Possible Loopholes in the Public
Sector Contracts
Anthony Hussey
NOTICE PROVISIONS
Clause 10.3.1
“If the Contractor considers that under the Contract there should be
an extension of time or an adjustment to the Contract Sum, or that it
has any other entitlement under or in connection with the Contract,
the Contractor shall, as soon as practicable and in any event within
twenty working days after it became aware, or should have become
aware, of something that could result in such an entitlement, give
notice of this to the Employer’s Representative”. (Emphasis added)
2
Akenhead J in WW Gear Construction Limited v McGee Group
Limited [2010] EWHC 1460 (TCC) related to Clause 4.21 of the JCT
Trade Contract which provided:
“The Trade Contractor’s application shall be made as soon as and in
any event not later than two months after it had become, or should
reasonably have become apparent to him that the regular progress of
the works……..was likely to be affected…….”. (Emphasis Added)
The Judge found:
“There is no reason to construe this part of the sub-sub-clause in any
way other than in effect giving the Contractor the option of making its
application under clause 4.2.1 at the later of the two alternative
stages, if as a matter of fact they turn out to be different”
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DISCLAIMERS
1.9.1
………..entire Agreement………….Neither party has relied
on any other written or oral representation, arrangement,
understanding or agreement.
1.10.2(1) The Employer has no liability whatsoever to the contractor
in contract, tort, under statute, or any other basis
whatsoever (including negligence and breach of statutory
duty or other duty) in connection with Background
Information.
1.10.2(2) The Employer has not made and does not make any
warranty representation, or undertaking in connection with
Background Information.
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Sale of Goods & Supply of Services Act 1980, Sections 45 & 46
45.—(1) Where a person has entered into a contract after a misrepresentation has
been made to him by another party thereto and as a result thereof he has suffered loss,
then,….the person making the misrepresentation………….shall be…..liable……………
unless he proves that he had reasonable ground to believe and did believe up to the
time the contract was made that the facts represented were true.
46.—(1) If any agreement (whether made before or after the commencement of this
Act) contains a provision which would exclude or restrict—(a) any liability to which a
party to a contract may be subject by reason of any misrepresentation made by him
before the contract was made, or (b) any remedy available to another party to the
contract by reason of such a misrepresentation, that provision shall not be enforceable
unless it is shown that it is fair and reasonable.
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BREACH OF CONTRACT CLAIMS
•
Article 3:
“The initial Contract Sum is a lump sum and shall only be adjusted when
the contract says so”.
• Article 4:
“The Contractor has included in the initial contract sum allowances for all
risks………..and other circumstances that may affect its performance of the
contract, whether they could or could not have been foreseen…………”
• The Contract provides for the contract sum being adjusted only in the
event of a Compensation Event.
• Compensation Events do not include employers breach of contract unless
the employer’s breach causes delay (Schedule K, Part 1).
• Apart from Item 16, Schedule K, is the Employer exempt from its own
breach of contract?
• If not, how do you assess the Contractor’s entitlement?
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Negligence (Clause 3.5)
Version 1.5:
“The Employer shall indemnify the Contractor against liability the Contractor incurs in
the course of performing the Contract, to the extent that the liability is:
1. Caused by the negligence of the Employer;
Version 1.8:
“The Employer shall indemnify the Contractor against:
1. Liability for death, injury, or illness of any person or loss of or damage to any
physical property that the Contractor incurs in the course of performing the Contract to
the extent caused by the negligence of the Employer“
Lest it be suggested that the concept of indemnity only applies in respect of a third
party claim, this is not the case. The Longman Dictionary of Law, 7th Edition at page
298 defines “Indemnity” as including:“2. Compensation for injury or loss”.
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Case Law on Exclusion Clauses
•
Keating on Construction Contracts, 9th Edition, Para 3-072 explains “Exclusion
Clauses” as follows:“The term is intended to refer to clauses variously termed exclusion, exception,
exemption or limitation clauses. It is a convenient description of clauses relied on by a
party who would otherwise be under a liability in contract to exclude or limit that liability.
Such clauses…………are construed against the party seeking to rely on them”.
•
In the case of Chiemgauer Membran-und Zeltbau GmbH (formerly Koch
Hightex GmbH) v New Millennium Experience Co Ltd (formerly Millennium Central
Limited) (No 1) (1999) CILL 1595, CA (3rd November 1999), the English Court of
Appeal held the following clause not to be a condition precedent:“The provision of a guarantee and performance bond is a condition precedent to any
liability or obligation of the New Millennium Company under the contract”.
•
In Walsh v Jones Lang Lasalle Limited [2009] 4 IR 401, the Vendor of a
commercial premises sought to rely upon a disclaimer in the brochure to the effect that
the purchasers should not rely upon the floor areas set out in the brochure. It was held
that the disclaimer clause was not operable.
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Conciliator’s / Arbitrator’s Discretion
•
Clause 10.6.4 states:“Instead of sub-clauses 10.6.1, 10.6.2 and 10.6.3 applying, the Employer’s
Representative may conclusively direct that additional or substituted work
required as a result of a compensation event be determined (in full or in part)
on the basis of the cost………….stated in the Schedule Part 2D………”.
•
ER is likely to apply the schedule to any determination other than a
compromise, but what about a conciliator or arbitrator?
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CIF Form of Sub-Contract for use with
Public Sector Contracts
• Different philosophy
• Clause 10(b)(6):
“Where the adjustment to the Sub-Contract Sum arises as a consequence of a
Compensation Event, the method of its determination shall correspond to that being
applied by the Employer’s Representative under Clause 10.6 of the Main
Contract……”
• Clause 10(c)(5):
“To the extent that the Sub-Contractor is entitled to compensation for delay due to a
cause other than a Compensation Event, the Sub-Contractor is entitled to be
reimbursed its reasonable additional costs incurred”.
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