We are currently seeing a flurry of cases in which the parties fail to conclude a written construction contract. Normally, the courts will endeavour to find a contract where the parties have agreed most of the pertinent terms. However, in this case there was a sting in the tail. Although every version of the contract passing between the parties contained a cap on the consultant’s liability, when the consultant refused to sign the contract, the judge found that the resulting contract was a simple one which did not include a liability cap. The message? Do not prevaricate about signing the building contract, or you could find that you cannot rely on the clauses which you have included to protect your position.
Confusingly in this case, both parties changed their names. Therefore the judgement refers to Arcadis throughout as Hyder and AMEC as Buchan.
Buchan was engaged as the specialist concrete subcontractor on the Wellcome Building and Castlepoint Car Park. When the car park was found to be defective, Buchan reached a deal with the main contractor, Kier, and then claimed £40 million from Hyder in relation to defective design works. Hyder defended the claim on the basis that it had entered into a simple contract with Buchan under which liability was capped at £600,000.
In granting the declaration sought by Buchan that the parties had agreed no such limitation of liability, the judge found that, although all three of Buchan’s proposed versions of the design agreement had contained limitations of liability, the parties had failed to enter into any of these versions of the agreement and had instead entered into a simple agreement which did not contain such terms.
The judge noted that this might appear harsh on Hyder, but he criticised it for failing to respond promptly to Buchan’s communications, and for remaining ambiguous about which terms it agreed to. He noted:
This case starkly demonstrates the commercial truism that it is usually better for a party to reach a full agreement (which in this case would almost certainly have included some sort of cap on their liability) through a process of negotiation and give-and-take, rather than to delay and then fail to reach any detailed agreement at all.
The lesson? Consultants may be tempted to prevaricate about finalising a contract. The resulting uncertainty as to which terms apply might allow them to pick and choose the contract clauses that benefit them, such as liability caps, whilst dissuading those they are advising from bringing an action against them. This case sends a strong message to consultants that this course of action is incredibly risky.