LAWBUILD
Letter No. 8
Wednesday 17 December 2003
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Lawbuild provides construction law expertise
to save clients time and money.
A personal message from Lawbuild's Principal
David Lewis
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I have been asked more than once (well, all right, once) how I
came to choose the name Lawbuild. I am about to tell you, so it is only fair
to mention that your “Page Down” key is just to the left of the digit “7” on your
keypad, and that you will need to press it two or three times to escape this narrative.
The name Lawbuild preceded the birth of the firm itself by about
18 months. It happened in January 2000, while I was still an employee in a large
law firm with no expectation of starting my own legal practice. Having just bought
a new computer, I decided to change my email service to CompuServe 2000, who invited
me to choose a user name. Since CompuServe 2000 shared the same multi-million
user name database as AOL, it was quite difficult to find a suitable name which
had not already been taken.
While still mulling over this problem, I created a mailbox for
my wife Rosemary, and invited her to choose her own user name. Since her skills
and business are in sewing and embroidery, she chose the name Rosysews.
This gave me the idea of choosing a name with a similar structure
but reflecting my own profession. However, “Davesolicits” didn’t seem quite right.
How about “Constructionlaw”? “Buildinglaw”? “Buildlaw”? All taken.
Then, in a moment of inspiration, I reversed “Buildlaw” and tried
“Lawbuild”. Amazingly, no-one in the AOL/CompuServe universe had taken the name.
So lawbuild@compuserve.com I became. Later, in November 2000, at a time when
I was starting to think seriously about becoming self-employed, I decided to purchase
the Internet domain lawbuild.com in case I ever wanted to use it commercially.
When, in May 2001, I took the decision to start my own practice,
it took me little time to discard the safe but boring “David Lewis & Co” in
favour of the meaningful, distinctive and appropriate “Lawbuild”. Soon afterwards
I purchased lawbuild.co.uk, and I have since protected the name legally in various
other ways.
I little thought, at the dawn of the millennium, that a name
which I had chosen only because no-one else had, would later help me to start
a legal practice with a solid brand identity and would launch a thousand business
cards.
I need only add that if you’ve got as far as this without falling
asleep, you’ll have no difficulty in reading the rest of The Lawbuild Letter No.
8.
With kind regards.
Principal of Lawbuild, solicitors
Editor of the Lawbuild Newsletter
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Contents
The party of the second part
A glossary of construction law
expressions: I and J are for …
Make a note …
They liked it
Business Network International®
Newsletter stuff
About Lawbuild
Contact information
Legal disclaimers and warnings
relating to this newsletter: please read
Return to contents
The party of the second part
Does it matter who you contract
with?
In these real-life examples the names and businesses, and
other non-material details, have been changed.
A basic principle is that you can only enter into a contract
with a natural person (i.e. an individual) or a legal person (e.g. a company).
If you contract with an unincorporated firm or partnership, you are contracting
with several individuals, i.e. the partners or at least some of them.
What happens if you contract with an entity which is neither
an individual nor a legal person? And what happens if you contract with an identifiable
natural or legal person, but it’s the “wrong” person?
Case No. 1
A maintenance company signed a form of contract to provide services,
using its standard form. The contract named the customer as “Marchmont Catering
Co”.
No registered company with that name existed, but there was,
undeniably, a catering business which used the name on its letter paper and business
cards and which wanted the maintenance company to provide services to it.
The contract was signed on behalf of Marchmont Catering Co by
one Anita Cook, Director. Subsequently Anita’s involvement in the business ceased
and another individual, Harold Brown, stepped in to represent the customer.
The maintenance company provided the services but did not receive
payment. Whom could it sue? Tricky, because Marchmont Catering Co didn’t exist
as a legal entity and suing a non-existent entity would be a waste of time.
In this kind of situation the normal solution is to treat the
non-existent entity as a trading name or partnership and to sue the people who
were the principals of the business at the time when the contract was made, e.g.
“AB and CD, trading in partnership as Marchmont Catering Co”; or at least the
people who at that time were holding themselves out as being principals (even
if they weren’t).
So the first step is to find out who the principals of the business
were at the time when the contract was entered into. The maintenance company
didn’t know for sure who those principals were, but they did know that the contract
had been signed by Anita Cook, who had described herself as a “Director”.
So Anita was holding herself out as being one of the principals
of the business, and the maintenance company could and should have sued “Anita
Cook trading as Marchmont Catering Co.”
Instead, however, they sued Harold Brown, the man who had taken
over from Anita as the catering company’s representative. This was a less sound
approach, because the maintenance company couldn’t prove that Harold had been
a principal of the business at the time when the contract was entered into. (They
could of course have proved that Anita was holding herself out as a principal
because she’d signed the contract and had called herself a director.)
Of course, Anita would not have been happy about being sued for
money owed by a business which she had ceased to be involved in. However, that
is the price you pay for signing contracts on behalf of an unincorporated business.
(Do you do that, and are you comfortable about it after reading this story?)
Case No. 2
PQR Investments Ltd are buying a small office building, which
the seller is converting and refurbishing, and they then plan to let each floor
to a different tenant. As is quite normal, the buyer requires warranties from
the designers and contractor doing the conversion and refurbishment. The seller
gives the buyer a draft of the warranties, but because of some confusion on the
part of the seller’s solicitor these drafts are in favour not of PQR Investments
Ltd (“Investments”) but of its associated company, PQR Properties Ltd (“Properties”).
Does it matter?
It might, from the point of view of the PQR group of companies.
It’s Investments which will be granting the leases, and which will therefore be
giving covenants to repair the common parts of the building (including the floors
and ceilings). If the common parts fall into disrepair because of defective work,
Investments will have to repair the defects. So they will want to sue the contractor.
But the contractor’s warranty is in favour of Properties, so only Properties will
be able to sue the contractor. This allows the contractor to say, “I’m not liable
to Investments because my warranty is in favour of Properties. But Properties
can’t recover any damages from me because they have no liabilties under the leases
and therefore they’ve suffered no loss.”
The House of Lords case of Alfred McAlpine Construction Ltd
v. Panatown Ltd (2000), which we wrote about in Lawbuild Newsletter
No. 3 (July 2002), suggests that Properties would not be able to recover more
than nominal damages from the contractor, but might be able to recover the cost
of remedial works on behalf of Investments. Be that as it may, it would make
a lot of sense to keep things simple by recognising that two companies in the
same group are not “the same company” and that it can really matter which
one enters into a particular contract.
Conclusions
Business people entering into contracts need to be aware of the
pitfalls of entering into an agreement with the “wrong” person, or even with no
person at all. Here are some tips:
- If contracting with a UK company, visit www.companieshouse.org.uk/info
to make sure the company exists and to verify the correct company name
- Don’t get the company name wrong: describe it in the contract
exactly as it appears in the Companies Register or the company’s letter paper
(but see the next two bullet points)
- The law requires companies to print their name, company number
and registered office on their letter paper, but many companies fail to do so
or print incorrect or out of date information, so don’t rely entirely on this
- Be aware that companies sometimes write letters using the stationery
of another company in the same group
- Remember that company names, at least within England and Wales,
are unique; and in case of doubt you can always use the company registration number
as a failsafe identifier
- If you are contracting with an unincorporated firm, such as
Lawbuild, you are effectively contracting with the partners or sole proprietor.
The firm’s stationery may include their names, but if it doesn’t you should ask,
and name the other party as (for example) “David Lewis carrying on business [or
trading] as Lawbuild”
Groups of companies need to be careful as to which companies
in the group enter into particular contracts. In the Panatown case mentioned
above, the choice of company was determined by the group’s desire to reduce its
VAT bill by £1.3m, but it cost the group “many millions of pounds” to make good
defects for which its tax avoidance measures had inadvertently left it without
a remedy. By all means avoid tax, if you can do so legally, but don’t overlook
the possible side-effects. (We recently had to advise a client that making its
subsidiary enter into a particular contract in order to save VAT could cost it
a six-figure sum.)
Return to contents
A glossary of construction law
expressions: I and J are for …
IFC
The JCT Intermediate Form of Contract, intended to be used for
"works of simple content" and without complex services installations,
which are fully designed and billed or specified at tender stage, and which have
a value of up to £375,000 (at 2001 prices) and a contract period not exceeding
12 months: JCT Practice Note 5 (Series 2).
JCT
Joint Contracts Tribunal. Not a tribunal at all. Formerly an
association, established in 1931, of representative bodies of developers (including
local authorities), main contractors, subcontractors and specialist contractors,
and consultants. Now incorporated as The Joint Contracts Tribunal Ltd). Produces,
by industry-wide consensus, standard forms of contract and subcontract, and other
forms of agreement, for the use of the construction industry.
RIBA Enterprises publishes JCT Forms on Disk, a quirky but indispensable
software package which enables users to search all or virtually all the JCT standard
forms, and to produce edited agreements from them.
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Make a note
…
Many kinds of dispute arise in connection with contracts, perhaps
the commonest being disputes as to whether or not a contract has come into existence
or what its terms are.
Under English law, as a general rule, a contract does not need
to be in writing but can be made orally. Where the law does require the terms
of a contract to be written down, it makes a distinction between the contract
being in writing and being evidenced in writing. In construction
law, the main legal consequence for a purely oral construction agreement is that
statutory adjudication and payment provisions won’t apply to it.
When a construction lawyer has to advise on any kind of contract
dispute, he asks for the client’s papers and carefully reads the tender documents,
letters, faxes, emails, site meeting minutes, and other documents created by the
parties.
It is common practice in the construction industry for the project
manager or contract administrator to prepare a note of site meetings but not,
for some reason, other meetings. It is also extremely rare to see on the file
any notes of telephone conversations. If such a note has been made, it is usually
the handwritten note made during the meeting or telephone call, and may need to
be deciphered and interpreted.
This is an area where clients could learn a useful habit which
is (or ought to be) second nature to their lawyers.
We would urge our readers to make a concise note of all meetings
and telephone conversations of any consequence. There is no need to be verbose;
we have sometimes found that a conversation lasting 40 minutes can easily be summarised
in three or four short paragraphs, because essentially you are summarising information
and instructions given and received and matters agreed and decided. You don’t
need to reproduce all the talking that leads up to these key events.
I sometimes hear clients say things like, “He told me such-and-such
over the phone, but there’s no proof.” Implicit in such statements are several
beliefs, rarely articulated by the speaker but evidently embedded quite deeply
in his thinking: that evidence is useless unless it amounts to “proof”; that no-one
is bound by anything unless they’ve signed a written document; and that it is
impossible to create evidence of a conversation which will convince a court, because
the judge will assume you are lying about it.
None of these assumptions is true. The fact is that the party
who has made a contemporaneous note of a conversation is very much more likely
to have his version believed by the court than the party who has made no such
note. Yes, of course it is possible for someone to make a false note of a conversation,
either at the time or later, but how often does this happen? And someone who
is stupid enough to “forge” such a note long after the event risks criminal liability,
especially if the note is made on a computer and can be examined by forensic experts.
A few words are in order about the methodology of note-taking.
During the meeting or telephone conversation itself you probably only need to
jot down the main topics discussed, because you will probably remember for at
least a few hours what was said regarding each topic. (I don’t know about you,
but I would find it hard to participate fully in a discussion at the same time
as writing a full note of what each party is saying.) You should make your formal
note as soon as possible after the meeting or phone call – as soon as you can
get to a keyboard or dictating machine and have a free moment – and it is very
important to include the dates and times not only of the discussion but also of
your formal note. (I record the date and time of the note itself by using a template
with a footer which outputs the dates and times when the document is created and
saved.)
By acquiring this discipline, which admittedly is difficult at
times when you are under constant pressure, you can help your lawyers and your
company to win legal disputes.
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They liked it
Some comments we received on Lawbuild
Newsletter No. 7
“Loved your opener - have you ever considered a career on stage?”
Stephen Citron, Visual Guide (computer training), Cheam.
“This is an automatically generated Message Disposition Notification
message. It is to inform you the recipient of your message has performed an action
upon it.” postmaster@uk.taylorwoodrow.com.
“Great newsletter, keep up the good work.” Steve North, Computer
Xpress Ltd (IT support), London NW4.
“Thank you very much for the newsletter,
it is sobering to read that professionals like yourself are making absolute sense
over re-branding company names. As someone who used to work for 'British Steel'
for several years, I agree 'Corus' was a poor substitute for a well established
& trusted name!! Keep up the good work.” Mani Hussain, Bestsafe Ltd (health
& safety services), East Barnet, EN4.
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Business Network International®
Lawbuild and David Lewis are a member of the Victoria (London)
Chapter of Business Network International (BNI).
BNI is a business and professional networking organisation whose
purpose is to generate quality referred business for its members. BNI can claim
to be the most successful organisation of its kind in the world, as it records
the business transacted on a weekly basis. In 2002 the 54,000 members of BNI worldwide
passed 2,500,000 referrals generating over €1 billion of business. Currently,
there are more than 2,700 active groups, of which several hundred are in the UK
and Ireland.
BNI groups limit membership to one person per business, so members
have an opportunity to lock out their competition.
BNI insists on references before a member can be accepted, and
requires members to sign up to a code of ethics. These safeguards, together with
testimonials from other members, promote confidence in the products and services
offered by members. So if you need a contractor, an architect, a quantity surveyor,
a building surveyor, an IT support company, or a telecommunications company, before
picking up the Yellow Pages it might be worth having a word with us.
You can also contact us to ask about the benefits of becoming
a BNI member, and we can arrange for you to attend one or two meetings as a visitor
and without obligation.
To learn more, visit BNI Europe and BNI Victoria.
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Newsletter stuff
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Tell us
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About Lawbuild
Lawbuild is a specialist construction law practice offering
expert advice and services to anyone carrying out or lending money for construction,
and to any buyer, seller, landlord or tenant of recently built or refurbished
property. We are experienced, thorough and professional. Our aim is to save clients
time and money, and our charges are very reasonable.
Lawbuild is equally at home with contracts for services and with
many other kinds of non-specialist agreement.
Lawbuild’s principal, David Lewis, has more than 25 years’ experience
in contracts and construction law.
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Contact information
Here’s how to get in touch with us:
Email
letter@lawbuild.co.uk
Phone
020 8346 6424
Fax
020 8346 0745
Mobile
07887 757 606
Post
David Lewis
Lawbuild, solicitors
37 The Grove
LONDON
N3 1QT
Website
www.lawbuild.co.uk
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Legal disclaimers and warnings
relating to this newsletter: please read
Disclaimers
Lawbuild is providing this newsletter on an “as is” basis and
makes no representations or warranties of any kind with respect to this newsletter
and disclaims all such representations and warranties.
In addition, Lawbuild makes no representations or warranties
about the accuracy, completeness, or suitability for any purpose of the information
published in this newsletter. The information contained in this newsletter may
contain technical inaccuracies or typographical errors. All liability of Lawbuild
howsoever arising for any such inaccuracies or errors is expressly excluded to
the fullest extent permitted by law.
Neither Lawbuild nor any of its employees or other representatives
will be liable for loss or damage arising out of or in connection with the use
of this newsletter. This is a comprehensive limitation of liability that applies
to all damages of any kind, including (without limitation) compensatory, direct,
indirect or consequential damages, loss of data, income or profit, loss of or
damage to property and claims of third parties.
Notwithstanding the foregoing, none of the preceding exclusions
and limitations is intended to limit any rights you may have as a consumer under
local law or other statutory rights which may not be excluded or in any way to
exclude or limit Lawbuild’s liability to you for death or personal injury resulting
from our negligence or that of our employees or agents.
Intellectual property
The Lawbuild trade mark has been registered under the Trade Marks
Act 1994 of the United Kingdom of Great Britain and Northern Ireland in respect
of Classes 16, 41 and 42. All other trade marks, brand names, product names and
titles and copyrights used in this newsletter are trade marks, brand names, product
names or copyrights of their respective holders. No permission is given by Lawbuild
in respect of the use of any of them and such use may constitute an infringement
of the holder’s rights.
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You’ve come to the end
You’ve now reached the end of Lawbuild Letter No. 8.
We hope you’ve enjoyed reading it, and we look forward to hearing from you at
any time.
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