An agreement higher up the contractual chain than a building contract (such as a development agreement or an agreement for lease) can adopt a variety of terms to describe the developer’s or landlord’s main obligation in relation to the works. For example, it could be to “carry out” the works or to “procure” them or, simply, to “arrange for the carrying out” of them. The difference between such terminology can be crucial, especially where the agreement doesn’t spell out the parties’ specific obligations on matters such as design, materials and workmanship.
Previous case law
The term “procure”, like that of “ensure” or “secure”, imposes a strict obligation so that failure to secure the result amounts to a breach. As Peter Smith J said in Nearfield Ltd v Lincoln Nominees Ltd and others:
“…the normal meaning of the word ‘procure’ is to ‘see’ to it”.
“Arrange”, on the other hand is not so onerous. In Sweett (UK) Ltd (formerly Cyril Sweett Ltd) v Michael Wight Homes Ltd, HHJ Wildblood QC held that the word “arrange” was not the same as “ensure”. In the context of the case (did the employer’s agent have a duty to ensure that the contractor provided an executed performance bond?), “arrange” meant a duty to put in order the execution of the bond, not an absolute duty to ensure that it was executed.
A recent case
The issues are illustrated in the recent decision in Cometson and another v Merthyr Tydfil County Borough Council and another. The claimants owned property in Aberfan. The council arranged for repair work to be carried out to that and other properties. The claimants had no contract with the builder but sought damages for alleged breaches of the contract they said existed between themselves and the council in relation to the work. They argued that the contract contained a long list of implied terms, including that the works would:
- Be carried out in a proper and workmanlike manner, with reasonable skill and care and using goods or materials of satisfactory quality.
- Be completed within a reasonable time and without undue delay.
- Be compliant with the law.
- Leave the premises in an improved state.
- Not decrease the rent that the property could command.
- Have snags and defects remedied properly.
That is, the types of terms usually implied into a building contract and more besides.
The council, on the other hand, argued that it was only acting as the claimant’s agent in the matter. The judge rejected both arguments and came to a decision somewhere in the middle. He accepted that there was an agreement between the parties, finding that a Scheme Consent Form that the claimants had signed and an Agreement to Pay (the claimants were to pay a specified sum to the council for the works) had contractual effect. This was despite the fact that those documents did not (deliberately, perhaps, as they were drafted by the council) spell out what, if any, commitments the council was undertaking. The documents did state that the council was responsible for “arranging for the eligible works to be carried out”. However, Morgan J said that even that specific reference didn’t provide a complete answer: what exactly was involved in arranging for the works to be carried out? What responsibility, if any, did the council have to the claimants in relation to the work?
Although the council did have an obligation to pay the builder the money received from the claimants for the work, it was not entering into the building contract as agent for the claimants (as the council alleged), said the judge. However, neither was the council effectively in the position of main contractor to the claimants, with the actual builder being a sub-contractor.
Importantly, this meant that the council did not contract on the basis that it would either do or procure the doing of the works for the claimants and so it was not responsible for the quality or progress of those works. The council had a contractual obligation to organise the works only. The obligations owed by the council to the claimants constituted a “service”. The works themselves were not part of that service, which included arrangement of the works and supervision of the contractor.
The services to be performed by the council attracted the statutory implied terms under sections 13 and 14 of the Supply of Goods and Services Act 1982 and those implied terms only. Therefore the services had to be performed with reasonable skill and care and carried out within a reasonable time. This did not include an obligation to do the building works in a reasonable time and there was no implied term as to the quality of goods and materials.
Practical lessons
A well-drafted development or similar agreement will be clear as to the exact extent of the developer’s, landlord’s or authority’s obligations. The latter should ensure that the obligations they undertake are “back-to-back”, and certainly no greater than, those owed to them by the contractor. Developers and landlords in particular will want to exclude any possible warranty as to fitness for purpose of the completed works.
