Problem: Late last year, on a recommendation, my business was contacted by company ‘A’ to carry out work on a large building project. We submitted a quote which was accepted and the work was duly completed and an invoice subsequently raised to company A, which remains outstanding.
The building has now been handed over to company ‘B’, who have since requested us to carry out additional work. This involves upgrading materials previously installed by us. The owners want us to commence the work in the next few weeks. However, I am concerned that if company ‘A’ does not pay and I am forced to instigate proceedings against it, will carrying out work for company ‘B’ potentially cause my business a problem in chasing company ‘A’ in the future.
The invoices are obviously to 2 different companies for 2 separate jobs. However, 1 invoice does involve my business removing approximately 30% of materials from the initial job where company ‘A’ has yet to pay, and the materials will be worthless as they are specifically for this job.
Norman, Rothley
Response: Hello Norman. Although your 2 jobs are not only on the same building but are actually covering the same work, you have separate agreements with different parties which means that there are 2 contracts that are in law, completely independent from each other.
When you enter into a contract with a party, there is a common law doctrine which prevents a person who is not a party to a contract from enforcing a term of that contract. This is called privity of contract and applies even where the contract was made for the purpose of conferring a benefit on a third party [notwithstanding in specified circumstances the Contracts (Rights of Third Parties) Act 1999 that reformed the privity of contract rule].
Providing you have carried out your work for company ‘A’ to the requisite standard under that contract (i.e. the materials you installed met the contract specification), then company ‘A’ will have no defence should it attempt to make any reference to the same materials now being removed under a separate contract.
You have not said what the value of your invoice is, but I suggest that you consider issuing a statutory demand or apply for summary judgement (Part 24 of the Civil Procedure Rules). Alternatively, you may wish to consider statutory adjudication if your work comes under the [new] Construction Act.
In the meantime, I wish you luck in carrying out the work for company ‘B’.
© Michael P. Gerard MSc, PGDipLaw, PGDipBar, FCIOB, MCIArb, MAE
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.
Author background
Michael is a Barrister, Chartered Builder, Registered Adjudicator & Accredited Expert in quantum and planning matters. He is Managing Director of Michael Gerard & Co www.michael-gerard.co.uk, a company of chartered building consultants and quantity surveyors who provide a specialised service in the areas of construction law, quantum, programming, business recovery and insolvency support to the construction industry. Michael is also a consultant with Silver Shemmings LLP, a London practice of solicitors specialising in construction.