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P&I Data Services was acting as main contractor on the GlaxoSmithKlein site in Stevenage, Hertfordshire.

It sent tender specifications and drawings for pricing to subcontractor SWI Electrical Contractors. The tender was made up of drawings describing the detail of the work that had to be performed and record sheets identifying particular elements and parts of the site.

SWI priced the tender documentation on a lump sum basis for each broad item of work and sent in its quotation. P&I accepted the quotation by purchase order, and the contract was formed.

Calm before the storm

During the course of the work, P&I changed the drawings, so that SWI did not have to complete as much work as it had agreed to.

When SWI finished the work, it sent in its final account at the purchase order price. P&I worked out the value of the work that had not been completed by SWI and knocked it off the bill.

SWI disapproved and made its feelings known to P&I. Any discussions that ensued thereafter between the parties in an attempt to resolve the matter failed.

A dispute was born.

County court

SWI decided to sue P&I in the county court for the full amount. The judge said that, based on the written evidence of the documents, it made no difference that the work was less than shown on the drawings or included in the specifications.

He decided there was a fixed-price contract and found in SWI鈥檚 favour, awarding it the full amount.

鈥淏ased on the written evidence of the documents, it made no difference that the work was less than shown on the drawings鈥�

Let me explain why I believe the judge decided in favour of SWI.

The company tendered a fixed price for the work that was shown on the drawings and in the specification. That meant SWI took on the risk of the work being more extensive or expensive than anticipated, but was still only entitled to the fixed price.

No doubt most readers are familiar with the JCT building contract. Well, that is technically a fixed-price contract, but with a difference.

The difference is that it provides for variations to be issued during the construction phase, in which case the fixed price may change.

It is not to be confused with a 鈥榬e-measurement鈥� contract, where the work content is only estimated at the start of the job. When the work is finished, it is then subject to re-measurement and priced at unit rates included in the contract.

The contract between SWI and P&I was different. There was no mechanism for making changes: it was fixed.

SWI didn鈥檛 fail to do things it was required to do. P&I effectively asked it to do less work by altering the drawings and specifications. There was no agreement that by doing this P&I could pay less.

Court of Appeal

Not happy with the judge鈥檚 decision, P&I marched off to the Court of Appeal to settle the matter once and for all. The Court of Appeal decided that the judge was right in holding that the contract was a fixed-price contract. P&I had to pay.

Readers are cautioned not to rely on this as legal advice.