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Author Lisa Keane
Issue November 2009
Pub Suffolk Business Magazine
Doing business with friends can be fraught with danger, as a recent case illustrates.
This case involved two men, one of whom was building a house for himself and his fiancée. He wanted to have complex electrical devices built into the house and entered into discussions with his friend (a builder), who advised him that the work required would cost in the region of £15K.
By the end of 2001 the requirements had been confirmed and a costed schedule of works agreed. As time passed the house owner changed the specification and added extra items to this schedule. It is clear that as this was occurring, neither of the two men put the agreed changes, and the cost implications, into a proper written format, with the predictable result that at the end of the project, the bill presented was for more than £15K and accordingly a dispute arose.
The homeowner refused to pay the extra amount and the matter ended up in court. The hearing took three days; the cost of which must have been similar to the value of the original contract. In court, it was accepted that some of the changes warranted extra payment, as they were “variations” or “extras” to the agreed schedule. Additionally, there was no complaint about the quality of the workmanship; the dispute was solely over the cost. In essence, the claimant’s case was that the contract was a design and build contract, with reasonable remuneration for labour and materials supplied.
The defendant’s case was that it was a fixed price contract for £15K and that almost all of the extras should have been accommodated within the original price. The court ruled that the contract was not a fixed price contract and awarded the claimant a modest extra sum.
The essential point is that the case only arose because, being friends, the two men did not agree changes formally as they went along, each ssuming that their view of the circumstances was also held by the other. When this turned out to be incorrect, a falling-out was predictable.
The moral of the story is that if you decide to do business with a friend, and you value their friendship, it is important to make sure you have all the necessary paperwork in place. It is a mistake to rely on your friendship to prevent a disagreement; a mistake that could prove very costly.
Lisa Keane
Dispute Resolution Solicitor
Tel: 01473 232425
This article is for general information purposes only and does not constitute legal or other professional advice. You should not act or rely upon this information.
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