The Court of Appeal has provided clarification on 'mistaken' payments.
Here the parties had an oral contract which allowed for one parties 'build costs' to be paid by the other, with overall profit to be shared equally. Interim invoices were submitted periodically, and paid by the other party. However, the party making the payments then claimed that it had not checked that the work being invoiced had actually been done in a way that would ensure overall profitability. It sought the repayment of the invoices, on the basis that it had mistakenly paid them.
The Court of Appeal held that he could only claim those back over-payments made on completed developments if he could show that there was either fraud or misrepresentation by the contractor because these were ‘closed transactions', which could not be re-opened to challenge.
The lessons? If you contract with someone in a way which permits interim invoices, make sure there is a mechanism in place for establishing what is it for and whether it is payable. Ideally, this should be something verifiable. Some contracts break the work down to discrete stages, and then so long as stage 1 is complete, you can be satisfied you've got what you pay for. There other obvious point is to make any challenges to the invoice before making payment. After you pay, it will be difficult to claim mistake, unless you can show fraud or misrepresentation
The case? Case ref: Graham Leslie v Farrar Construction Ltd  EWCA Civ 1041
The Court of Appeal accepted that he could claim for overpayments in the developments that were still ongoing. However, it ruled that he could only claim back overpayments made on the completed developments if he could show that there was either fraud or misrepresentation by the contractor because these were ‘closed transactions’.