What Lies Beneath: beware documents hidden in the contract bundle


Author: Ian Smith


Ian Smith, Associate, Fladgate LLP (ismith@fladgate.com)


 

The recent decision of Clancy Docwra Ltd v E.On Energy Solutions Ltd[1] is a useful reminder to parties to be clear on how works in a construction contract are defined and incorporated.

E.ON was the contractor on a large residential development in central London. Clancy Docwra Ltd (CDL) was its sub-contractor, engaged by an amended standard form of sub-contract for excavation of trenches and pipework installation.

During the course of the works, adverse ground conditions were encountered and a dispute arose when CDL was instructed to carry out works it considered were dangerous, resulting in CDL stopping work. E.ON claimed there was a specified default on the basis that contractually sub-surface conditions were at CDL’s risk. E.ON was successful in an adjudication and CDL issued proceedings for declarations as to the scope of its obligations extending to ground interference, and that the allocation of risk under clause 2.1.7 of the sub-contract had been modified by documents appended to the contract.

The court found in favour of CDL. CDL had excluded certain works through its tender submissions and post tender minutes, which were appended to the sub-contract. E.ON, who argued that the sub-contract works included ‘all civil works’, had in fact instructed works that had been expressly excluded and was therefore instructing a variation to the sub-contract.

Clause 2.1.7 of the sub-contract stated that the sub-contractor was deemed to have inspected the site and its surroundings and satisfied itself as to the nature of the ground conditions and the extent, nature and difficulty of the sub-contract works. However, that clause had to then be read in connection with the definition of the sub-contract works and the appended documents. The court determined that clause 2.1.7 was not able to allocate to CDL the risk of carrying out work that it had expressly excluded from its scope of works. Interpreting the clause as meaning CDL had satisfied itself in respect of the site for the purposes of carrying out works that did not form part of its scope ‘would not make sense’.

This case illustrates the care that parties must take when compiling documents forming the contract, especially with reference to the anticipated scope of works. Appended documents that may detail the scope of work and technical information must be checked to ensure the position agreed by the parties is properly reflected. The presence of pre-contract correspondence and clarifications can exclude obligations when determining the overall scope or work and consequently impact on risk allocation in the contract. Proper care and consideration should be given to any document before appending to the contract as parties will get out only what they put in.


[1] [2018] EWHC 3124 (TCC)


 

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