Liability caps of no use without binding agreements

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January 30 2017 |  Mayer Brown International LLP

A specialist concrete subcontractor made a £40 million claim against its consultant, alleging defective design.(1) The consultant denied liability and argued that, even if it were liable, there was a simple contract with a liability cap of £610,515. The court had to decide whether there was a contract and whether any of the three sets of competing terms and conditions, and the cap, were incorporated in it.
The court found there was a simple contract which was not "subject to contract". Work was done and paid for on the basis of instructions from the subcontractor, which were accepted by the consultant, as evidenced by its conduct in undertaking the work. Further, none of the sets of terms and conditions and the schedule containing the liability cap were incorporated in that contract. While the court should always strive to find a concluded contract where work has been performed, it is not entitled to rewrite history in order to incorporate express terms which were not the subject of a clear and binding agreement. The court stated that the case demonstrates that it is usually better for a party to reach a full agreement – which in this case would almost certainly have included some liability cap – through negotiation and compromise, rather than to delay and fail to reach any detailed agreement.

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.