Henry Boot Construction Ltd v Alstom Combined Cycles
The case of ‘Henry Boot Construction Ltd. v Alstom Combined Cycles’ [1999] set a precedent that contractor’s rates do not become reasonable or unreasonable by the execution of variations.
The extent to which bill of quantities (BoQ) rates are applicable for valuing variations in the works, is a common cause of conflict on projects, particularly when there are substantial changes in quantities. This can be a particular issue if the rate in question is abnormally high or low due to the fact that an error has been incurred. Contractors argue that abnormally low rates compound losses, while clients point out that abnormally high rates exaggerate contractor profits.
In the case of Henry Boot Construction Ltd. v Alstom Combined Cycles, Henry Boot Construction Ltd. was employed by Alstom to undertake civil engineering works at a power station. Boot quoted a price for temporary sheet piling and this figure was included in the contract. As the works proceeded however, variation instructions affecting the sheet piling were issued.
Boot’s price was found to have been calculated incorrectly, meaning that the additional quantity required by the variation would have given them a large profit. Boot argued that the contract rates must be adhered to whereas Alstom argued that a fair valuation should be made.
At the trial, the judge emphasised the importance of the contract rates, ruling that they were ‘sacrosanct, immutable, and not subject to correction’ on the basis of one party’s dissatisfaction with them. He referred to Clause 55(2) in the relevant ICE Standard Form (6th ed.) contract which stipulated that there should be no rectification of errors, omissions or estimates, and that a mistake in a rate or price bound both parties equally.
The Court of Appeal endorsed the judge’s ruling in 2000, confirming that pricing errors do not allow the parties to adjust the rates.
The rates may however be adjusted where they are used to value variations:
- Where the works are not executed under similar conditions.
- Where the rate is rendered inapplicable by a substantial change in the quantities.
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