A ground works subcontractor attempted to include, in its subcontract for the design and installation of vibro compaction, a clause (12(d)) requiring notification of claims within 28 days of any alleged defect appearing, or of the occurrence (or non- occurrence) of the event complained of, and stating that claims were barred unless so notified within a year of completion of the works. The court decided  that the clause was not included in the subcontract but also considered whether, if it had been, the  subcontract order was on the subcontractor’s “written standard terms of business”, so that the Unfair   Contract Terms Act applied, and whether the clause then passed the Act’s test of reasonableness.

The court ruled that, for the Act to apply, it is unnecessary for the whole contract to be “on the  other’s written standard terms of business”. Clause  12(d) was one of the subcontractor’s standard terms. If, therefore, it was incorporated into the contract at the subcontractor’s insistence, the main contractor would have had to deal on the subcontractor’s written standard terms of business and clause 12(d) must then satisfy the Act’s requirement of reasonableness.

In the court’s view it did not satisfy this requirement. The clause 12(d) 28 day period started running with “the appearance of any alleged defect” or “the occurrence (or non-occurrence...) of the event complained of” but, in practical terms, any defect in the ground compaction work would never be visible because it would be concealed by the structure above it and would manifest itself in the form of some distress to the building’s structure, probably cracking of the f loor slab or a wall. Defects in ground compaction work and piling do not appear until some time after the work has been carried out, generally after substantial loading is applied, and, in the court’s experience, it was rare for a failure of ground or piles to manifest itself in months, rather than years. This type of failure is also almost invariably progressive, starting with small cracks which may not be readily visible and which may occur in an area seldom visited, or where the cracking can be difficult to see. In addition, the main contractor in this situation will not be the user of the building. It was therefore not reasonable to expect, when the subcontract was made, that compliance with the 28 day time limit would, at least in most cases, be practicable.

Commercial Management (Investments) Ltd v Mitchell Design and Construct Ltd & Anor [2016] EWHC 76