This case has its origin in a somewhat untidy contracting by a total subcontractor.
The main question in the case was whether the total subcontractor (A) was entitled to be paid according to the billing principle, or whether a fixed price had been agreed.
There was no formal contract.
Total Contractor had first received an offer from a subcontractor (B). This offer was presumably deemed to be too high, and so A was approached. The A's were counting on the job, giving up a lineup that at an early stage was referred to as a budget. The budget consisted of R.S items for specific work operations, and the total sum was lower than B's offer. Later, an email was sent with the heading offer, and there were no r.s records, unit prices, circa figures or anything else that could indicate that the works should be done on account.
No formal contract was signed between the general contractor and A.
Liability rights for A were applied for and it concerned both design and execution. A also undertook detailed design of its works.
Among other things, based on these circumstances, the Court of Appeal concluded that the parties had entered into a total subcontracting contract.
It may be of interest to know that the Court of Appeal held that although NS 8417 could not be used directly, it was a relevant source of law. The Court of Appeal's reasoning was, inter alia, that “the contract standards are presumed to express general principles of contract law”.
After A had sent 4 a account invoices, the parties disagreed, and A left the construction site. The direct cause was that the general contractor withheld payment for a account invoice No. 4 as a result of justified objections to A's works. After leaving construction site A sent an “a account” invoice No 5 which was a settlement as if all works were to be paid by bill.
The Court of Appeal came to the conclusion that the parties had agreed fixed price. In its evidentiary assessment, the court went thoroughly into everything that had occurred between the parties prior to A's commencement of its works. There was nothing to indicate that the bill works had been negotiated and the court took the view that the offer sent in a post appeared as an offer for a fixed price.
The fact that A had sent four a account invoices and did not submit documentation such as timesheets to substantiate his claim was contrary to the fact that the billing principle could have been agreed.
There were also examples where A had made several change order claims where A should have additional payment. After all, there is no need to claim additional compensation if you are going to have to pay for all work on account anyway.
The Court of Appeal also pointed out that A had not said anything about its understanding with regard to bill work before the conclusion of the cooperation. This was considered by the Court of Appeal to be contrary to the duty of loyalty that parties have in a contractual relationship. When one understands or should understand that the other person relates to the agreement as a fixed-price contract, one must state that one has a different opinion, and not wait until the cooperation is terminated.
The conclusion was that the parties had entered into a fixed-price contract.