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Careless Words…. Cost Time and Money!

The dispute in this case concerned a condition precedent; namely a clause in a contract that provides that the contract, or certain obligations in the contract, will only be enforceable if and when certain conditions are met. Part of this clause contained some obvious drafting errors which cast a shadow of uncertainty over the meaning and enforceability of the condition precedent.

WW Gear, the Employer, was developing a site in the centre of a roundabout in London. The development was to include the construction of the Westminster Park Plaza Hotel.   McGee Group Limited was subcontracted to carry out the excavation and ground works on the site.   McGee completed the works in October 2009, and had received some payments from Gear, however a dispute arose in respect of claims McGee made for delay and disruption related loss.   

Gear referred the dispute to adjudication to establish the interpretation and application of the extension of time and delay related loss and expense clauses in the contract. In March 2010 the adjudicator decided against the Employer on these issues. However WW Gear was not satisfied with this outcome and issued proceedings in the Technology and Construction Court.

Gear sought a declaration that McGee must comply with the requirement of clause 4.21.1 of the contract; more specifically, as a condition precedent to McGee’s entitlement to payment, McGee must provide a written application to the Construction Manager within a fixed period of time, stating any loss and/or expense as incurred or likely to incur. McGee opposed this argument on the basis that, as the wording was “superficially meaningless”, it should not prevent McGee from claiming for loss and expense where an application had not been made.

Despite the judge concluding that there were obvious errors that had occurred in the drafting of the clause, he held that the intention of the contract was clear and that the written application was a precondition. For this reason, Gear was permitted to a declaration that the provisions of clause 4.21.1 be adhered to before McGee were entitled to any direct loss and/or expense incurred pursuant to clause 4.21.

The underlying message to be learnt from this case is that parties should take particular care with the wording of contract documents rather than having to revert to the courts for interpretation.

Careful, precise wording has the potential to save both time and money.
The information provided in this article is not a comprehensive analysis of the law and must not be treated as a substitute for legal or professional advice.  To the extent permitted by law, Kerrigans will not accept or otherwise be held liable for any loss or damage incurred in relying upon the contents of this article. Should you require any legal or professional advice about any of the topics covered in this article we recommend that you contact Kerrigans.

04/12

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