23 January 2019 | Firm news | Article by Matthew Stevens

Allocating the risk of ground conditions in a construction contract: a cautionary tale

The recent Technology and Construction Court (TCC) decision in the case of Clancy Docwra Limited v E.ON Energy Solutions Limited [2018] EWHC 3124 (TCC) highlights the importance of clearly defining the scope of contract works and the inherent risks in appending pre-contract documentation to a construction contract.

Background

The contractor, E.ON Energy Solutions Limited (E.ON) retained sub-contractor Clancy Docwra Limited (CDL) to install an underground district heat network (UDHN) at the Barts Square Development in Central London. E.ON used a Joint Contract Tribunal (JCT) Standard Building Sub-Contract with a bespoke schedule of amendments to apportion ground risk to CDL.

There was some ambiguity as to what CDL had tendered for which was not cleared up in the clarification process. However, CDL did expressly exclude some items from its works.

The dispute

A dispute arose and CDL sought a declaration from the court as to the scope of the sub-contract works and its entitlement to variations. CDL also sought rectification of the contract to bring into effect the alleged common intention of the parties.

CDL relied on restrictions stated in the tender documents (appended to the contract as the ‘Numbered Documents’) that allowed them to carry out the works in an unrestricted corridor and without the need for breaking out of rock or dealing with obstructions. The sub-contract works were defined in the sub-contract as “the works referred to in the Sub-Contract Agreement and described in the Numbered Documents”.

E.ON therefore alleged that CDL had assumed the risk of the ground conditions by virtue of a broadly worded ground risk provision stating that CDL was deemed to have inspected and examined the site.  They also alleged that a priorities clause stating that any inconsistency between the Numbered Documents and the other sub-contract documents should be reconciled in favour of the sub-contract documents.

The decision

The court found that the ground conditions provisions could only apply to the sub-contract works (as defined in the contract). Therefore, neither the contractual provisions nor the priorities clause could render CDL responsible for items that were excluded from the sub-contract works.

Consequently, where instructed to carry out works expressly excluded from the sub-contract works, CDL would be entitled to a variation.

In relation to CDL’s alternative claim for rectification, the court noted, despite not having to make a decision, that it would have dismissed the claim on the basis that there was no common mistake.

This decision highlights the critical importance for contracting parties to ensure that the scope of works is fully and correctly defined.

For more information on this topic or to speak to our construction team.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

Business news, knowledge and insight