A client instructed Samuel Okoronkwo Jr. in relation to a dispute concerning building works at a property purchased in 2019. The client entered into a contract with a building company under which the client would supply the materials and the contractor would undertake the labour for an agreed sum of £59,500. The works were substantially delayed and, despite repeated attempts by the client to obtain updates and assurances that the project would be completed, the contractor failed to complete the works within the expected timeframe.
The contractor subsequently informed the client that the project had exceeded its original budget and requested an additional £9,000. The client paid this sum following an assurance that the works would then be completed, but the contractor failed to return to site or make satisfactory progress. The continuing delay caused the client difficulties with a bridging loan and resulted in additional interest and associated costs. The client eventually terminated the contractor’s involvement and instructed an alternative contractor to complete the works.
The principal issue was whether the contractor had breached the building contract by failing to complete the works within the agreed or expected timeframe and whether the client was entitled to terminate the contract. Counsel considered whether time had been made of the essence and whether the client’s communications regarding the need for completion and the effect of delay on the bridging loan were sufficient to give rise to a right to terminate. Counsel also considered the extent to which the client could recover the additional costs of completing the works, the £9,000 additional payment and increased bridging loan costs as damages.
Samuel Jr. advised that the potential claim would principally be based on breach of contract. Counsel considered the principles arising from HDK Limited v Sunshine Ventures & Others [2009] EWHC 2866 (QB), in particular the requirement for clear notice where a party seeks to make time of the essence and subsequently terminate a contract for delay. Counsel advised that further evidence was required before determining whether the termination had been valid, including the signed contract, payment records, correspondence concerning the additional £9,000, any formal notice making time of the essence or terminating the contract, and evidence demonstrating the extent of the incomplete works.
Counsel further advised that, if the contract was validly terminated following a breach, it appeared plausible that the client could seek recovery of reasonable additional expenditure incurred in completing the works and other losses directly resulting from the contractor’s delay. However, the recoverability of the additional bridging loan interest would depend upon establishing a sufficient connection between the contractor’s breach and those additional costs, as well as whether such losses were sufficiently foreseeable. Further evidence was also required to quantify the costs of completing the works and establish the amount of work left outstanding when the contract was terminated.
Counsel therefore requested further documentation and information, including evidence of the additional £9,000 payment, photographs of the property when the contract was terminated, evidence of additional bridging loan charges, invoices for the replacement contractor and any surveyor’s assessment of the outstanding works. Counsel also advised that the contractual position regarding sums already paid to the original contractor required further consideration, particularly whether payments were made on an interim basis and the extent to which the contractor had actually performed the agreed works. The matter highlights the importance of establishing the contractual completion date and properly documenting notices before terminating a building contract for delay.
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