Legal Updates

Commercial Law – Implied Contractual Term – Letter of Engagement

The case of Weetwood Services Ltd v Ansvar Holdings Ltd [2007], concerned the implication of a term of a contract. The defendant occupied a site on which it planned to develop a car showroom. It received an abatement notice from the local authority concerning the unauthorised creation of a culvert for a stream on the site. The existence of the culvert affected the planning permission for the proposed car showroom.

It was the intention of the authority that the culvert be removed and replaced by an open channel stream. The defendant engaged the services of the claimant engineering company to provide a report on the culvert. The claimant was asked:

• whether the culvert was capable of handling the volume of water ever likely to pass through it (referred to as the “1 in 100 year test”); and
• whether the previous stream could be reinstated within a channel 10m wide along the north landing.

By the terms of the engagement letter, the claimant undertook:

• To carry out a topographical survey;
• To assess the catchment hydrology to give culvert inflow hydrographs for return periods of 5, 25, 50 and 100 years;
• To build an HEC-RAS model of the watercourse with the culvert in place and with the replacement channel; and
• To run the two models for the various return periods and 'report on' the results.

In December 2001, the claimant provided a report which concluded that the culvert was inadequate. The defendant took the view that the report did not comply with the letter of engagement, in that insufficient calculations for the two models had been provided, only the results.

The claimant subsequently provided some further information, though not to the satisfaction of the defendant, who refused to pay the fee of around £5,000. The claimant then issued proceedings.

The judge held that the limit of the claimant's obligation under the letter of engagement was to provide the results of the mathematical modelling, without more. The defendant subsequently appealed.

The issue was whether by the wording of the engagement letter, or by an implied term (the defendant's alternative argument), the claimant had been in breach of contract in failing to provide the basis of the results of the modelling which it had undertaken.

The appeal would be dismissed.

It was held on appeal that on the true construction of the engagement letter, the claimant had not undertaken to report the calculations involved in its report, only the results. The suggested implied term was therefore not necessary for business efficacy. It was therefore decided that the purpose of the engagement of the claimant was to determine the potential for flooding, which the information that the engineers had provided had done.

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© RT COOPERS, 2007. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.