"OUTSIDE COSTS"

Evening Post, Volume CXVII, Issue 127, 31 May 1934, Page 13

"OUTSIDE COSTS"

CONSTRUCTION WOEK

MEANING OF THE WORDS

SUPREME COURT CASE

Interpretation of'the meaning of the •words "outside costs" in an agreement for. thebuilding of certain premises in Hastings was sought in a case of particular interest to builders and others ■* associated with contracting work which came before his Honour the Chief Justico (Sir Michael Myers) in the Supreme- Court1. The plaintiffs were Trevor Eros., Ltd., contractors (Mr. D. Perry), and the defendants Westcrman and Co., Hastings, drapers (Mr. C. Buff). The agreement between- the parties was made on March 10, 1932, and the Court was asked to decide whether the words "outside costs" used in the agreement meant outside costs to the employers (the defendants) or outside costs to the contractor (the plaintiffs). His Honour held that the words meant the outside net costs to the contractor. TERMS OF 'AGREEMENT. His Honour said it appeared that the agreement was drafted ana settled by a layman without legal advice, and it. might bo for all he could say that the construction ho thought must be placed upon the agreement was not what the draftsman intended. But what he had to do was to ascertain the intention of the parties not from any oral evidence that the draftsman if called might give as to what he intended, but from the words which he actually used in the agreement. The agreement said: '' The contractors (that is, the plaintiffs) have covenanted to carry out such work according to the said plans and specifications at. the following outside c.osts, that is to say, (a) general contract, ten thousand three hundred and ten pounds (£10,310); (b) emerald pearl granite, two hundred and seventy-fiye pounds (£275); (c) window backs, etc., seven hundred and six pounds (£706), a total of eleven thousand two hundred and ninety-one pounds (£11,291)." "The whole questio*n between the parties," stated his Honour, "is whether the words 'outside costs ' mean outside :or: maximum gross costs, (which would include the contractor's profit) or outside net costs (which would not): or, put in another way,,; whether: they mean cost to the owner or cost to the contractor. If the agreement ended with the .extract .that I haye .'quoted I would have no difficulty in concluding that the words meant outside gross cpsts, because in the ordinary building contract the price tendered by the contractor is a gross price and includes his profit. In this, case, however, the contract was not such an ordinary building contract. The agreement continues as follows: 'It is agreed'that the contractors' profit fee shall be ten per centum (10 per cent>) on" the net cost of materials and labour to be paid at the times and in the manner hereinafter mentioned, provided, however, that should the total net cost' of the completed works in accordance with the above-mentioned plans and specifications be less than the said sum of eleven thousand two hundred aud ninety-one pounds (£11,291), .then the owners will pay the contractors as and by way of special profit fee a bonus of twenty-five per centum (25 per cent.) on the difference between the total net cost and the above sum of eleven thousand two hundred and ninety-one pounds (£11,291), provided that in' no case except for authorised additional work shall t'ho total net cost exceed eleven thousand two hundred and ninety-one pounds (£11,291).' ' "OTTTSIDE NET COSTS." : "The contract," his Honour continued, "must of course be read as a whole, and in my opinion—so reading itit "■■ is clear; : that: the words' 'outside costs' must be construed as meaning ' outside net costs.' The owners stipulate that the total net cost shall not exceed £11,291, which is the 'same figure-as that previously mentioned as the figure of 'outside costs'; and they further, agree that if the total net cost is less than £11,291 they will pay the contractor a special bonus of 25 per cent, on the difference between the total net cost and £11,291:' Mr. Duff's argument that the words 'outside costs' must be read as meaning outside gross costs involves.the necessity of entirely disregarding, and' treating as if it were absent,.the word 'net' wherever it occurs in the portion' of the agreement that I have set out above. Clearly this cannot be done;'it would be contrary to the cardinal rules' and first principles of construction..; Ido not think that, there is any ambiguity at all in the agreement and I answer the question submitted to me by saying that the words 'outside costs' mean outside net costs, that is to say, the outside net costs to the contractor."