Case Update - Tender Price Omissions - The Consequences of Ignoring a Sub-Contractor’s Mistake

In the recent Technology and Construction Court (TCC) case of Traditional Structures Limited v H W Construction Limited^[1] a sub-contractor mistakenly omitted the price of roof cladding from the contract and the contractor failed to notify the sub-contractor of this mistake and as a consequence benefited from it. The sub-contractor brought a claim for rectification of the contract, on the ground of unilateral mistake, and a claim for a reasonable price for the cladding works.

Facts: In 2008, the Defendant (in this case the contractor, H W Construction Limited) was engaged as the main contractor in connection with the construction of a new business development centre in Sutton Coldfield ('the Birmingham Metropolitan College'). The Defendant sought to sub-contract the supply and installation of structural steelwork and roof cladding and accordingly requested that the Claimant (in this case the sub-contractor, Traditional Structures Limited) provide a quotation for 'steel work and roof cladding'.

In April 2008, in response to this request, the Claimant completed and submitted a tender to the Defendant, first by fax (the 'Fax Copy') and then by post (the 'Post Copy'). In May 2008, the Defendant then placed an order with the claimant 'to supply and fit the steelwork and roof cladding as per your quotation ...'.

Dispute: In July 2008, it became apparent that there was a difference between the Fax Copy and the Post Copy of the Claimant's quotation. It was evident that on the Fax Copy, the final line of one page had been missed off, so that the quotation read: "For the supply and delivery of structural steelwork and claddings erected onto prepared foundations (by others) to form the proposed buildings as detailed above, our budget prices would be:- Steelwork £37,573.43 +VAT". However, on the Hard Copy there was an additional line stating "Claddings £32,365.83 +VAT".

It was therefore the Claimant's position that the total quotation for the Steelworks and Claddings was £69,939.26 plus VAT and the Defendant's that it was £37,573.43 plus VAT. Correspondence ensued between the parties and eventually the Defendant wrote to the Claimant on the basis that "we have no option but to place the order with you as no-one else will be able to take over the contract in the time frame available. Accordingly, we are placing the enclosed order with you, but are doing so without prejudice to our contentions that in fact the correct contractual sum for this order is £37,573.43".

The Claimant completed the works, but subsequently issued a claim against the Defendant, firstly for rectification of the subcontract and secondly for a reasonable price for the cladding element of their works.

Decision: The Court held that the Claimant succeeded in its claim for rectification and its claim for a reasonable price for carrying out and completing the cladding works in the sum of £34,754.17. In particular the Court held that the Managing Director of the Defendant had actual knowledge of the mistake and/or had wilfully and recklessly failed to enquire of the Claimant whether the price of £37,573.43 plus VAT related to both the structural steelwork and the cladding elements of the work for which the Claimant was tendering. It held that an honest and reasonable man would have made such an enquiry in the circumstances of this case. The court further and/or in the alternative held, that the Managing Director had shut his eyes to the obvious, the obvious being that the price quoted was self-evidently a price that related only to structural steelwork, and that the Claimant had not included a separate price for the cladding.

Advice: This case highlights the problems that can arise when a sub-contractor makes a mistake in pricing, at the tender stage, and the contractor attempts to take advantage of this. It provides useful guidance as to what the Courts regard as unfair conduct, in a commercial context.

If you would like advise in respect of any of the issues dealt with in this case, or any other construction issues, please contact Priscilla Hall on 0845 209 1435 (Priscilla.Hall@clarkewillmott.com) or Nicola Lee on 0845 209 1138 (Nicola.Lee@clarkewillmott.com).

^[1] Traditional Structures Limited v H W Construction Limited [2010] EWHC 1530 (TCC)

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