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Provisions to "get on with it" (proceed regularly and diligently) will not be implied into construction contracts
7 February 2012
In the recent decision of Leander Construction Limited v Mulalley and Company Limited [2011] EWHC 3449 (TCC) the Technology and Construction Court rejected a claim that a sub-contractor was impliedly required to proceed regularly and diligently with its sub-contract works.
A clause which allows termination for failing to proceed with works regularly and diligently does not automatically give rise to an additional stand-alone duty to the same effect. The decision confirms the court's strict approach in imposing implied obligations on parties to a contract. It also highlights the need to expressly provide for key milestones in a sub-contract if achieving interim deadlines is vital.
The facts
Mulalley and Company Limited ("Mulalley") engaged Leander Construction Limited ("Leander") as a sub-contractor in respect of ground-works, drainage, concrete frameworks and other associated works at a site in Lewisham. The sub-contract period was 46 weeks with a completion date of 8 August 2011.
Before completion, Leander failed to complete the works in accordance with the dates set out in an activity schedule. Mulalley alleged 12 weeks' delay on site. The parties disputed responsibility for the delay and Mulalley subsequently withheld the sum of £113,695.75 in respect of its losses.
Mulalley considered that Leander was under an implied obligation to proceed with its works regularly and diligently. Leander contended that no such implied obligation existed and brought proceedings under Part 8 of the Civil Procedure Rules seeking a declaration to this effect and for the release of the withheld sum.
The decision
Although Mulalley relied on the dates in the activity schedule to measure Leander's compliance with regular and diligent progress, it conceded that the schedule was not in itself a contractual document.
Mr Justice Coulson noted that the schedule dates were "contradictory and confused" and that the sub-contract contained no express provisions about interim performance.
With regard to an implied term to proceed regularly and diligently, the Judge found that the sub-contract operated satisfactorily without it.
Implications of the decision
The principle to proceed regularly and diligently with the sub-contract works must have been an important element of the contract. However, Coulson J. stated that to include such a provision impliedly would lead to Leander's rights and duties being completely altered. Furthermore, the contractual provisions which existed already provided Mulalley with considerable control over Leander's performance.
The decision reinforces the court's reluctance to imply terms into a construction contract where it is generally accepted that a contractor or sub-contractor can manage their own performance, provided that works are completed by the completion date and that there is nothing in the contract stating the contrary.
In light of the decision, those drafting construction contracts should consider the following points.
- Drafting clear and logical milestones in a sub-contract if the contractor is relying on certain aspects of these works being completed before the completion date. It may be appropriate to link payment to the completion of specific tasks, but bear in mind that any delay to the contractual programme not caused by the sub-contractor will give rise to a claim.
- Including a carefully drafted contractual clause imposing an independent duty to proceed regularly and diligently, especially where the duty has been considered in other provisions. Contracts such as the JCT forms state expressly that the contractor is under such an obligation.
- Drafting all obligations as express terms. A contract which provides control over a sub-contractor's performance will avoid the need for persuading the court that terms should be implied.
It is also interesting that the sub-contractor used the CPR Part 8 procedure to determine contractual issues, rather than going to adjudication. Given the growing number of Part 8 applications, does this suggest that the Technology and Construction Court is becoming the preferred way of resolving construction disputes?
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