This case concerned a battle of the forms between the contractor (“Mitchell”) and the ground works subcontractor (“RBL”) concerning the terms of a subcontract under which RBL was to provide vibro compaction and piling at the site on which Mitchell was contracted to build a warehouse for the Claimant (“CML”). The contentious clause was one of RBL’s standard terms and conditions which required the notification of any claim for defective works to be made in writing within 28 days of the appearance of the defect, and in any event to be notified within one calendar year of completion of the works. The failure of the ground piles did not manifest until over 10 years after completion, and so the issue was whether RBL’s limitation would be effective to prevent CML’s recovery against them.

Edwards-Stuart J considered that there were three issues to be determined:

  1. whether the limitation had been incorporated into the subcontract;
  2. whether the limitation would count as being on RBL’s standard terms and conditions, and hence would be subject to the provisions of the Unfair Contract Terms Act 1977 ("UCTA"); and
  3. if the limitation was subject to UCTA, whether it would satisfy the test of reasonableness.

1) Was the limitation incorporated into the subcontract?

The placement of the order was somewhat unusual in this case as the records showed that the contract had not been concluded until after the works were done. RBL had first submitted a quote to Mitchell which referred to its own standard terms and conditions, and this was enough for Mitchell to show interest and the works duly began. By the time Mitchell had sent RBL a purchase order the work had been completed, but Mitchell’s standard terms and conditions had been included with the purchase order rather than relying on RBL’s standard terms. Clause 14 of Mitchell’s standard terms in fact stated that they would override all of RBL’s terms, and so RBL only signed the order after amending clause 14 to read that it would only override RBL’s own terms and conditions “where applicable.” Mitchell countersigned the order, thereby accepting the counter offer that RBL had proposed.

The key issue was whether clause 15 of Mitchell’s standard terms and conditions, under which RBL would indemnify Mitchell against defective performance of the subcontract works, was “applicable” to RBL’s notification clause and hence would override it in the contract between them.

Edwards-Stuart J considered that “applicable” did not require a conflict between the terms and conditions of each party, as the definition of “applicable” was more straightforward:

In my opinion, 'applicable' is the opposite of 'not applicable'. Everyone will at some time have filled in a form or completed a questionnaire which contains a question or questions that are irrelevant to the purpose for which the form is being completed. Such questions are invariably met with the response 'N/A' - 'not applicable'. Turning to this case, if a term is relevant to the performance of the sub-contract or the remedies under it, it is by definition applicable. I reject Mr Mort's submission that there has to be inconsistency in order to bring the overriding provision into play.” 

Accordingly, RBL’s notification clause had been overridden by the indemnity clause in Mitchell’s standard terms and conditions.

2) Did Mitchell deal on RBL’s standard terms and conditions?

The issue to be determined in this case was whether RBL’s standard terms and conditions had to be incorporated into the contract in their entirety in order for Mitchell to have been dealing on those terms for the purposes of UCTA. The answer to this issue was provided by Pegler v Wang, which arose on similar facts and in which the wording of the part of UCTA applicable to Scotland was considered. The judge in that case found that the wording of UCTA was wide enough to include any fixed terms or conditions applied to a contract without material variation from their application to other similar contracts. As such, Edwards-Stuart J considered that Mitchell was required to deal on RBL’s written standard terms of business.

3) Does RBL’s limitation satisfy the requirement of reasonableness?

The limitation provided that the claim had to be notified in writing within 28 days of the first appearance of the defect, and in any event within one year of the completion of the works. Edwards-Stuart J had to determine whether such a limitation would be reasonable for ground works of the sort provided by RBL. 

It was clear to him that such a limitation was not reasonable for a variety of reasons:

“that there will often be a substantial lapse of time between the carrying out of the work and the occurrence of any visible cracking to the fabric of the building, and an even longer lapse of time until the likely cause of the cracking is established. The construction of even a simple warehouse building is likely to take a few months, and it will not be for a few further months before it becomes at least substantially loaded by the user. Whilst it is possible, as Mr Colven agreed, for ground treatment works to fail whilst the sub-contractor is still on site, in such cases the potential for a claim is reduced because the sub-contractor will probably put the work right straightaway. Where the failure of ground or piles occurs under load, experience suggests that that seldom, occurs instantaneously: it is usually a gradual process.

It is, in my experience at least, rare for a failure of ground or piles to manifest itself in a period measured in months, rather than in years.


Therefore, RBL’s limitation did not satisfy the requirements of reasonableness.

Afternote

Edwards-Stuart J also took the opportunity to criticise the length of a skeleton argument put forward by one of the parties. He cited paragraph 15.2.1 of the TCC guide which provides: 

"In general terms, all opening notes should be of modest length and proportionate to the size and complexity of the case."

In the context of the current case, Edwards-Stuart J considered that a skeleton argument running to more than 25 pages would not have been of modest length. The 70 page skeleton submitted by one of the parties was quite clearly excessive and beyond what was required. 

By way of final remark, Edwards-Stuart J also criticised the over citation of authorities. It was unnecessary for the parties to put so many authorities before him which did no more than demonstrate the application of a well-known principle to particular facts, especially when those facts were not analogous to those in the current case. 

Both warnings should be keenly observed by any parties acting in future cases in the TCC.