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Developer unable to recover payments he failed to investigate

Posted: 20th December 2016   In: Corporate Commercial

A developer has been told he cannot recover overpayments he made on a building project because he knew when he made them that they might be wrong but he failed to investigate.

The issue arose after the developer entered into an agreement to acquire a number of sites for a construction company. He agreed to pay the cost of building several houses and share the profits with the builders once the properties were sold.

The two sides agreed a costs budget in advance to build five houses and the developer made interim payments as work progressed. The payment requests were round figures unsupported by any evidence. He did not ask for any breakdown and assumed that the build costs were the same as the budget costs.

The relationship then broke down, leaving a further two projects unfinished. The developer claimed that he had overpaid on all seven projects. The judge interpreted the term "build costs" and found that because of the parties' differing understanding of what it meant, the developer had overpaid on all the projects.

He ordered the construction company to refund the overpayments on the incomplete projects on the basis that developer had asked for detailed costs breakdown and had made the overpayments by mistake.

However, he held that the developer was not entitled to recover the overpayments on the completed projects because he had assumed that the payment requests were within budget and had chosen to pay without investigating the figures.

The Court of Appeal has upheld that decision.

Please contact Sing Li if you would like more information about the issues raised in this article or any aspect of contract law.

Posted by: Sing Li
Corporate Commercial
Luton Office