Lump Sum Contract CASES
In English law, a lump sum contract is an agreement where a contractor completes a defined scope of work for a fixed, predetermined price, regardless of actual costs.
Definition and Principles
A lump sum contract transfers financial risk to the contractor, who must deliver the agreed result within the fixed price. Any additional costs beyond the agreed price generally fall on the contractor, unless explicitly provided otherwise in the contract.
Common Examples
- Construction and engineering projects.
- Fixed-price renovation contracts.
- Agreements for delivery of turnkey solutions.
Legal Implications
- Contractors bear the risk of unforeseen expenses or cost overruns.
- Variations or changes typically require clear contractual provisions or amendments.
Practical Importance
Understanding lump sum contracts helps manage financial risk, ensures project budget predictability, and clearly defines each party’s obligations, minimising disputes over costs.
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A contractor completed decorating work with some defects. The client refused to pay the balance, arguing the contract was not wholly performed. The court held that as the contract was substantially performed, the contractor was entitled to the full price, less the cost of rectifying the defects. Facts The plaintiff, Mr Hoenig, a decorator, was contracted by the defendant, Mr Isaacs, to decorate and furnish the defendant’s one-room flat for a lump sum of £750. The terms stipulated that payment would be made as the work proceeded, with the balance due on completion. The defendant paid £400 in instalments but
