Brian Royle Maggs v Guy Marsh

Mr Marsh employed Mr Maggs to carry out building works. A number of estimates were given but there was no detailed specification of the work required. Inevitably there was a dispute as to the work included in the contract price. The dispute ended up in the Court of Appeal in Brian Royle Maggs v Guy Marsh [2006] EWCA Civ 1058.

If the contract had been wholly in writing the Court’s task would have been to examine the terms and decide what the parties had agreed as part of the contract price. The Court would decide what meaning the written contract would convey to a reasonable person having all the background knowledge reasonably available to the parties at the time of the contract. In that case it was irrelevant to call evidence of how one party behaved after the contract was made.

In this case the contract was partly in writing and partly oral. The documents available at contract formation were not a complete record of the contract terms. In addition there were significant differences in the recollections of Mr Marsh and Mr Maggs as to the things discussed in the period leading to the contract.

Mr Marsh wished to use evidence of what had been said after the contract was formed to show what the parties had agreed. In particular he wished to rely on the list of extras in Mr Maggs’ letters as a very good guide as to what Mr Maggs understood had been agreed.

The judge at first instance refused to allow the evidence. The Court of Appeal held that he was wrong. In a contract that was partly oral and partly in writing, establishing the terms of the contract depended upon the recollections of the parties and other witnesses. The accuracy of those recollections may be tested by things said and done by the parties or witnesses after the contract had been made. In this case the first judge’s decision depended on his accepting the evidence of Mr Marsh and the excluded evidence was relevant to the credibility of that evidence.

What This Means

The decision emphasizes the importance of ensuring that all the contract terms are in writing if disputes of interpretation are to be avoided, or at least reduced.

If the pressures of time result in a partly oral contract, then the essential first step is to record as early as possible the specification of the work that has been agreed as part of the contract price. It may be tempting not to issue the record of the agreement to the other party in order to avoid any argument. It may be hoped that if matters are left to proceed that differences can easily be resolved. This approach should be avoided. In practice the longer the period from contract formation the more likely that there will be differences of recollection of the agreement made. Indeed in many situations the individuals involved may move on and no longer be readily available to give their account of the agreement made.

If disputes are to be avoided issues should be addressed at an early stage and the most important issue will always be the extent of work included in the contract price. A breakdown of the contract price against the items of work should also be sought to provide a basis for valuation of variations.