Supreme Court allows appeal finding a binding contract exists despite document discrepancies due to clear mutual intention.

THE SUPREME COURT

Record No. 002/2008

Hardiman J.

Fennelly J.

Murphy J.

Between:

McCabe Builders (Dublin) Limited

Plaintiff/Respondent

-and-

Sagamu Developments Limited,

Laragan Developments Limited and

Hanly Group Limited

Defendants/Appellants

Judgment delivered the 1st day of April, 2009 by Mr Justice Fennelly

1. The parties to this appeal are a building contractor and a developer. They are in dispute regarding the terms of the

contract under which the plaintiff/respondent agreed to carry out a large building project for the defendants/respondents.

Each party puts forward a set of documents said to comprise the terms of the contract between them. The appellants

(whom I will describe as “the Hanly Group”) bring this appeal from the judgment of Charleton J in the High Court, in which

that learned judge held that there was no contract because the parties were not ad idem. Consequently, the respondent

(which I will describe as “McCabes”) is to be remunerated on the basis of quantum meruit.

2. McCabes proposed a tender price for works described in tender documents provided by the appellants. Negotiations

followed. There was an exchange of letters, said by the appellants to comprise a contract. The respondents say that the

contract basically consists of the standard-form contract later signed. There are inconsistencies between that document and

some, at least of the tender documents.

3. It is necessary to recount the contractual history and to recall the applicable principles of the law of contract in order to

reach a conclusion as to whether there was a concluded agreement and, if so, on what terms.

Contractual history

4. The Hanly Group is an established group of builders and developers. In the year 2005, it proposed to build 32 houses and

14 apartments at a site known as Rocky Valley, Kilmacanogue, County Wicklow. They had obtained planning permission

for the development. They engaged Nolan Ryan, a leading firm of Quantity Surveyors, to conduct an initial tendering

process. Tender documents were sent out by Nolan Ryan on behalf the Hanly Group under cover of a letter of 24th June

2005 to a number of builders, including McCabes. The tender documents comprised:

(i) The Bill of Approximate Quantities in four volumes;

(ii) A Form of Tender for completion;

(iii) Architectural Drawings and Landscape Architect’s Drawings;

(iv) A specification.

5. The core of the dispute between the parties is whether the Bill of Approximate Quantities remained a contractual

document once the standard-form contract had been signed. McCabes contend that the version of standard-form contract

signed by the parties excluded it from having any contractual effect insofar as it described the works to be carried out. The

learned trial judge agreed. The Hanly Group contend that the description of the works is “partly definitive” of the

contractor’s obligations under the contract partly because the tender drawings and specification were quite inadequate for

that purpose and partly because of the exchange of correspondence between the parties after tender but before signature of

the contract.

6. It is necessary, in order to discern the precise nature of the contractual dispute, to refer to some of the documents

generated during the process in some detail.

7. The Bill of Approximate Quantities is central to the case for the Hanly Group. It contained the following material

provisions:

· Under the heading, “Project Particulars,” there appeared a subheading “Contract” as follows:

“The form of contract will be the Articles of Agreement and Conditions of Contract 2002 (Revision 1, Print 4) as issued by

the R.I.A.I. in agreement with the C.I.F. and S.C.S. where quantities do not form part of the contract.

The Appendix to the Contract will be filled in as shown in the Preliminaries Section of the Bill of Approximate Quantities.”

This is known as the Blue form. I will refer to it as the R.I.A.I. form.

· A slightly varied version of the foregoing provision appeared in the schedule to the Bill of Approximate Quantities, once

more emphasising the expression “where quantities DO NOT form part of the Contract” but followed by a large number of

references to provisions of the R.I.A.I. form. Opposite a reference to “(36) Wage and Price Variations” there appeared:

“(Clause Deleted).” There was a large list of items for inclusion in the completion of the Appendix to the Articles of

Agreement (the R.I.A.I. form).

· In the Bill of Approximate Quantities under the heading “General Conditions” at GC 2 and GC 4 and the sub-heading

“Documents” there at two places appeared the following:

“The Contractor shall carefully examine the drawings and other Contract documents and satisfy himself as to their accuracy

and ensure that they cover and embody the proposed works.

The Contractor shall properly execute the Works whether or not shown on the drawings or described in the Bill of

Approximate Quantities, provided that same may reasonably be inferred therefrom.”

· GC 5 of the General Conditions provided:

”The “Works” shall mean the whole of the works envisaged by this Contract…”

· The notes to the form of tender included: “The Contractor’s attention is drawn to the fact that Quantities do not form

part of the Contract for this Project.”

· There was also a “Specification for Materials,” which contained no material provision. However, it seems to have been

common case that it was quite inadequate to its stated purpose. The learned trial judge noted that it had “been described in

evidence as one of the worst, meaning lacking in detail, ever issued as part of a tender process in a job of this size.”

8. The tenders were received on 19th July, 2005. The VAT exclusive tender prices for the works varied between

approximately a high of €21.2 million and a low of €15.7 million. McCabes’ tender was the second lowest at €17,222,620.

Negotiations took place between the Hanly Group and McCabes resulting in a reduction of their tender price of almost €2

million bringing it to a level below the next lowest competitive tender.

9. On 5th August 2005 Mr John Hanly of the Hanly Group commenced to write a letter to Mr Richard McCarthy of

McCabes referring to conversations that had taken place between them. The letter includes the following sentence:

“As per our conversation, we will be entering into a Fixed Price Contract with the Contractor to carry

out the works at Kilmacanogue; there will however be 6 No. PC Sums, 3 of which will be nominated

suppliers and the other 3 will be at the Contractors discretion. In all cases, should there be an extra

overspend on the 6 PC Sums, it will be the Developers responsibility to pay the difference.”

10. The writing of the letter was interrupted by a telephone conversation between Mr Hanly and Mr McCarthy. The learned

trial judge found as a fact that, in that conversation, “a deal was made to do the works tendered for, including any extra

works that might be implied by the correspondence of the 25th July, and 3rd August, for the sum of €15.3 million plus

VAT.” These references to other correspondence are not in dispute on the appeal. The works being discussed (I will avoid

saying “agreed” at this point) extended to the subject-matter of a large number of other letters or other documents, which

were incorporated in the August correspondence. The learned trial judge found as facts that McCabes had received, in

particular the letters dated 25th July and 3rd August referred to in the quoted passage. These were incorporated in the letter

of 5th August.

11. In the light of the “deal” made in the telephone conversation, Mr Hanly completed the letter of 5th August proceeding,

so far as relevant, as follows:

“The parameters of this letter encompass all other documentation provided by The Hanly Group to McCabe

Builders surrounding the compilation of this contract.

“Since writing this letter, we have reached agreement on the project via telephone. I would like to summarise our

agreement as follows:

“The Hanly Group will pay McCabe Builders €15.3 million plus VAT for the Contract as outlined in the Spec.

and Bill of Quantities at Kimacanogue, County Wicklow. The Hanly Group is entering into a Fixed Price

Contract and as stated earlier in this letter there are 6 PC Sums of which there are only two nominated

Suppliers/Subcontractors ……

“Although not relevant to McCabe’s, it must be noted that the Hanly Group are giving in excess of €600,000

over and above a competitor’s price. We are doing this in the knowledge that the show house will be delivered in

a timely fashion by the second/third week in November as discussed; also the consolidation of what should be a

mutually beneficial relationship between our firms.

“In view of the above, whereby the Hanly Group will be fair to the contractor, we will be entertaining no claims

whatsoever, we will work in conjunction and on a timely basis with McCabe’s to approve whatever alternatives

(both products and methods) are put forward, thus ensuring cost effectiveness for McCabe’s throughout the

course of the project.

“We propose taking the opportunity over the coming days to work closely with McCabe’s to finalise all

outstanding issues and also we would hope to put forward some real samples of the type of product mentioned in

the designer’s report. It would be beneficial for both of our companies to have reached a conclusion on this upon

signing of contracts.

“It is the Hanly Groups understanding that all correspondence forwarded to McCabe Builders from our offices

and Nolan Ryan’s offices regarding conditions, planning conditions and special conditions are and form integral

parts of our agreement. I would be grateful if you could review this document, and if you concur that the

conditions laid out in this document are as agreed, please sign below and return to our offices at your earliest

convenience.”

12. A copy of the letter was duly signed and returned on behalf of McCabes on 8th August, without alteration.

13. Although the letter of 5th August refers throughout to the Hanly Group, Mr Hanly signed the letter on behalf of Laragan

Development Ltd. The first-named appellant, Sagamu Developments Limited, was not mentioned as a possible contracting

party at that stage. In short, the precise contracting party in the Hanly Group remained to be identified.

14. No further negotiations took place after 5th August and its counter-signature on behalf of McCabes on 8th August.

However, in order to get the project started, a letter of intent for works to the value of €1 million, signed on behalf of

Laragan Developments Ltd, was sent on the 26th August, 2005, in the absence of completed contract documents.

15. On 24th November 2005, Mr Hanly wrote to Mr McCabe enclosing the R.I.A.I. form and Bill of Quantities. A copy of

the letter of 5th to 8th August was interleaved. The letter was written on Hanly Group notepaper and signed on behalf of

Laragan Developments Ltd. The R.I.A.I. form named Sagamu Developments Limited as the contracting party. Mr Hanly

said that he had initialled the documents and asked that they be returned following signature. Signature did not, in fact, take

place until 19th January 2006. It is common case that the R.I.A.I. form was signed on behalf of both parties.

16. The R.I.A.I. form is entitled “Articles of Agreement” and is headed with the following:

“This form is applicable where quantities DO NOT form part of the contract.”

Sagamu Developments Limited is named as the employer and McCabes as the contractor.

Paragraph 1 provides:

“For the consideration hereinafter mentioned the Contractor will upon and subject to the Conditions

annexed hereto execute and complete the Works shown upon the Contract Drawings and/or described

in the Specification and Conditions all of which together with this Agreement are hereinafter referred

to as “the Contract Documents.”

Paragraph 2 specifies the contract sum as €17,370,500 (the sum of €15,300,000 with VAT added). Paragraph 3(a)(ii) is

crucial. It provides:

“If the Articles of Agreement do not provide for the inclusion of the Bill of Quantities as a contract

document the contract sum shall be deemed to provide for the quantity and quality of work set out in

the drawings and specification and the contractor shall, before the signing of the Articles of Agreement

furnish the architect with the Schedule of Rates.

The Schedule of Rates shall be deemed to mean:

A copy of the fully priced and detailed estimate upon which the contractor’s tender is based priced in

ink, or

Where a Bill of Quantities is provided for tendering purposes the rates therein contained.

The Bill of Quantities unless otherwise stated shall be deemed to be have been prepared in accordance

with the method of measurement of building works last before issued or approved by the Society of

Chartered Surveyors and the Construction Industry Federation. Nothing contained in the contractor’s

estimate or the Bill of Quantities (except as a Schedule of Rates) shall confer rights or impose any

obligations beyond those conferred or imposed by the contract documents.”

17. As already stated, the contract was signed on behalf of McCabes on 19th January 2006.

The proceedings

18. McCabes issued the present proceedings on 31st January 2007. They claim a declaration to the effect that there exists a

binding agreement between McCabes and some or all of the appellants in respect of the development, “the terms of which

are to be found in the RIAI Form of Contract 2002 Edition (Rev. 1 Print 4) where quantities do not form part of the

contract and the associated documents, namely the Articles of Agreement (where quantities do not form part of the

contract), the Conditions, the Specification, Appendix 1 containing a full list of the Contract Drawings and to the extent that

it is relevant, the Schedule of Rates (deemed pursuant to clause3.1(ii) of the Contract, to be the rates as per the Bill of

Approximate Quantities).” McCabes claim that the contract does not include either the letter of 5th to 8th August or the

letters of 25th July and 3rd August, which, according to the findings of the learned trial judge, they had received.

19. The defence of the appellants need not be cited, but the counterclaim seeks a declaration that there exists a binding

agreement between McCabes and the appellants, or alternatively Laragan Developments Limited in the terms of the letter or

letters of 5th to 8th August 2005 and the documents listed in appendices to the pleading. In effect, the counterclaim is for a

contract in the terms of the correspondence of August, to include the various other documents and letters received,

especially the Bill of Approximate Quantities.

20. The learned trial judge, as already stated, did not accept either version of the contract. He held that the parties were not

ad idem.

21. The learned trial judge analysed the R.I.A.I. form at length and concluded that it was not possible to incorporate the Bill

of Approximate Quantities with it, essentially because of the wording of the document and the adoption of clause 3.1(ii). He

effectively placed the onus on the appellants to satisfy him of the inclusion of the descriptions from the Bill of Approximate

Quantities in the R.I.A.I. form and they had not done so.

22. On the other hand, this conclusion was not sufficient to persuade him to accept McCabes contention that the R.I.A.I.

form, with the documents expressly incorporated, represented the contract. He reviewed the dealings between the parties in

enormous detail, referring frequently to their respective intentions. He thought that the test as to whether a contract ever

existed was “whether each contracting party had the same intention as to the fundamental terms that give any agreement

substantial efficacy.” He thought that “the essence of the concept of an agreement [was] that the minds of the parties

should meet as to their mutual obligations” and that “[t]hose obligations must be expressed in such a way that the

obligations of each party can be determined with a reasonable degree of certainty.” He found that “[t]he minds of the

parties never met as to central issues that are crucial to their differing understanding of what would otherwise be their

mutual obligations.” He could not hold that there was a concluded contract and said that the matter would have to be sent

to arbitration as to amount.

23. The learned trial judge held that the case had to be dealt with on the basis of a quantum meruit: McCabes were entitled

to reasonable recompense for the benefit which they had conferred through the work they had done under the purported

contract for the appellants. While the learned judge made further observations on the question of reasonable remuneration,

including that it should be at such value as was prevalent in 2005, he did not relate the claim McCabes would be entitled to

make in any way to the negotiations between the parties, the August correspondence, the tender which had been submitted

by McCabes or the agreed sum of €15,300,000.

24. The Hanly Group have appealed against the High Court decision. They claim, as they did in the High Court, that the

contract consists of the series of contractual exchanges between the parties and, in particular, that the works are to be

defined by reference to the descriptions contained in the Bill of Approximate Quantities.

The opposing contentions

25. In its simplest terms, the issue is whether the R.I.A.I. form excludes any right of the Hanly Group to rely on the Bill of

Approximate Quantities though only insofar as it describes the works. McCabes, in reliance on the express written terms,

claim that it does. I will summarise the opposing claims.

26. The Hanly Group rely crucially on the following provision, repeated at GC 2 and GC 4 of the General Conditions in the

Bill of Approximate Quantities:

“The Contractor shall properly execute the Works whether or not shown on the drawings or described in the Bill

of Approximate Quantities, provided that same may reasonably be inferred therefrom.”

27. This they say is “partly definitive” of the contractor’s obligations. In other words, they say that the scope of the “works”

is partly defined by the Bill of Approximate Quantities. The contract drawings and specification are also relevant, but the

evidence in the High Court was that those documents were inadequate for that purpose. I have already noted the comment

of the learned trial judge that the specification was utterly inadequate to describe the works. The Hanly Group, therefore,

use the Bill of Approximate Quantities to define in part the scope of the contract works. They refer to the columns of the

Bill, comprising, firstly, descriptions of work, secondly, quantities and, thirdly, rates. They emphasise that they rely on the

descriptions column only and not the quantities. Insofar as there is conflict, they say that the provisions of GC 2 and 4

overrule condition 3(a)(ii) of the R.I.A.I. form.

28. The Hanly Group claim that a concluded agreement had been reached in the correspondence of August 2005. This

showed that the Hanly Group insisted on a fixed price for the works as then agreed.

29. They point out that, in the absence of the descriptions in the Bill, McCabes would be able to limit their contractual

obligations by reference to the drawings only. Although they had tendered on the basis that they would carry out the work

described in the Bill of Approximate Quantities, they would not, in fact, be bound to do so. Thus, insofar as the Bill

described works in excess of what could be gathered from the drawings, they would be entitled to claim extra over and

above the amount agreed (€15.3m). Thus, they could claim double payment. Insofar as the R.I.A.I. form provides to the

contrary, they say that the provisions of GC 2 and 4 of the Bill of Approximate Quantities should prevail.

30. It is convenient, at this point to recall that the learned trial judge addressed this point. He dealt with it in the following

passage:

“Mr. McCarthy [of McCabes] agreed that the drawings in this case were lacking. The specifications, he

accepted, were poor. In those circumstances, descriptions might be regarded as necessary for the purpose of

defining the obligations of the contractor. I accept that this could have been done. In this case, it was not

done. The plaintiff expected that the Bill of Quantities would drop away, apart from becoming a Schedule of

Rates as the “blue form” RIAI contract specifies. If something was not in the drawings or specifications but

was in the Bill of Quantities as a description then, theoretically, it is possible for the plaintiff, as contractor,

to claim twice in respect of the same work. Some of the later correspondence from the plaintiff hints at some

unstated, and perhaps even this, extreme position. I accept the evidence of Mr. McCarthy that no claim would

be pursued on the double by the plaintiff. I accept also the evidence of Mr. Hanly that he could never have

signed up to any form of agreement that might allow for this. I would also regard a reasonable bystander with

knowledge of the intentions of the parties to immediately declare that a claim on the double, even if not

expressly ruled out by the form of the contract chosen, would have been excluded. It is thus excluded by

implication.”

31. In other words, the learned trial judge accepted that McCabes might well be entitled to claim on the double, but that Mr

McCarthy said that they would not do so. He then proceeded, by reference to the notion of the reasonable bystander, to

hold that such a right was excluded by implication. More importantly, the learned trial judge accepted the necessity for

“descriptions” for the purpose of defining the scope of the contractor’s obligations but that the Bill of Approximate

Quantities, since it had “dropped away” did not do so.

32. McCabes supported the decision of the learned trial judge to the effect that the parties were never ad idem and that,

essentially, there was no written agreement in extensive written submissions.

33. At the hearing counsel for McCabes nevertheless concentrated on the proposition that the R.I.A.I. blue-form contract

together only with those documents expressly included comprises the entire agreement between the parties. McCabes case,

in this respect, is very simple. The Bill of Approximate Quantities is not a contract document except to the extent that it can

provide a schedule of rates. At one point, counsel described the provision that Quantities do not form part of the contract as

the sheet-anchor of McCabes’ case.

Was there a contract?

34. It is notable that both parties to this appeal embarked on the proceedings in the High Court by alleging that a contract

existed between them for the carrying out of the development at Kilmacanogue. McCabes were to be the contractor and the

Hanly Group (or one of the companies in the Group) was to be the contractor. On the pleadings, they differed only as to the

contractual documents which governed their relationship. Furthermore, by the time the parties commenced this litigation, a

very large part of the development had been carried out.

35. It is striking, in these circumstances, that the learned trial judge concluded that there was no binding agreement at all

between the parties.

36. The parties went through three distinct phases of contractual negotiations.

37. Firstly, the Hanly Group, through Nolan Ryan, a firm of quantity surveyors, circulated a set of tender documents. Those

documents expressly provided that, at the end of the tender process, the contract would be in the R.I.A.I. form of contract.

It is obvious that both the Hanly Group and McCabes, in tendering, envisaged that a binding written agreement would come

into existence.

38. Secondly, following McCabes’ tender, negotiations took place between the parties culminating in the August exchange of

correspondence. It is unnecessary, for present purposes, to decide whether that exchange itself constituted a binding

contract. The letter was signed on behalf of McCabes and by Mr Hanly on behalf of the Hanly Group and of Laragan

Developments Limited. Leaving aside the identity of the contracting party, it is inescapable that both parties envisaged a

written agreement. The tender process had been followed by negotiations leading to a reduction in the tender price to

€15,300,000 and to important modifications to the scope of the works by including reference to a number of letters

particularly those of 25th July and 3rd August. The August letter spoke of a Fixed Price Contract. It asked for signature on

behalf of McCabes. The letter was, in fact signed on behalf of both parties.

39. Finally, the correspondence from 24th November 2005, which was accompanied by both the August letter and the Bill

of Approximate Quantities, was designed to lead to the signature of the R.I.A.I. form which was expressly provided for by

the tender documents.

40. At every stage of the contractual exchange, it is indisputable that both the Hanly Group and McCabes wished their

agreement for the carrying out of a very substantial development to be contained in a formal written agreement. In my view,

their intentions are to be gathered objectively from their exchanges of documents and not from their expressions of

subjective intention as given in evidence at the hearing in the High Court. Amongst other things, the R.I.A.I. form would

provide for arbitration of disputes and how variations were to be assessed and paid for.

41. The result of the finding of the learned trial judge is that each party is left to the uncertainty of a quantum meruit claim.

Since there is no contract, there seems to be no reason to limit McCabes to the amount of €15,300,000 apparently agreed in

the August correspondence or even to the amount of their tender of July 2005. The learned trial judge seems to have

perceived that this would give rise to a problem. He noted that it would be “theoretically” possible for McCabes to claim

twice in respect of the same work. In this, he was perhaps inconsistent. If there was no contract, McCabes would not be

bound by the reduced tender sum of €15,300,000. They could claim payment without any reference to that sum or to the

works they had agreed to perform for it. This simply serves to show that the decision that there is no contract at all between

parties who have negotiated a hard-won deal is liable to produce injustice. On one version, McCabes may be entitled to

claim twice; on another, they are free to charge without reference to the tender process. The learned judge’s final

observation, on this point, was that a claim on the double would be excluded “by implication.” It is not clear how such a

term could be implied in the absence of a contract. Nor can I see how any statement made on behalf of McCabes at the

hearing that they would not claim on the double would have contractual effect.

42. The parties to the project for the development at Kilmacanogue clearly intended to enter a legally binding contract

governing their relationship. They were experienced and reputable contracting companies. They engaged in a tendering

procedure, followed by negotiations on price and other matters. They formally agreed to use the R.I.A.I. form and they

signed it. One of the essential components of the standard-form building contracts is the provision for arbitration to settle

disputes or disagreements. The absence of an arbitration procedure in the case of large building contracts will inevitably

work great inconvenience for all parties, not to mentions the courts.

43. I agree with the statement in Contract Law, by Paul A. MacDermott (Butterworths. Dublin 2001) at page 171, that in

“commercial arrangements it will be presumed that the parties intended to create legally binding contracts.” Lord

Wright said in Hillas & Co. Ltd. v. Arcos Ltd (1932) 147 LT 503 a p.514:

“Businessmen often record the most important agreements in crude and summary fashion. Modes of expression

sufficiently clear to them in the course of their business may appear to those unfamiliar with the business far

from complete or precise. It is accordingly the duty of the Court to construe such documents fairly and

broadly, without being too astute or subtle in finding defects; but, on the contrary, the Court should seek to

apply the old maxim of English law, verba ita sunt intelligenda ut res magis valeat quam pereat. That maxim,

however, does not mean that the Court is to make a contract for the parties, or to go outside the words they

have used, except in so far as they are appropriate implications of law”.

44. In other words, the courts should seek to give effect to the apparent intentions of parties to enter into binding contracts.

It is clear that the parties to the present proceedings intended that their relationship would be governed by a formal legal

contract. The question is what the terms of the contract are.

Terms of contract

45. The principal dispute comes down to quite a narrow question. It can be expressed in various ways by reference to the

terms of the various documents. The essential issue is whether the description of the “works” is limited, as McCabes

contend, to what was described in the “Contract Drawings” and the “specification.” These are the documents mentioned on

the first page of the “Articles of Agreement,” or the R.I.A.I. form. The opposing contention is that is that the description of

“the works” is in part contained the Bill of Approximate Quantities.

46. It is not necessary to repeat the account of the three contractual stages, which I have set out above. Insofar as the tender

stage is concerned, there can be no doubt at all that the Bill of Approximate Quantities was central to the description of the

works. GC 2 and 4 impose an obligation on the contractor to execute the “works” “whether or not shown on the drawings

or described in the Bill of Approximate Quantities, provided that same may reasonably be inferred therefrom.”

47. McCabes tendered on the basis of these documents. Their tender as reduced following negotiation was also based on the

works as so described. The parties then entered an agreement. In the letter of 5th and 8th August, the agreed sum of

€15,300,000 was expressed as payment “for the Contract as outlined in the Spec. and Bill of Quantities…”

48. Thus, the Bill of Approximate Quantities was central both to the description of the “works” and the price to be paid

therefore at all times prior to the execution of the R.I.A.I. form contract. That document was indisputably intended to

incorporate formally the terms of the agreement reached in August.

49. Looking at the object of the contract as a whole, therefore, there is no doubt that the intention of the parties was that the

contract sum specified in the R.I.A.I. form would represent the consideration for the carrying out of the works for which

McCabes had submitted their tender.

50. The sheet-anchor of McCabes case against the foregoing is the term: “where quantities DO NOT form part of the

contract.” This term undoubtedly appeared, not only in the tender documents, specifically the Bill of Approximate

Quantities, but in the R.I.A.I. form.

51. Resolution of the contest between the opposing contentions depends on which of two approaches is adopted to the

ascertainment of the contract terms. McCabes say that the contract is to be found only in the R.I.A.I. form together only

with any documents expressly incorporated with it. The alternative approach is to take account of the apparent intention of

the parties as shown by course of dealing between them, thus including the August correspondence and the Bill of

Approximate Quantities.

52. There is very great merit in the first approach in normal circumstances. Following a tender procedure, the employer and

the contractor normally intend that their entire agreement be contained in one or other of the R.I.A.I. forms which has been

negotiated and prepared with such care and expertise by all sides in the building industry. At that point the tender documents

fall away except to the extent that they are incorporated in the chosen R.I.A.I. form of contract. Accordingly, I see great

force in the view expressed in the judgment which is about to be delivered by Murphy J.

53. In the present case, however, I am convinced that the R.I.A.I. form does not fully represent the true agreement between

the parties. In particular, it does not at all fully describe the works for which McCabes tendered in July, which they agreed

to carry out in August and which was to be the subject of the contract. The reasons for this are already apparent and I will

develop them further. It is well established that the courts will, in appropriate cases, look at the terms of a contract by

reference to the course of dealing between commercial undertakings. We have had a series of cases in which applicable

terms for the purposes of the Brussels Convention (now the Brussels Regulation) have been upheld by reference to a finding

that a party was on express or implied notice of them. Examples are Clare Taverns t/a Durty Nellie’s v Gill t/a as

Universal Business Systems [2003] 1 I.R. 286; Leo Laboratories Ltd. v Crompton B.V. (formerly Witco B.V.) [2005] 2

I.R. 225. The following statement of McGuinness J in the High Court in the former case at page 296 has been approved in

subsequent cases:

“In the submissions made before this Court, it was not seriously suggested that the practice of printing general

conditions of sale on the reverse side of invoices and similar documents, with a reference on the face of the document to

the said conditions, was not a common commercial practice in the type of international trade with which we are

concerned here. Indeed, from the point of view of practical experience every ordinary consumer, and still more anyone

engaged in trade or commerce, must be familiar with this type of document.”

It is quite clear from the exchange of correspondence in August and the fact that the Bill of Approximate Quantities and that

correspondence were enclosed with the letter from the Hanly Group of 24th November the Hanly Group wished these

documents to form part of the contract and that McCabes were on full notice of those documents and of their contents.

54. It is still possible, of course, for the R.I.A.I. form as signed by the parties to have excluded those documents from the

contract and it is to that issue that I now turn.

55. The first page of the R.I.A.I. form refers to the “works” referring to the development at Kilmacanogue. The “works,” as

so described, are the works the subject of the tender documents.

56. This becomes clear from the ensuing statement that “the Contractor has made an estimate of the sum which he will

require for carrying out the said works as shown on the tender dated 19th July 2005……………….” The R.I.A.I. form

states that the employer has “caused drawings (hereinafter called “the Contract Drawings”) and a Specification describing

the work to be done to be prepared….”

Condition 1 then provides:

“For the consideration hereinafter mentioned the Contractor will upon and subject to the Conditions annexed

hereto execute and complete the Works shown upon the Contract Drawings and/or described in the Specification

and Conditions all of which together with this Agreement are hereinafter referred to as “the Contract

Documents.”

However, the works “shown upon the Contract Drawings and/or described in the Specification and Conditions” are not the

entire of the “works” included in the tender of 19th July.

57. Before turning to clause 3(a)(ii), it seems to me that these terms do not exclude the descriptions contained in the Bill of

Approximate Quantities from playing a role in identifying the “works.” Condition 1 does not purport to be exhaustive and

must, in any event, be read in the light of the introductory reference to the “works” already cited. From the latter, read with

the earlier contractual documents, it is clear that the works should be identified by reference to the “estimate” dated 19th

July 2005, which is, of course, the tender.

58. It remains, therefore, to be considered whether clause 3(a)(ii) has the effect of entirely excluding the Bill of Approximate

Quantities, as indeed the learned trial judge held, although, in the end, he did not find that there was a concluded contract in

the terms of the R.I.A.I. form. The effect of that clause is, it is agreed, that the Bill of Approximate Quantities acts only as a

Schedule of Rates. The key provision is the following:

“If the Articles of Agreement do not provide for the inclusion of the Bill of Quantities as a contract document the

contract sum shall be deemed to provide for the quantity and quality of work set out in the drawings and

specification and the contractor shall, before the signing of the Articles of Agreement furnish the architect with

the Schedule of Rates.” (emphasis added)

59. This provision, therefore, like Condition but unlike the introductory material on the first page appears to define the

works only by reference to the drawings and specification, the latter being, by common consent, utterly inadequate.

60. This provision cannot, on the facts of this case, be interpreted without reference to the general background. It is most

important to recall that McCabes tendered for the contract on the basis of a description of the Works as contained in the

General Conditions of the Bill of Approximate Quantities. Those conditions were, as the Hanly Group have argued, “partly

definitive” of the contractor’s obligations. As already noted, any other interpretation would potentially leave McCabes in the

position of being able to claim in effect “on the double.” It seems obvious to me that the Court should lean against such a

potentially unjust interpretation. The signing and countersigning of the August letter demonstrates a clear intention of both

parties to enter an agreement for a fixed sum of €15,300,000 for the carrying out of the works described in that letter and

documents incorporated by reference with it. That contractual intention was carried through to the letter of 24th November.

I have no doubt, therefore, that the parties intended this agreement to be expressed in the R.I.A.I. form. To the extent that it

does not, it is in conflict with the intentions of the parties. In the face of such a conflict, I believe the clear intention of the

parties must prevail. I do not think it is necessary to resort to the equitable remedy of rectification, sought by the Hanly

Group in their pleadings. I believe that correct result can be achieved by interpreting the R.I.A.I. form together with

documents necessarily related to it.

61. I would add that the August agreement significantly differentiates this case from other cases where there might be

discrepancies between tender documents and the signed R.I.A.I. form. In normal circumstances, the latter will prevail in the

event of any discrepancies. Here, however, the parties had engaged in strenuous post-tender negotiations resulting in very

significantly varied the tender sum but also made significant modifications to the scope of the works. The August agreement,

signed by both parties, other than the identification of the proper contracting party, represented a step away from the tender

procedure.

62. For the same reasons, I believe that the R.I.A.I. form was intended to include within the scope of the works all the

works described directly or indirectly in the August correspondence.

I would allow the appeal and make a declaration that there exists a binding contract between McCabes and the first-named

appellant the terms of which are set out in the Articles of Agreement and Conditions of Contract 2002 (Revision 1, Print 4)

as issued by the R.I.A.I., signed by the parties on 24th November 2005 and 19th January 2006 together with the letter from

the letter from the Hanly Group dated 5th August 2005 and signed on behalf of McCabes on 8th August 2005 and the

documents referred to therein and incorporated thereby as more particularly set out in Appendix 1 and Appendix 2 of the

Counterclaim.