After studying the latest Judgment in Buckingham Group v Peel L&P Investments, you’d be forgiven for pondering that there isn’t a must have a contract drafted by an skilled as a result of the Courtroom will type out any errors. On this case, the Courtroom was prepared to miss contractual phrases that, on their face, appeared to lack each certainty and readability. Though this isn’t essentially stunning (the Courts have lengthy been reluctant to carry contractual provisions void or unenforceable), the case highlights a danger that inadvertent errors throughout contract drafting can result in extreme and unintended penalties if the Courtroom is much less useful.
Background
The case involved bespoke liquidated damages provisions in an amended JCT Design and Construct Contract.
Below the phrases of the contract, the Claimant was to design and assemble parts of a brand new manufacturing facility at Ellesmere Port in Merseyside. The works had been considerably delayed, and a dispute arose as to who was accountable. The Defendant, the employer, issued a Pay Much less Discover notifying the Claimant that it meant to deduct £1,928,253.77 from the sum in any other case because of the Claimant by the use of capped liquidated damages. Unsurprisingly, the Claimant sought to withstand the deduction, arguing that the liquidated damages provisions within the contract had been void and unenforceable.
The Claimant highlighted varied irregularities within the phrases of the contract and claimed that it was faulty on the idea that (amongst different issues):
- The contract contained two dates for completion. The Claimant argued {that a} clause that gives for liquidated damages by referencing the date for completion can’t be sure when the contract comprises competing dates.
- The bespoke liquidated damages provisions included two completely different charges. The Claimant’s place was that this made it inconceivable to find out which fee ought to apply.
- The contract contained two completely different Contract Sum values. The Claimant sought to argue that it was unclear which of the 2 sums needs to be used to calculate the liquidated damages.
The Choose rejected the arguments superior by the Claimant. On a correct development of the contract, the events’ intentions had been clear. The Courtroom did be aware that the 2 separate charges for liquidated damages could possibly be defined by the events taking a shortcut, copying and pasting an earlier proposal doc into the ultimate contract, however was not perturbed in its willpower.
Unintentional Normal Restrict on Legal responsibility
The Choose went on to contemplate whether or not a void liquidated damages provision can nonetheless act as an enforceable basic limitation of legal responsibility clause. Earlier authorities point out that liquidated damages clauses which might be void are wholly unenforceable. Nonetheless, whether or not these provision(s) can nonetheless function as a parallel basic limitation of legal responsibility is a matter of contractual development. Within the current case, the precise wording of the liquidated damages provisions included a “cap on most LADs [liquidated and ascertained damages]”. The cap itself was situated in a schedule that associated completely to liquidated damages. Accordingly, the provisions didn’t apply a cap to basic damages. The provisions had been clearly expressed as making use of to liquidated damages solely.
The place could be completely different if, for instance, it appeared that the provisions had been meant to restrict total legal responsibility. In Eco World v Dobler, the Courtroom held that if the liquidated damages clause was void and/or unenforceable, the final damages out there to the Claimant could be capped on the idea that “the clear intention of the events was that [the Defendant’s] legal responsibility…could be so restricted”.
Conclusion
In gentle of those circumstances, contracting events should pay cautious consideration to make sure that overzealous bespoke liquidated damages provisions don’t embody further or various legal responsibility. The impact of an in any other case unenforceable liquidated damages clause appearing as a basic limitation of legal responsibility clause could possibly be devastating for employers.
Our devoted development division has expertise in navigating pitfalls equivalent to these and may help you in drafting clear and constant development contracts. If you need to talk with one among our workforce, please name 0345 314 2044 at this time.
