Share:
By Freddy Ashe, Trainee
In early 2023, the Claimant, Jaevee Homes Ltd (“Jaevee Homes”), a property developer, entered into a contract with the Defendant, Mr Steve Fincham, a demolition contractor, for demolition works at a site in Norwich. After an initial meeting on site on 3 May 2023, and further negotiations via WhatsApp, a price of £248,000 was agreed for the works.
After a history of unpaid invoices, Mr Fincham issued a statutory demand against Jaevee Homes and intimated that he would seek a winding up petition. Jaevee Homes secured an Order restraining this petition from being presented, but Mr Fincham subsequently referred the dispute to adjudication. Following the decision in that adjudication, Mr Fincham commenced proceedings to enforce the decision in the TCC. At the enforcement, the Court found in favour of Mr Fincham and Jaevee Homes subsequently commenced a Part 8 adjudication.
The Short Form Sub-contract, sent via email on 26 May 2023 by Jaevee Homes, was the result of an extended exchange of correspondence and negotiations via WhatsApp from 17 May 2023. The origin of the Contract was in dispute with Jaevee Homes arguing it was finalised on 26 May 2023 via its standard form, and Mr Fincham arguing it had been concluded on 17 May 2023 via WhatsApp negotiations.
In July 2024, Mr Fincham commenced an adjudication seeking the outstanding sum due to him of £125,650.38.
The First Adjudication
Jaevee Homes argued that the Contract was agreed on 26 May 2023 and that Mr Fincham accepted this by commencing works on site on 30 May 2023. Jaevee Homes alternatively argued that the Contract was agreed by WhatsApp messages on 17 May 2023 following extended exchanges between the CEO of Jaevee Homes and Mr Fincham. Crucially, Jaevee Homes submitted that these WhatsApp messages made clear that payment applications were to be issued once a month.
Mr Fincham agreed that the Contract was agreed by WhatsApp on 17 May 2023, and that it was agreed that payment would be made every 28-30 days following the issue of an invoice.
The adjudicator found in favour of Mr Fincham, awarding he be paid the outstanding sum of £125,650.38 plus interest.
On contract formation, it was decided that the WhatsApp messages of 17 May took precedence over the Short-Form Sub-contract issued on 26 May. The WhatsApp messages evidenced agreement to conclude the contract itself, rather than any pre-contract discussions. The same messages supported an argument from Mr Fincham that the parties agreed that invoices would be submitted, and payment would be made, 28-30 days following receipt of such invoices.
The Part 8 Proceedings
Following enforcement proceedings, initiated by Mr Fincham, in which the Court ruled that Jaevee Homes pay the sum of £137,472.12 plus costs, they issued Part 8 proceedings.
Jaevee Homes argued that, firstly, the Contract had not been concluded on 17 May 2023. This was because other essential terms for a contract had not been agreed, such as an agreement for the duration of the works and a start date. It also submitted that payment terms had not formed part of the agreement.
Mr Fincham, on the other hand, argued the opposite – that the Contract had been concluded on 17 May 2023 and that the WhatsApp discussions between the Parties were clear on contract price and a start date.
It was found that:
- The Parties intended that the works should be started as soon as possible, and had agreed when the Defendant would come to site;
- The scope of works had been agreed;
- A price had been agreed;
- There was no express indication that the final terms of the agreement between the Parties depended upon agreement as to any other matter, such as incorporation of the Claimant’s standard terms of contract;
- There was clear evidence, via WhatsApp, of a concluded agreement.
On payment terms, Jaevee Homes argued that the agreement between the Parties provided for only one payment application per month. They further argued that the WhatsApp messages made no provision as to how to calculate monthly instalments. On the authorities, this meant that the Scheme for Construction Contracts would step in to fill the gaps. They also pointed out that the invoices were not intended to be payment notices under the Construction Act and the Scheme for Construction Contracts.
Mr Fincham, on the other hand, argued that a reasonable recipient would, in fact, have understood that the invoices were applications for payment. They requested payment, the WhatsApp messages had specifically referred to payment following an invoice, and Jaevee Homes understood that the first two invoices were applications and had described them as such in internal emails.
The Decision
On the Contract, the Judge found that the WhatsApp messages of 17 May 2023, while informal, were sufficient evidence of a concluded contract.
On the invoices, the Judge found that the invoices were indeed applications for payment, because this is what an objectively reasonable recipient would have understood them to be. Jaevee Homes’ arguments concerning the requirements of the Contract, the application of the Scheme and the requirements of invoices were divorced from the factual context of how contracts such as these operate. However, it was found that Mr Fincham was only entitled to raise one invoice per month. He had raised two in the second month, and consequently the second invoice was an invalid application for payment.
Conclusion
This case re-affirms that a contract can be formed through informal digital communications if the essential elements are present. Parties should therefore be extremely cautious when carrying out informal negotiations, as in spite of the circumstances, the court looks at whether the parties objectively agreed on the key terms of the contract.