In this blog, we look at a question that was raised in the recent case of Flexidig Ltd v A Coupland (Surfacing) Ltd  EWHC 2578 (TCC) which was whether a third party company who had been contracted to undertake remedial works in the place of another sub-contractor had committed the tort of inducing breach of contract.
The necessary ingredients for inducement of breach claims:
Inducement + Knowledge + Intent = Inducement of Breach of Contract
- The party at fault must have acted in a way to induce the contracted party to breach the existing contract.
- The party at fault must have knownor been completely unconcerned with, the act that is being taken is a breach of contract between the influenced party and the contracted party.
- There must be an intention to induce the contracted party to breach the contract in question.
Brief details of the case:
M&M Contractors engaged Flexidig Ltd to carry out works with the following clause included within the contract:
‘The sub-contractor shall maintain and protect the sub-contract Works and shall make good at the subcontractor’s own expense and at such times to be decided by the Contractor, any defects in or damage to the sub-contract Works… Where the sub-contractor does not make good any sub-contract Works to the satisfaction of the Contractor and Client, the Contractor may engage another contractor.’
It was alleged that Flexidig did not undertake the works to the required standard. M&M Contractors issued a “stop notice” to Flexidig.
Flexidig persuaded M&M Contractors to give them a second chance. However, it quickly became clear that Flexidig’s work was still unacceptable and M&M Contractors issued a further “stop notice”.
M&M Contractors engaged Coupland (Surfacing) Ltd to complete the remedial works.
Following the contract being agreed between M&M Contractors and Coupland, Flexidig made Coupland aware of its existing contract with M&M Contractors.
M&M denied there was any contract in place when asked. As a result, Coupland went ahead with completing the works.
Flexidig issued proceedings against Coupland alleging that Coupland had committed the tort of inducing breach of contract. Flexidig alleged, among other things, that M&M Contractors were obliged under their contract to allow Flexidig the opportunity to undertake any remedial works and by going ahead with the remedial works Coupland had knowingly induced M&M Contractors to breach the terms of its contract with Flexidig.
The judge considered the allegations and concluded:
- Inducement – Coupland had only complied with M&M Contractors instructions to complete the remedial works; they did not try to encourage or sway M&M Contractors into committing a breach of contract.*
- Knowledge – Coupland was initially unaware of the contract between M&M Contractors and Flexidig and M&M assured Coupland that Flexidig were incorrect with their allegations.
- Intent – It was not the responsibility of Coupland to see if there was an existing contract, especially in circumstances where, when asked, M&M Contractors denied the existence of an existing contract.
*The court confirmed there is a difference between inducement and facilitation.
At most Coupland had deprived Flexidig of the chance to carry out the works and so facilitated a breach but as they had not chased or tried to persuade M&M Contractors to commit a breach they did not induce it.
This judgment illustrates the difficulty of proving that there has been an inducement or even a breach of contract concerning replacing a contractor or sub-contractor during a defects liability period.
We do not know what why Flexidig brought injunctive action against Coupland instead of an action for breach of contract against M&M Contractors. It is an interesting strategy; but, in light of this judgment, not one that we think will gain traction in the future.