: one wanted to pay £35,000 for the whole job, the other wanted £70,000 for completing it. Their dispute ended up in court.

The court rectified the contract, rewriting it to include a higher price. The court ruled that the party that argued it had accepted a £35,000 tender for the whole job must have, or should have, realised that the tender could not relate to both packages of work. That party had “wilfully and recklessly failed to enquire” whether £35,000 was the right price.

Unilateral mistake is, in some senses, an unusual branch of the law. Often, the courts take a purely objective view of a contract (for example, when determining whether a contract includes an implied term). However, for unilateral mistake, the court looks at the matter subjectively.

So, if you have made a mistake, you may be able to turn to the courts for help. However, it may be difficult to marshall your evidence to prove that there was a mistake (you must show the mistake, and that the other party knew of the mistake) and the courts will not help you, if you have simply got yourself into an unprofitable contract.

However, the contract may hinder

You may find that you cannot recover from some mistakes, because the contract you have entered into sets out what is to happen. For example, clause 2.14.4 of the JCT Standard Building Contract, With Quantities, 2005 edition, Revision 2 2009 states:

“Any error in description or in quantity in the Contractor’s Proposals or in the CDP Analysis or any error consisting of an omission of items from them shall be corrected, but there shall be no addition to the Contract Sum in respect of that correction…”

While an omission from a contract bill in the contractor’s proposals might sometimes lead to a small loss, it could also be significant. Significant costs are most likely where the error relates to an item that is repeated often: for example, quoting the wrong price for one square metre of flooring when the contract requires 5,000 square metres of flooring.

Looking at previous court decisions, a lawyer might refer to Dudley Corporation v Parsons and Morrin Limited (1959, Court of Appeal, unreported) to support an argument that even a significant mistake in bills of quantities cannot be rectified. Henry Boot Construction v Alstom Combined Cycles, which refers to the ICE Conditions of Contract, 6th edition, may bolster this view.

In other words, don’t argue that you have made a mistake (and expect the court to rectify that mistake) without thinking about the terms of your contract.

Be honest

Whatever the terms of your contract, the most practical advice is usually to be open and honest about a mistake, and to seek a commercial solution. If a commercial solution is not possible, and dispute resolution is your only answer, having an open and honest paper trail can certainly help you prove your case, so keep good records. Despite this, there is a risk that, even with good records, you have assumed the risk of your own mistake under the contract.

In Traditional Structures, the court criticised one party’s conduct. It’s never a nice experience to be censured in a High Court judgment, and your commercial reputation may suffer. In that case, the party who was criticised also lost the case, so trying to take advantage of a mistake may end up costing money, not saving it. Always remember that the courts are not there to protect businesses from bad bargains. You can still be the author of your own commercial misfortune.