Construction Matters Autumn 2007

Welcome to the autumn edition of Construction Matters.  Already this year we have seen a number of interesting cases within and related to the construction industry.  In this edition we look at some of the cases you need to know about and highlight some important issues impacting on our industry.

Case Law Update

Liquidated Damages

Chattan Developments Limited v Reigill Civil Engineering Contractors Limited
The parties to a JCT 1980 contract had deleted the LAD clause and had agreed orally that damages would not be claimable.  The issue which went before the Court under Section 69 of the Arbitration Act 1996 was whether this arrangement had the effect of excluding a claim for unliquidated damages.  The Court, applying Temloc v Errill, upheld the Arbitrator's decision on both the law and the facts - that this indeed was the effect of the arrangement.

Informal Agreements not Binding?

Monavon Construction Limited v Davenport (No. 1)
This case concerned an oral agreement made in a coffee shop for work to complete the refurbishment of an expensive Knightsbridge House.  The issue was whether or not the arrangement did include a price cap of £100,000 as the employer contended. The Court found that because the precise scope of the works had not been defined the £100,000 was only a guide figure and not contractually enforceable.

Architects Duties

Plymouth and South West Co-operative Society Limited v Architecture, Structure and Management Limited
In an action against the architects for professional negligence, allegations  were made of failure to advise on a suitable contract strategy and to advise on cost saving opportunities during the works.  The claimant was successful and accordingly the additional costs incurred (in consequence of the contract strategy pursued) and the cost savings not made, were recoverable.

Extension of Time Time at Large
Multiplex Construction (UK) Limited v Honeywell Systems Limited

Wembley continues to produce interesting litigation and earlier this year the Court had to decide issues about conduct, time at large and extensions of time.  The judgment examined the circumstances in which time under a construction contract may be regarded as being at large, particularly looking at the situation when one party, by its conduct, renders the contract time machinery inoperable.

The Court ruled that acts by an employer that were perfectly legitimate under the construction contract in question might still constitute preventative acts causing time to be at large, if they caused delay beyond the specified completion date. 

At the other end of the scale Reinwood Ltd v Brown & Sons is a case which contained typical construction industry scenarios. A project to construct residential apartments had overrun its contractual completion date. The contractor applied to the architects for an extension to the completion date, but before an extension was confirmed the employer served a notice of non-completion and notified of its intention to deduct contractual liquidated and ascertained damages from the amount payable to the contractor under the interim certificate. 

The Court amongst other things had to consider whether the extension of time was valid because it had not been granted in the form of a certificate but rather was recorded in the architect's letter.
The Court held that on the true construction of the appropriate contract clause, no particular form was required for the granting of extension of time in writing and there was no room for doubt that the architect's letter had been sufficient to fix the new completion date. 

A formal certificate might have been useful and would provide a formal record of the new date but was not a requirement for the extension of time to become effective.