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25 February 2020 | Comment | Article by Ioan Prydderch

Completion contracts: the dangers of finishing another contractor’s work.


In this blog, we look at a question that was raised in the recent case of Flexidig Ltd v A Coupland (Surfacing) Ltd [2019] 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

  1. The party at fault must have acted in a way to induce the contracted party to breach the existing contract.
  2. 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.
  3. 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 Decision:

The judge considered the allegations and concluded:

  1. 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.*
  2. 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.
  3. 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.

Comment:

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.

Author bio

Ioan is head of the firm’s business services division, which comprises all of the teams which provide transactional, contractual, advisory and dispute resolution advice to businesses and organisations.  Ioan is also Head of our Construction, Energy and Projects team and has spent almost 20 years advising clients on non-contentious and contentious construction matters. He has extensive experience in the construction and engineering sector and has acted in a number of high value and complicated disputes.

Ioan’s role involves advising the firm’s key clients on some of the most significant construction projects and disputes in Wales and the wider UK.

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.

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