The main contractor in an office development has been allowed to claim against a sub-contractor after a flood caused damage to the site.  The question the court had to answer was the meaning of the phrase “practical completion of the sub-contract works” used in the sub-contract, and the case throws a spotlight on the risks that parties face when they make amendments to standard form contracts.

GB Building Solutions appointed SFS Fire Services to design and install a sprinkler system in an office development.  During the latter stages of the works, there was a flood which GB Building Solutions blamed on SFS Fire Services.

Under the terms of the sub-contract both parties co-insured specified risks of loss until the date of ‘practical completion’ of the sub-contract. However it was contended that by the terms of the sub-contract “practical completion” meant Practical Completion under the Main Contract.

The competing interpretations were critical in determining whether the flooding occurred before or after the termination of the sub-contract and consequently the right of the contractor to claim against the sub-contractor. If the flooding was subject to the co-insurance arrangements, a right of the contractor to bring a claim did not arise. Conversely, if the sub-contract had ended, the co-insurance had also ended, and the contractor could proceed with their claim against the sub-contractor.

The Court had to interpret the sub-contract between the parties, which was based on a standard JCT Design & Build 2005 edition sub-contract with several amendments.  It noted that “practical completion” within the sub-contract was an un-capitalised term, and had to deal with conflict provisions stating a definition of “Practical Completion” included in the amendments would take precedence. After deliberation, the court concluded that there was no conflict and that two definitions applied to different sections of the contract. Therefore termination of the sub-contract had in fact occurred before the flood, allowing GB Building Solutions to make a claim.

This case demonstrates just how important it is for parties to make sure that their contracts are drafted clearly,” said James Burgoyne, Director – Claims & Technical, Brunel Professions.  “Professionals can often feel under pressure to agree to amendments through fear of missing out on a contract.  However rushing through amendments due to commercial pressure or an impending property sale is a two edged sword and brings uncertain risks to both parties. Generally a more conservative approach of earlier negotiation and fewer changes would usually benefit both.

Details of the case have been published by law firms Hardwicke, Philip Ross Solicitors and Clyde & Co and reported in Building Law Monthly.

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