Hoenig v Isaacs [1952] EWCA Civ 6 (13 February 1952)

An interior decorator contracted to decorate and furnish a flat for £750. The work was completed but with minor defects costing £55 to remedy. The defendant refused to pay the balance, arguing the contract was entire and not fully performed. The Court held substantial performance entitled the plaintiff to the contract price less the cost of remedying defects.

Facts

The plaintiff, an interior decorator, contracted with the defendant to decorate and furnish a one-room flat for a lump sum of £750, with payment terms of ‘net cash as the work proceeds, balance on completion.’ The defendant paid £400 in instalments. The plaintiff completed the work by 15th July 1950, but the defendant complained of defects, including a wardrobe door that twisted and a bookshelf that was 2½ inches too short due to faulty measurements. The defendant used the furniture but refused to pay the £350 balance.

The Defects

The Official Referee found that certain items were defective: the wardrobe door would cost £15 to replace, the bookshelf required remaking at a cost of £29.6s.8d., and other minor defects brought the total remedial cost to £55.18s.2d.

Issues

The central legal issue was whether the plaintiff could recover the contract price where the work was completed but contained defects. The defendant argued that this was an ‘entire contract’ requiring complete performance as a condition precedent to payment, relying on the principle in Cutter v Powell.

Judgment

The Court of Appeal dismissed the appeal, upholding the Official Referee’s decision that the plaintiff was entitled to the contract price of £750 less the cost of remedying the defects (£55.18s.2d.).

Lord Justice Somervell

Somervell LJ held that in contracts for work and labour for a lump sum, the defendant cannot repudiate liability simply because the work, though finished, contains some defects. He affirmed the principle in Dakin & Co Ltd v Lee that where there has been substantial compliance with the contract, the contractor is entitled to the contract price less a deduction for the cost of remedying defects.

Lord Justice Denning

Denning LJ explained the approach to lump sum contracts:

When a contract provides for a specific sum to be paid on completion of specified work, the Courts lean against a construction of the contract which would deprive the contractor of any payment at all simply because there are some defects or omissions.

He held that the promise to complete work is construed as a term, not a condition, unless the breach goes to the root of the contract such as abandonment. He also held that even if entire performance were a condition precedent, the defendant had waived it by entering into possession and using the furniture.

Lord Justice Romer

Romer LJ agreed, stating that where a contractor substantially performs his contract but what he supplies has minor defects, it is more equitable to apply the Dakin v Lee principle than to deprive him wholly of his contractual rights.

Implications

This case is a leading authority on the doctrine of substantial performance in contract law. It establishes that in lump sum contracts for work and labour, a contractor who substantially performs the contract is entitled to the contract price less a deduction for the cost of remedying defects. The innocent party’s remedy is to claim damages or set off the cost of remedial work, not to refuse payment entirely. The case distinguishes between breaches that go to the root of the contract (permitting repudiation) and lesser breaches that sound only in damages. It also confirms that acceptance of defective performance may constitute waiver of any right to reject.

Verdict: Appeal dismissed. The plaintiff was entitled to recover the contract price of £750 less £55.18s.2d. for the cost of remedying defects, resulting in judgment for £294.1s.10d.

Source: Hoenig v Isaacs [1952] EWCA Civ 6 (13 February 1952)