Dr. Derek Ross of Layng Ross Given the Task to Determine the Meaning and Effect of a Condition Precedent Clause.
Online PR News – 23-April-2010 – – Dr Derek Ross of Construction Dispute specialists Layng Ross www.layngross.com was recently the Adjudicator in a case involving a heavily amended JCT Trade Contract Standard Form in relation to an hotel development that is achieving a certain degree of notoriety within the London legal and construction scene. The amendments were extensive, and were clearly intended to be very onerous from the Trade Contractor’s point of view. This however is a cautionary tale for Employers who amend Standard Forms to make them more onerous for contractors, as the contractors will always be given the benefit of any doubt or ambiguity in the drafting of such amendments.
Derek's task was principally to determine the meaning and effect of a condition precedent clause. Conditions precedent are essentially preconditions that need to be fulfilled before other provisions of the Contract apply. They are used quite legitimately in for instance FIDIC and NEC contracts to deprive contractors of their usual rights to extensions of time and/or additional payment if the contractor does not give written notice of a delaying and/or disrupting event to the Contract Administrator within a certain time limit of the occurrence of such events. Thus, irrespective of the cause of the delay and/or disruption, FIDIC and NEC contractors lose their usual rights to extra time and extra payment if they fail to give notice in the required form within the time limits set out in the Contract, and this is accepted practice by users of these Standard Forms.
The particular condition precedent clause with which Derek was recently concerned had a time limit of 2 months. The content of the notice required within that time frame was also quite onerous, but that is incidental to the point of this story. The point of interest here is what the condition precedent sought to achieve, which was to deprive the Trade Contractor of its entitlements under a specific clause of the Contract if the terms of the condition precedent were not met. So far so good from the Employer’s point of view you may think, except that the Employer’s legal adviser appears to have taken his eye off the ball and specified a contract clause that made no sense, as when Derek studied the clause referred to, he found it contained only Trade Contractor obligations, and no Trade Contractor entitlements whatsoever. However, in the absence of any representations that the condition precedent clause did not accurately represent what the parties had agreed on the day the Contract was signed, Derek had no option but to interpret it precisely in the way it had been written. This accords with the guidance recently set out in the Scottish judgment in Education 4 Ayrshire v South Ayrshire Council ScotsCS CSOH 146 (4 November 2009) where notice was required to be given to a specific individual within South Ayrshire Council, and notice given to a different individual was held to be ineffective.
Thus in Derek's recent adjudication he decided that the condition precedent provision had no efficacy, as even if it was not complied with, it did not exclude any of the Trade Contractor’s entitlements. This finding provoked a somewhat scathing response from the Employer’s legal adviser. His displeasure was doubtless heightened by Derek’s further finding that the exclusion of the Trade Contractor’s contractual entitlements under a particular clause of the Contract, even if that clause had contained Trade Contractor entitlements, would not necessarily have excluded the Trade Contractor’s equivalent right to damages for the Employer’s breaches of contract, assuming that the delaying and/or disruptive event of which the Trade Contractor is complaining also amounts to a breach of contract by the Employer.
Please Note: The foregoing bulletin has been prepared by Layng Ross for the general interest and benefit of readers. It is not intended to be a definitive analysis of the law or of other matters described. Thus no liability is accepted in respect of any reliance placed on any statements made in the foregoing bulletin. Proper advice ought always to be taken before deciding to take, or not to take, action in respect of a specific issue.
ABOUT:- Layng Ross is a UK based specialist in construction dispute resolution services, construction contract claims advice, and also provides neutral mediator, conciliator, adjudicator, arbitrator, dispute adviser and dispute board services.
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Dr Derek Ross
Construction Disputes Resolution
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Surrey KT13 9AN
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