Subcontractor's claims time limit clause struck down as unreasonable

Newsletters

April 25 2016 | Contributed by Mayer Brown International LLP

Construction United Kingdom

A ground works subcontractor attempted to include in its subcontract for the design and installation of vibro compaction a clause (Clause 12(d)) requiring notification of claims within 28 days of either any alleged defect appearing or the occurrence (or non-occurrence) of the event complained of. The clause also stated that claims were barred unless so notified within one year of completion of the works. The court decided(1) that the clause was not included in the subcontract. The court went on to consider whether, if it had been included, the Unfair Contract Terms Act would apply, and if so whether the clause would then have passed the act's test of reasonableness.

The court ruled that in order for the Unfair Contract Terms Act to apply, it is unnecessary for the whole contract to be "on the other's written standard terms of business". Clause 12(d) was one of the subcontractor's standard terms. Therefore, if it was incorporated into the subcontract at the subcontractor's insistence, the main contractor would have had to deal on the subcontractor's written standard terms of business and Clause 12(d) must then satisfy the act's requirement of reasonableness.

In the court's view, the clause did not satisfy this requirement. The 28-day period under Clause 12(d) started running with "the appearance of any alleged defect" or "the occurrence (or non-occurrence...) of the event complained of"; but in practical terms, any defect in the ground compaction work would never be visible, because it would be concealed by the structure above it and would manifest itself in the form of some distress to the building's structure (probably cracking of the floor slab or a wall). Defects in ground compaction work and piling do not appear until some time after the work has been carried out, generally after substantial loading is applied. In the court's experience, it was rare for a failure of ground compaction work or piling to manifest itself in months, rather than years. This type of failure is also almost invariably progressive, starting with small cracks which may not be readily visible and which may occur in an area where the cracking can be difficult to see. In addition, the main contractor in this situation will not be the user of the building. It was therefore unreasonable to expect, when the subcontract was made, that compliance with the 28-day time limit would, at least in most cases, be practicable.

For further information on this topic please contact Chris Fellowes at Mayer Brown International LLP by telephone (+44 20 3130 3000) or email (cfellowes@mayerbrown.com). The Mayer Brown International LLP website can be accessed at www.mayerbrown.com.

Endnotes

(1) Commercial Management (Investments) Ltd v Mitchell Design and Construct Ltd [2016] EWHC 76.

Reference:http://www.internationallawoffice.com/Newsletters/Construction/United-Kingdom/Mayer-Brown-International-LLP/Subcontractors-claims-time-limit-clause-struck-down-as-unreasonable