Challenging contractual provisions for uncertainty

Vinci Construction UK Ltd v Beumer Group UK Ltd [30.08.17]

The Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Ltd [31.08.17]

 

Challenging contractual provisions for uncertainty

In two recent cases The Technology and Construction Court (TCC) has demonstrated the court’s reluctance to hold contractual provisions void for uncertainty. The first case considered contractual provisions relating to sectional completion and liquidated damages, and the second considered the enforceability of a limitation of liability provision.

Vinci Construction UK Ltd v Beumer Group UK Ltd

Background

This is the second litigated case for these parties relating to the same construction project. We reported on the first case last year, where the High Court held that adjudicator’s decision should not be enforced where a party had advanced factually inconsistent cases in two separate adjudications relating to the same project.

Vinci employed Beumer as its subcontractor in relation to works on the baggage handling system at Gatwick Airport. The subcontract provided for sectional completion, with separate completion dates and different liquidated damages for each section. Delays occurred in two sections (sections five and six), and Vinci sought to levy liquidated damages according to the contract. Beumer argued that it was unclear from the subcontract documents which elements of the delayed work fell into section five, and which into section six. The liquidated damages clause should therefore be declared void for uncertainty. Vinci disagreed, and sought a declaration from the TCC in relation to this point.

Decision

The TCC held that, although the sub-contract documents made it challenging to allocate the works, it was not impossible. The provisions relating to sectional completion and liquidated damages were therefore enforceable. If there was uncertainty or disagreement as to which work fell into which section, this could be resolved by factual or expert evidence. Parties should therefore ensure they take great care when drafting provisions regarding sectional completion, to ensure that the mechanisms are sufficiently detailed to allow the agreed regime to be implemented. This case is a useful reminder of how the rules of contractual interpretation work in practice and how clear drafting is fundamental.

 

The Royal Devon and Exeter NHS Foundation Trust v ATOS IT Services UK Ltd

Background

In 2011, the Trust entered into a five year contract with ATOS for the provision of an electronic document management system and associated services. Ongoing issues relating to defects with the system eventually led to the Trust terminating its contract with ATOS, claiming damages for wasted expenditure due to the failure of the system. ATOS argued that this claim for wasted expenditure was excluded by the contract, and in any event, any damages were subject to a liability cap. The TCC tried these two points as preliminary issues.

Decision

The TCC held that the damages claim was not excluded by the contract, for reasons outside the scope of this update. In relation to the liability cap, the TCC held that it was valid and enforceable. The court agreed with the Trust that the wording was unclear, but stated that the mere presence of such a provision suggested that the parties had intended a limitation to apply. It was for the court to determine whether it could be interpreted with sufficient certainty to render it enforceable. The TCC held that although the provision could give rise to competing interpretations, only one of those interpretations made commercial sense, and it was open to the court to prefer this interpretation.

Comment

These cases emphasise how each contract will be interpreted on its own language and in its own context, and how the court will go to some lengths to ensure a commercially sensible meaning. However, it remains important to take the time to draft clear wording to avoid ambiguity and to ensure that the contracts can operate as intended in practice.