Lloyd's Maritime and Commercial Law Quarterly
LIABILITY FOR WORK DONE WHERE CONTRACT IS DENIED: CONTRACTUAL AND RESTITUTIONARY APPROACHES
Man Yip * and Yihan Goh **
This paper explores the divide between the law of contract and the law of restitution in dealing with the different situations that arise from one party commencing work prior to the conclusion of a formal contract. It argues that contract and unjust enrichment each have a proper role to play in dealing with such cases. First, it argues against a purely contractarian view that such cases should be exclusively resolved by the law of contract, through an implied collateral contract. Such a technique, applied vigorously, would result in nullifying the concept of “essential terms” and an artificial construction of parties intentions. Second, it dispels the myths that the law of unjust enrichment is inadequate to deal with the problem, by clarifying the enrichment test and the unjust factor to be applied in such cases. It will be shown that the defendant s assumption of the risk of financial responsibility for the benefit is key to establishing these two elements of the claim.
I. INTRODUCTION
It is not unusual for parties to commence work while negotiations on the contractual terms that are to govern their relationship are continuing. However, if negotiations break down and no formal contract is concluded, contractual,1 as well as restitutionary,2 disputes may well arise between the parties as to liability for the work already done. That different bases of liability are possible is not problematic in itself; problems arise when different courts come to different conclusions based on the same facts.3 Putting aside issues of evidence, this generates uncertainty in the law. Prominent commentators in this area generally advocate using principally one area of the law to deal with such disputes so as to avoid any uncertainty. Some of these commentators posit the expansion of doctrines which are
* Assistant Professor, School of Law, Singapore Management University.
** Assistant Professor, Faculty of Law, National University of Singapore.
We would like to thank Professor Tiong Min Yeo and Associate Professor Chee Ho Tham for their helpful comments on the earlier drafts of this paper. We are also grateful for the comments from the anonymous referee. All errors remain our own.
1. Way v Latilla [1921] 3 All ER 159.
2. British Steel Corp v Cleveland Bridge and Engineering Ltd [1984] 1 All ER 504; Vedatech Corp v Crustral Decisions (UK) Ltd [2002] EWHC 818; Yeoman’s Row Management Ltd v Cobbe [2008] UKHL 65; [2009] Bus LR 12; [2008] 1 WLR 1152; Whittle Movers Ltd v Hollywood Express Ltd [2009] EWCA Civ 1189; [2009] 2 CLC 111.
3. See, eg, RTS Flexible Systems Ltd v Molkerei Alois MUller GmbH & Co KG (UK Production) [2008] EWHC 1081 (TCC); rvsd [2009] EWCA Civ 26; [2009] BLR 181; rvsd [2010] UKSC 14; [2010] Bus LR 116; [2010] 1 WLR 154.
LLOYD’S MARITIME AND COMMERCIAL LAW QUARTERLY
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