Projects & Construction Law Update

All all too often, construction works are commenced without the parties having finalised the terms of their engagement. AMEC was engaged as a specialist concrete sub-contractor on two large construction projects. It appointed Arcadis to perform certain design works. After conclusion, the works relevant to one of the projects were found to be defective – a lot so that the structure might need to be demolished and rebuilt.

While AMEC settled its dispute with the main contractor, it sought problems of £40 million from Arcadis, alleging that the defects related to design. The Court had to consider (i) if the parties had been working to an agreed group of conditions; and (ii) if those terms included a cover on Arcadis’ responsibility. Initially, in early 2001 (and prior to the design and works commencing), the parties decided to work under a framework / protocol agreement, which would be intended to govern all projects for which Arcadis was engaged by AMEC.

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During negotiations, multiple rounds of correspondence (and draft terms) were exchanged between the parties. However, no agreement regulating the works was finalised ever. Not surprisingly, works commenced in March 2002 and were completed by way of extensions to a financial limit put in place around once. In your choice at first example, Coulson J kept that, while a “simple contract” had been formed between the parties, no specific term had been agreed limiting Arcadis’ liability for defects.

Arcadis appealed and the Court of Appeal overturned your choice of the TCC. In reviewing the correspondence exchanged between the parties, the Court of Appeal centered on a contact dated 8 November 2001 where AMEC’s commercial director delivered Arcadis a draft protocol agreement and an in depth set of terms and conditions. Throughout the judgement, we were holding known as the “November terms”.

Schedule 1′ (which was unhelpfully left empty). In January 2002 Other critical correspondence included a further set of conditions which were circulated. These conditions sought to vary the November conditions and proposed a limit of liability in the sum of £110,000. Neither party could create a full set of documents circulated at that right time but evidence was produced, in the form of an interior memorandum, showing there were specific discussions about the scope of the responsibility clause.

Due to the lack of documentary evidence, and an obvious absence of agreement between your ongoing celebrations, the Court found that these terms could not override the November terms. Correspondence between your celebrations in March 2002 was analyzed also. Again, draft terms were issued which sought to make amendments to Clause 2A. However, the Court again made a decision that none of these further pieces of terms exchanged between your parties have been “obviously and unequivocally accepted” by Arcadis.

By May 2002, there is still no indication of contract on the modified Clause 2A, which was further evidence for the Court that the November conditions remained unchanged by the negotiations. Ultimately, the Court agreed with Coulson J that a “simple contract” had been formed between the parties in November 2001 which was the “interim contract” that the parties were working to.

Gloucester LJ concluded that your choice of the TCC should be overturned to “align with commercial good sense”. She said that Arcadis would never have decided to terms without a cap on liability had they known these were the final terms of the contract. This full case highlights the risk for contractors and consultants of commencing works before finalising written conditions. Of course, best practice dictates that parties ought never to start works before agreement has been finalised and performed. Failing that, contractors should ensure that interim conditions have been obviously agreed which both parties are certain as to the set of conditions they will work to. As always, parties should keep a precise record of all conferences and correspondence.

Contractors and consultants should be especially careful to avoid unexpected responsibilities and ensure they have agreed a limitation on liability. Read the full common sense here. Allocating floor condition risk? In this case, a sub-contractor sought declarations from the TCC in regards to what would total a variation teaching under an amended JCT agreement. The TCC was required to consider the range of work that were decided and determine whether or not instructions released by the contractor dropped within that range. E.On was a contractor involved in a considerable home development in central London. It sub-contracted Clancy Docwra Ltd (CDL) to excavate the necessary trenches and set up the pipework for the task.