Ghosh v Hanover Gate Mansions Ltd  UKUT 290 (LC)
29th November 2019
A contact between a landlord and a managing agent was found to have come into existence when the performance of management services commenced and not on the date of the landlord’s payment for the services provided. In the circumstances, the particular contract was a qualifying long term agreement and the statutory consultation requirements under section 20 of the Landlord and Tenant Act 1985 were applicable.
A draft contract between the landlord and the managing agent was drawn up on 12 June 2017 with its terms largely agreement. The agreement was never signed. Notwithstanding this, the managing agent commenced the provision of its services on 12 June 2017 and the landlord did not take any steps to prevent the performance of the agreement. The first payment for the provision of services was made around 27 June 2017.
First instance decision
The Tribunal held that the contract between the agent and the landlord was, in the absence of a signed written contract, an oral contract evidenced by both performance and payment. The Tribunal purported to apply the case of Brogden v Metropolitan Railway Co (1877) 2 App. Cas. 666 held that such a contract could not come into being until a payment had been made. Seeing as payment was not made until 27 June 2017, the agreement was not for a period of 12 months or more and therefore was not a qualifying long-term arrangement.
The issue on appeal was when the contract between the agent and the landlord took effect and whether, therefore, it was a qualifying long-term agreement.
Decision on appeal
The upshot of the proceedings before Tribunal was that it was admitted that:
- there was a contract between the landlord and the managing agent, and
- that services were provided from 12 June 2017 onwards.
On appeal, the Elizabeth Cooke, Judge of the Upper Tribunal, found that the only realistic finding open to the Tribunal on the terms of the engagement was that it was as per the draft unsigned agreement.
This left one issue to determine on appeal: at what date did the contract take effect? Judge Cooke reviewed the decision in Brogden. She considered, quite correctly, that this decision was not authority for the proposition that, in a contract by performance, payment is necessary for a contract to arise. Brogden is simply authority for the proposition that a contract may arise by performance in the absence of a formally signed agreement.
The performance relied on in Brogden was the supply of coal. By merely accepting the deliveries of coal, the purchasing railway company accepted the terms of the contract as amended by the coal supplier. No reference is made in that judgment as to when the coal was paid for. The contract therefore came into being when the coal was accepted. The date of payment was not relevant. Judge Cooke applied this reappraised ratio to the facts of the instant case and allowed the appeal. The contract came into being from the date of performance of the agents’ management functions under the drafted contract. The date of payment for those services was irrelevant. The management agreement therefore lasted 12 months and was therefore a Qualifying Long-term Agreement.
This case does not contain any new principles of law, but it demonstrates the application of the rules of the law of contract in the context of the provision of services. The decision also provides clarification that the payment of a fee is not necessarily required for a contract to arise by the conduct of the parties.
The fact that one party has provided their services as discussed between the parties and the other party has accepted the provision of services is likely to be enough for the contract to arise at the date of first supply. This rule is useful for those considering the length of engagement.
It is not always formal signing of a contract or indeed payment of monetary consideration that forms a contract. In many circumstances a supply contract can come into being without a signed agreement or payment, when one party begins to perform the contract as envisaged and the other allows him to do so.
The date of performance and not the date of payment will nearly always be the crucial date when considering when a contractual relationship began.