Formation Of Subcontracts And Time Bar Clauses

Author:Mr Edward Colclough
Profession:Fenwick Elliott LLP
 
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Today, notices and time bar provisions are found in most construction contracts. As Edward Colclough highlights, the 2016 case of Commercial Management (Investments) Ltd v Mitchell Design and Construct Ltd & Anor1 provides a useful insight into the enforceability of time bar provisions and highlights the confusion that can often exist when trying to identifying the applicable terms and conditions to a subcontract.

Here, the main contractor ("Mitchell") was engaged to design and build a warehouse in Erith, Kent. Mitchell appointed a ground works subcontractor ("Regorco") to carry out certain ground treatment works, known as vibro compaction, at the site. Ten years following practical completion, the tenant of the warehouse complained of settlement of the slab beneath the warehouse production area.

When the claims came to court, as a preliminary issue, the court had to determine:

which terms and conditions formed the subcontract between the parties; and if Regorco's time barring clause, contained within its standard terms and conditions, complied with the Unfair Contract Terms Act 1977 ("UCTA"). Terms and Conditions of the subcontract

Mitchell stated in its invitation to tender that the subcontract terms were to be the JCT Standard Form of Contract (DOM/2). In response, Regorco provided an estimate for carrying out the subcontract works stating that such works would be undertaken on its own standard terms - which included a time barring clause. Mitchell later issued Regorco with a letter of intent instructing them to proceed to keep the project on programme.

The letter made no reference to the terms governing the subcontract. Following completion of the works, Mitchell issued a purchase order to Regorco to finalise the contractual paperwork. This purchase order now sought to incorporate Mitchell's own standard terms and conditions to govern the subcontract. Regorco returned and counter-signed the purchase order, but only after having made various manuscript amendments to the document. The key amendment was that Regorco accepted that Mitchell's terms and conditions governed the subcontract "where applicable otherwise [Regorco's standard terms and conditions] apply".

In assessing the many conflicting provisions between the parties, Mr Justice Edwards-Stuart applied the established principle of the "battle of the forms" (i.e. the last party to put forward terms and conditions that are not explicitly rejected wins). In doing so, he found that...

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