Say it in a whisper, but most contracts are not particularly exciting read. Cluttered with impenetrable text and often competing with war and peace at length, it’s not entirely uncommon for construction contracts to be scanned, signed, and pigeonholed, the very existence of which gives the parties the false belief that, in the worst case, they will be protected are happening.
This is a dangerous approach: it is easy to step on a land mine when it’s buried in myriad dense legal texts. And this is exactly what happened to Triple Point Technology when the Supreme Court ruled last month that the company was liable for damages despite the termination of the contract if the work for its customer was not completed.
This ruling gives the industry two reasons for concern. First, as Lady Arden noted in her summary, the Triple Point Technology contract was literally tight, and the signatories did not appear to be aware of their contractual obligations. Crucially, however, the complexity of the Triple Point contract is not atypical of the construction industry; and Lady Arden’s words – if not the judgment itself – should therefore serve as a shot across the bow to those who have signed contracts but are not fully familiar with the terms.
Second, as we shall see, in one fell swoop the court overturned the release card for many troubled contractors facing claims for damages, namely the termination of the contract. In fact, the industry now has time to digest the court ruling that it might not be the last of the summer heat that makes big contractors work up a sweat.
The case in question began when Triple Point Technology was hired to provide software and software implementation services for the Thai state-owned oil and gas company, but quickly got into trouble and tried to terminate the contract after completing only part of the project .
In January 2019, the UK appeals court ruled that the US company was not liable for damages because it failed to complete the agreed work because the contract had been terminated before the work was completed. This turned common wisdom on its head and seemed to allow contractors everywhere, facing the double pressures of Brexit and Covid-19, an easy escape from their contractual obligations.
However, late last month, that verdict was overturned, with Triple Point Technology being ordered to pay $ 14.5 million in damages. Put simply, the judges re-established the accepted position that in the event that the work is not completed, companies are liable for lump-sum damages (and only for late completion) until the contract is terminated. Any other outcome, the presiding judges said, would essentially reward a company for its own failure.
Why is this important for construction?
The industry’s eyes were on the court because many contractors were in a similar position to Triple Point Technology. After all, we have seen in recent months that the shortage of materials and labor is putting ever greater pressure on contracts on an industry that is already trying to step out of the shadow of the pandemic.
Where the lower court seemed to have given the troubled contractors a lifeline, this support has now been thrown away. And with the Supreme Court questioning the extent to which Triple Point Technology actually understood its own contract, there is a risk that additional contractors will be bitten by terms they did not fully understand.
Indeed, Arcadis recently produced a report on UK construction disputes and found that “It is not surprising that the average value of disputes in the UK has increased significantly and that nearly three quarters of those surveyed have faced disputes or claims that were specific for Covid-19. The most common cause of disputes in the UK was that the parties failed to understand or fail to comply with their contractual obligations. “
A lesson in contract law
So a simple lesson for contractors from the judgment would be: Don’t sign a contract without understanding the terms.
Triple Point Technology’s contract was over a hundred pages long, and even Lady Arden noticed the complexity of the legal language used. It was clear that Triple Point Technology did not understand the meaning of the terminology, especially with regard to negligence, and did not understand the many clauses it contained.
Unfortunately, in my years as a construction dispute attorney, it is very common to come across contractors and employers in similar positions. In a society where we are taught to ignore the T and C, it is easy to get into a contract without understanding or reading the terms.
The case of triple point technology comes at a crucial time for contractors who need to be careful and avoid a legal landmine that might lurk in their contracts, especially when delays are so common in the industry.
* Bill Barton is a director of Barton Legal
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