LAW

A short but interesting point was decided by the Court of Appeal in the case of Sheffield v Conrad (1987) 22 ConLR 188 when a novel and ingenious argument was put forward unsuccessfully. It was an appeal from Judge Esyr Lewis QC and 'a startling feature of the case' was that the trial judge had sat for 18 days hearing two preliminary issues, before embarking on the litigation proper. Just under œ52,000 was at stake.

The facts were that Mr Conrad owned a small bungalow on a substantial plot of land at Sevenoaks, Kent, and he wished to convert it into a two storey house.

The defendant, a builder of considerable experience who traded as Sandpiper Construction, prepared plans at the defendant's request which were submitted to the local authority.

He quoted a price of about œ65,000 for the conversion. There was no formal contract and no express agreement as to the time for completion. There was no independent architect involved either.

The defendant accepted the quotation and work began in May 1982. Differences arose between the parties, arising out of what Mr Conrad, the defendant, thought was excessive delay by the builder and what he also thought were deficiencies in the quality of his work. These differences came to a head at a site meeting on 29 November 1982 when Mr Conrad instructed the plaintiff to leave the site and to cease work. Mr Sheffield prepared and submitted his final account which, largely because of variations, had risen to œ110,000. He gave credit for the advances already paid, but the defendant failed to pay the balance which amounted to œ51,932.

When sued, Mr Conrad denied liability and pleaded that he was justified in repudiating the contract.

He made criticisms of the quality of the plaintiff's work. The most serious criticism related to the cantilever supporting the lounge of the property.

It was found that this was faulty in design and remedial work was needed.

It was agreed that the defendant did not know about this defect at the fateful meeting on 19 November 1982.

It only came to light about a fortnight later when there was an inspection by the local council's building control officer.

The trial judge found that the design defect was not so serious to go to the rest of the contract.

He also found that when the local authority raised the question with the plaintiff by letters in December 1982 and January 1993 he had given an explanation that was quite untenable. He told the council that the defect was caused 'by premature removal of the supporting props to the cantilever projection, caused by premature termination of the contract'. Mr Conrad sought to argue that this conduct was relevant to the question of whether he was entitled to terminate.

The employer's argument was that had he known about the defect at the date of termination, and had the builder's reaction then been apparent, it would have provided him with sufficient cause to order the builder off the site because, so it was argued, the reaction of the builder was such as to destroy the employer's confidence.

This novel argument was rejected both by the trial judge and the Court of Appeal. The defendant was not entitled retrospectively to bring into account the reaction of the builder to justify his conduct in turning the contractor off site and refusing to accept further performance.

The correct approach, said their lordships, is to take account of what was known to the employer at the date of termination and assess the nature and extent of the builder's breaches of contract as at that date.

Obviously, the judge is entitled to take into account what breaches of contract there were at the date of termination, even if they were unknown to the employer, but a termination cannot be justified by an argument based on speculation as to how the other party might have reacted to the discovery of defects in the work.

This is, perhaps, a surprising case, and hopefully its facts will not be repeated. What the eventual outcome of the litigation was we shall probably never know, but the point raised in argument was an important and interesting one.

Even taking the defective design of the cantilever into account, the trial judge was satisfied that, although it was a substantial breach, it was not one going to the root of the contract so as to justify the termination.

Repudiation in the narrow sense is conduct which expressly or impliedly makes it clear that the repudiating party will not perform the contract. What was alleged here was repudiation by defective performance, and that requires that the performance must be so grossly defective as to strike at the heart of the bargain.

It is not the repudiatory breach which brings the contract to an end; it is the repudiation accepted by the other party.

The point was well put by the great Lord Blackburn in the 19th century case of Mersey Steel & Iron Co v Naylor, Benzon & Co (1884) 9 App Cas 434:

l 'Where there is a contract in which there are two parties, each side having to do something, if you see that a failure to prepare one part of it goes to the root of the contract, goes to the foundation of the whole, it is a good defence to say: 'I am not going on to perform my part of it when that which is the root of the whole and the substantial consideration for any performance is defeated by your misconduct.'