In Vinci Construction UK Limited v. Beumer Group UK Limited [2017], the TCC held that sectional completion and delay damages provisions were operable and enforceable, notwithstanding subsequent amendments to the contract.

Background

Vinci Construction UK Limited (‘Vinci’) contracted with Gatwick Airport Limited to carry out various development works at the South Terminal. Vinci entered into an NEC3 sub-contract with Beumer Group UK Limited (‘Beumer’) to carry out the ‘detailed design, manufacture, fabrication, supply, delivery, offloading, installation, testing, commissioning and user training in respect of the baggage handling system works forming part of the project’. The sub-contract provided the works to be carried out in sections. The sections relating to the dispute include section 5 (baggage), and section 6 (remaining works). The sub-contract also allowed for liquidated delay damages to be payable in the event that sectional completion dates were not achieved.

Compensation events arose as a result of delays to the works. As such, a settlement agreement was agreed between the parties to extend the access dates and completion dates of the sections. A dispute arose between the parties as to the sectional completion dates and delay damages provisions in light of the settlement agreement. It was decided, at adjudication, that the provisions relating to liquidated delay damages were uncertain, inoperable and unenforceable. Vinci subsequently commenced proceedings and sought declaratory relief as to the proper construction of the contract, as amended by the settlement agreement, in relation to the provisions for sectional completion and delay damages.

The case

The question for the court was whether certain sub-contract works fell within sections 5 and 6. Vinci argued that most of the sub-contract works fell under section 5, and a part of the works (disconnection of the redundant baggage) fell within section 6. Beumer argued that most of the works fell under section 5, but the disconnection works were not certain as to whether they fell within section 5 or 6. 

When assessing the certainty of the provisions, O’Farrell J referred to previous case law which confirms that the court will strive, if possible, to not find a contract or contractual provision uncertain, noting that the fact that it was included demonstrates that the parties intended it to have some effect.

Applying this, O’Farrell J found in favour of Vinci and made the following conclusions.

1. Vinci and Beumer had agreed separate rates of delay damages for section 5 and section 6 in the event of Beumer failing to achieve the sectional completion date for either section. O’Farrell held that as a result of the separate rates, “the parties must have had some understanding of the works within each section that would attract the agreed level of delay damages.”
2. Works in respect of section 5 were set out in the sub-contract, and said to include “works to be carried out in the area of the new pier building which was where the new baggage handling system was to be constructed. They also include works within the existing building necessary to make the new baggage system operational. Finally, they include sub-contract works in relation to the AOR trials.”
3. The sub-contract also expressly provided for section 6 to include “the strip out and disposal of the baggage equipment in the existing baggage hall”. O’Farrell J said it was common ground that Beumer’s works included disconnection of the existing equipment, and found that the works package summary sheet expressly referred to such disconnection works against the removal of redundant baggage equipment, indicating that this general description of removal was intended by the parties to include sub-contractor’s disconnection work and the contractor’s removal work.
4. The contract provided for Beumer to disconnect the redundant equipment “on completion of the new baggage system” – in other words, once the works to make the new baggage system operational under section 5 were completed. 
5. The original timing of the sub-contract works gave the sub-contractor access to the new building in 2014 for the carrying out of works to the new baggage system. Access necessary for the disconnection works to be carried out was provided one day after completion of the new baggage system – which O’Farrell J said was “consistent with the disconnection works being carried out after, and separate from the baggage system works in section 5.” Although the date for access to this area was amended in the settlement agreement, creating overlap with the works under section 5, the access date was still after the completion of the new baggage system.
6. For the reasons above, the provisions relating to sectional completion and delay damages were held to be sufficiently certain to be operable and enforceable.

Conclusion

The case serves as an example of the courts’ reluctance to find provisions under a contract to be so uncertain that they are inoperable and unenforceable. O’Farrell J was able to identify what the parties had intended to mean under the sub-contract, and identified clearly enough the works that were to be carried out under sections 5 and 6.

This should also to be a lesson for contracting parties to ensure that the provisions under their contracts are clear and understood between all parties, in order to reduce the risk of any potential dispute regarding uncertainty of contractual provisions in the future. That is particularly the case where contracts are amended by interim settlement agreements or such like, which can often lead to unintended consequences, or simply fail to address how an agreed change to part of the contract might impact on other provisions.

The content of this article is for general information only. For further information regarding contracts, please contact a member of Birketts’ Construction and Engineering Team.

This article is from the October 2017 issue of Cornerstone, our monthly newsletter for the construction industry. To download the latest issue, please visit the newsletter section of our website. Law covered as at October 2017.

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