Bespoke contracts and contract amendments are part and parcel with construction projects and schemes across NI and further afield. It is unsurprising that people like to get what they want and do things their own way. However, does your bespoke drafting do what you think it does? And does it create more problems than it is worth?
The case of Pickard Finlason Partnership Ltd v Mr and Mrs Lock [1] (heard in the Technology and Construction Court) highlights how quickly things can go wrong if your wording, particularly concerning payment, is not clear.
Pickard Finlason Partnership Ltd (“PFP”) was employed by Mr and Mrs Lock to provide professional services relating to the design and construction of a development and they agreed “bespoke and… complex terms as to payment”, payable in four stages, including 40% of the total fee when planning permission was obtained and the development costs were established. However, by the time planning permission was granted, Mr and Mrs Lock’s funding had been pulled. PFP’s invoice of £181,979 (the 40% payable upon planning permission being granted), went unpaid by Mr and Mrs Lock as a result.
PFP was unsuccessful both in adjudication and court proceedings seeking payment.
The Judgement
The Judge found that PFP had not fulfilled all of the requirements required by the bespoke wording to be in a legitimate position to raise a valid invoice under the contract. Under the bespoke drafting, not only had planning permission been required to trigger payment of 40% of the total fee, but in addition, PFP were to establish a firm and accurate cost for the building works. The Judge held that the bespoke wording regarding establishing a firm and accurate cost was vague and ambiguous. As such, this bespoke wording should be construed against the drafter (PFP).
Here, we can see that the bespoke wording introduced by PFP to aid prompt payment has in turn become a hindrance. The ambiguity around one of the requirements to satisfy to trigger the payment process created a hurdle to receiving payment that PFP failed to get over.
The express wording of their appointment included that the cost only became “firm” once the “cost estimates are refined and the contract sum is known” and once “a more accurate cost of the building and contract works is established”. PFP had not at this stage procured a tender from a contractor. The Judge was therefore satisfied that the ambiguous contract terms for payment had not been met.
Whilst the result of this case is very fact-specific, it does provide ample warning of the risk you take when introducing bespoke wording to your contract. Bespoke wording can cause ambiguity and can often cause more problems than solutions, if not drafted correctly or accurately.
The legal doctrine “contra proferentum” is prominent within this case. The doctrine includes a rule of contract interpretation whereby ambiguous terms are construed against the drafter of those terms. Case law strongly supports this legal doctrine and again highlights the risk you take when introducing custom wording.
It’s worth noting that this case included four expert witnesses for each party. You certainly do not need to be a quantum expert to imagine the costs PFP incurred by bringing this matter to adjudication and subsequently litigation with so many experts, as well as legal advisors, engaged. What would have been originally intended as bespoke contract drafting to ensure money in the door as early as possible, subsequently resulted in a hefty bill for the drafter of that wording.
The Takeaways
The takeaways from this case are therefore important, but also relate to what we see on a daily basis when revising and reviewing bespoke construction contracts. In particular, we frequently come across amendment to contract wording regarding the payment mechanism in place. However, upon review, the bespoke wording we see can often be non-compliant with the Construction Contracts (Northern Ireland) Order 1997 (“the Order”).
The Order specifically requires, for example, that parties to a construction contract must provide “an adequate mechanism for determining what payments become due under the contract, and when”. Parties can very easily fail to meet this requirement when attempting to introduce bespoke wording regarding payment. Whether your construction contract fails entirely or in part to comply with the Order, the Order provides that the specific provisions within the Scheme for Construction Contracts in Northern Ireland Regulations (Northern Ireland) 1999 (“the Scheme”) will be implied into your contract.
What this means for many parties is that, whether in full or in part, provisions of the Scheme may be implied into your contract and the payment provisions you are operating under are not valid under the legislation. The consequences of this include that there may be entirely different payment due dates, final dates for payment and deadlines for any pay less notices applicable to your contract. Therefore, all of a sudden, monies that parties believe are outstanding are not due or, on the other hand, monies that parties believed were not yet payable are now due and owing.
Whilst bespoke drafting can be extremely beneficial, parties to a construction contract should be aware of the risks. If you are in need of any advice concerning contract drafting or amendments, Mills Selig can readily assist.
[1] Pickard Finlason Partnership Ltd v Lock & Anor [2014] EWHC 25 (TCC) (15 January 2014)
Editorial by Conor Mulligan, Solicitor, Construction @ Mills Selig
For further information on all of the above, do not hesitate to contact the Construction Team at Mills Selig
Conor Mulligan, Solicitor, Construction @ Mills Selig
Conor specialises in both contentious and non-contentious work in Mills Selig’s Construction department. He has been involved in mediating, litigating and adjudicating high-value construction, engineering and procurement disputes.
He provides advice on drafting and negotiating construction documents to a wide range of clients including developers, professional consultants, contractors and sub-contractors.
T: 028 9044 5404
E: Conor.Mulligan@MillsSelig.com
W: https://millsselig.com/team/conor-mulligan/
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