| Date | 21 March 2007 |
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| Judgment | Shepherd Homes v Encia Remediation Ltd and Green Piling Ltd, TCC 26 January 2007 |
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| The Issue | The incorporation of terms and conditions. |
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| Implication |
The consequences of lapses in contract drafting when procuring works that have the potential for very costly remediation may be far reaching. |
printConstruction contracts seem bedevilled with instances where standard terms and conditions are at the root of a dispute. Such was the case in the recent trial of a preliminary issue in the case of Shepherd Homes v Encia Remediation Ltd and Green Piling Ltd. The main issue between the parties is being tried before Mr Justice Jackson at whose instruction the preliminary issue was heard by Mr Justice Christopher Clarke. This preliminary issue concerns the contract between Encia and Green, the Defendants in the main action. The issue that Mr Justice Christopher Clarke considered was “…to what extent, if at all, clause 4.3 of [Green’s] standard terms and conditions of contract: a) formed part of [Green’s] offer which was accepted by [Encia];The clause in question provides: “4.3 Our maximum total liability is limited to the Contract Price: whether in contract or in tort, for any damage or loss whatsoever, including all direct, indirect or consequential loss.”Shepherd, as owner and developer of land in Hartlepool, employed Encia as its civil engineering contractor for the initial site infrastructure works. These included piling installation and ring beam construction for the 94 dwellings that the site was to contain. Shepherd let the work to Encia in two phases and Encia, in turn, let the specialist piling works in the same phases. The relationship between Encia and Green arose as a result of a cold call from the latter to introduce its services. Encia had been in discussion with a number of piling contractors and had, by the time of the call, obtained tenders from four, albeit they were for more than it had allowed in its tender to Shepherd, with lead times longer than it hoped for. Green’s approach was, therefore, quite propitious. During a meeting on 27 June 2001 Green, by way of establishing its bona fides, provided photographs of works it had carried out, details of previous clients, a company profile, a copy of its standard terms and conditions and other supportive material. Having been given details of the requirements for the works, Green there and then calculated and quoted a price to Encia, which it was told was too high. Keen to obtain the work, Green offered a revised price and suggested possible further savings from redesign, which Encia undertook to consider in concert with the structural engineer and the groundworks contractor responsible for the design and construction of the ground beams. Encia requested a revision to the payment terms, included in Green’s standard terms and conditions, which it had reviewed whilst Green had been working out its revised price. It was common ground that clause 4.3 was not discussed. Subsequent to the meeting, and on the same day, Green sent a letter confirming the price and other details agreed and enclosing, amongst other items, terms and conditions of contract, as amended by the parties at the meeting, extending the period for payment from 14 days to 28 days. Encia replied two days later confirming a date works were to commence, agreeing the price and stating that its formal order would “…be forwarded…during the course of the next few days.” No order was ever sent. The works were carried out between July 2001 and September 2002. From around May 2003, signs of cracking due to settlement began to appear, leading in due course to a claim by Shepherd with the potential value of £10million or even more. Whether the defendants are liable will be decided in the main action, but it is not disputed that one element of the design which may have contributed to the failure was carried out by Green, namely the pile head design. The question of the extent to which damages may be recoverable from Green is therefore of vital importance to Encia. Encia was concerned to have assurances in relation to indemnity for Green’s pile head design and envisaged that the order it intended to place (but never did) would require this. Green held Professional Indemnity Insurance providing cover of £1milllion. The judge therefore had to consider whether there was a contract to which Green’s terms and conditions could be said to apply? In his detailed and clear judgement, Mr Justice Clarke held that a contract had indeed been formed by the letters of offer from Green and those of acceptance from Encia. Furthermore, he held that clause 4.3 of Green’s terms and conditions formed part of its offer of 27 June 2001; that both phases of the contract included that clause; that the clause satisfies the requirement of reasonableness and is enforceable and that there was no revision of the terms offered and accepted so as to exclude the clause. Finally he held that Green was not precluded from relying on it by reason of any waiver or estoppel. It would seem therefore that, should any liability devolve upon it in the judgement from the main action, Green may rely on the provisions of clause 4.3 in limiting its liability to the value of the subcontract works.
CJ-0711
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