CONSTRUCTION CONTRACTS
John ME Lyden
March 2013
D156
www.scl.org.uk
IMPLIED TERMS IN
CONSTRUCTION CONTRACTS
John ME Lyden
Introduction
Construction contracts contain express terms, which may be in writing, or oral,
or a combination of both. To take a simple example: a plumber may have
submitted a quotation in writing (or perhaps by email) for the installation of a
new kitchen sink and the associated pipework and the house owner may have
replied in writing (or by email) ‘Your price is acceptable – please start next
week’. Under the Electronic Commerce Act 2000, section 19, documents
transmitted electronically have the same status as hard copies, in the context of
the conclusion of a contract.1
1 Unless otherwise stated, references to statutes in this paper are to Irish statutes or to
statutes in force in Ireland. With the exceptions of the English Commercial Court
(Comm), Chancery Division (Ch), Queen’s Bench Division (QB) and Technology and
Construction Court (TCC), the abbreviated court names given in brackets in footnotes are
those currently used by the neutral citation system in force in that jurisdiction.
1
Terms implied under the Constitution of Ireland
In Meskell v Córas Iompair Éireann, the Supreme Court held that there was an
implied term in a bus conductor’s contract of employment to the effect that he
had a constitutional right either to join or not to join a trade union.2
In Glover v BLN Ltd, an office holder was summarily dismissed for alleged
misconduct by his employer, who contended that the contract contemplated
this action. Walsh J said:
‘This procedure was a breach of the implied term of the contract that the
procedure should be fair, as it cannot be disputed, in the light of so much
authority on the point, that failure to allow a person to meet the charges
against him and afford him an adequate opportunity of answering them
is a violation of an obligation to proceed fairly.’3
The implied term, to the effect that fair procedures will be applied, is not
confined to contracts of employment. In Bolger v Osborne, the plaintiff horse
trainer, and other trainers and jockeys, agreed to be bound by the rules of the
Irish Turf Club. The court treated those rules as being a private contract. The
plaintiff was fined £1,000 by the Turf Club arising from a race at Naas Race
Course in 1994 but gave no reason for this decision. Macken J said:
‘A charge was made against the jockey and against the plaintiff and
against the horse on the basis that the horse ‘did not run on its merits’,
by which is meant, in layman’s terms, that it did not run as fast as it
could have, or up to its potential on the day.
… the rules must be applied as in the case of rules constituting any other
contract ... where the rules give such power as fines, suspensions or
losses of licences the rules must be exercised strictly also from the
plaintiff’s point of view and in a manner which is not arbitrary ...
... it seems to me that a finding of fault, absent strict or vicarious liability
has no basis, was in breach of the contract existing between the parties,
was wholly irrational and, in the absence of any facts or matters being
disclosed to the plaintiff as to the allegation he was required to meet,
was in breach of his constitutional right to a fair and proper hearing.’4
[emphasis added]
2
rights will apply. In Macauley v Minister for Posts and Telegraphs, Kenny J
held, under Article 40.3 of the Constitution of Ireland: ‘… there is a right to
have recourse to the High Court to defend and vindicate a legal right’.6
In P Elliott & Co Ltd v Minister for Education, the contract was subject to the
RIAI Conditions of Contract 1968 edition, which provided that the final
certificate was conclusive in regard to certain matters. The Supreme Court
accepted the contractor’s contention that, because the final certificate clause
restricts the parties’ right to litigate either in court or in arbitration (in the
words of Finlay CJ), it must: ‘... be strictly construed in the sense that any
claim which falls to be barred by the issue of the final certificate must be
unambiguously within the terms of that sub-clause’. 7
The implied term of merchantable quality was held to apply to stone aggregate
supplied by a quarry in Noreside Construction v Irish Asphalt.8
3
Terms implied by the custom or usage of a particular trade
General principles
Keating states:
‘Custom and usage. Evidence is admissible to show that words were
used according to a special custom or usage attaching to the trade or
locality applicable to the contract. The custom must be strictly proved
and must be notorious so that everybody in the trade or locality
concerned enters into a contract with that custom as an implied term. It
must not be inconsistent with the express or necessarily implied terms of
the contract, must be reasonable and not against the law.’9
9 Stephen Furst QC and The Hon Sir Vivian Ramsey, Keating on Construction Contracts
(9th edition, Sweet & Maxwell, 2012), para 3-013.
10 Fidelma White, Commercial Law (2nd edition, Round Hall, 2012), page 203, footnote
17.
11 Noreside Construction v Irish Asphalt (note 8), para [46].
12 Paul A McDermott, Contract Law (Bloomsbury Professional (Ireland), 2001), para 7.07
[new edition due in 2013].
13 Tucker v Linger (1883) 8 App Cas 508 (UKHL), page 511.
4
Attempts to establish the existence of a custom often fail. In O’Reilly v Irish
Press, Maguire P said:
‘... a custom or usage of any kind is a difficult thing to establish ... it
must be proved by persons whose position in the world of [journalism]
entitles them to speak with certainty and knowledge of its existence. I
have to be satisfied that it is so notorious, well known and acquiesced in
that in the absence of agreement in writing it is to be taken as one of the
terms of the contract between the parties.’14
In older cases, quaint local customs were accepted by the courts in some cases.
For example in Smith v Wilson, the parties’ agreement referred to a ‘thousand’
rabbits. The court held that this meant 100 dozen rabbits (ie 1,200 rabbits) and
not 1,000 rabbits. Lord Tenderden CJ said, ‘... we must suppose the term
thousand to have been used by the parties in the sense in which it is usually
understood ... when applied to the subject of rabbits.’15
In O’Connail v The Gaelic Echo, the court did accept that there were customs
in the newspaper trade in Dublin to the effect that a journalist would be
entitled to holiday pay and to one month’s notice in the event of dismissal.16
14 O’Reilly v Irish Press (1937) 71 Irish Law Times Reports 194 (IEHC), page 195.
15 Smith v Wilson (1832) 3 B & AD 728 (KB); 110 ER 266, page 267.
16 O’Connail v The Gaelic Echo (1954) Ltd (1958) 92 Irish Law Times Reports 156
(District Ct).
17 O’Rourke v Cauldwell (unreported, IEHC, 20 March 1998).
18 Kempston v Butler (1861) 12 Ir Common Law Reports 516 (Irish Court of Common
Pleas).
19 Antisell v Doyle [1899] 2 IR 275 (QB).
5
abnormality, or pay for all the extra costs incurred.20 The court held that there
was not adequate proof of any such alleged custom.
There have been very few modern cases concerning construction where the
courts hold that a term has been implied by reason of a trade custom or usage.
6
of an inch less thick and that this explains the discrepancies in these
cases.’23
In Tony Cox v Jim 5, it was held that a reference in the parties’ agreement to
the sum of £800,000 was to that sum exclusive of VAT, on the basis of a well
established custom in the construction industry. Judge Bowsher QC said:
‘Mr Pickavance said that in his experience construction contracts are
almost always quoted exclusive of VAT and there is a general
understanding in the industry that VAT will be charged for and paid in
addition to the principal sum ...
The usual requirements for the existence of a custom exist. On the
evidence I find that there is a custom and that it is notorious, certain and
reasonable. I also find that it is not contrary to law, including the
intention or policy of any statute. It is a custom which exists regardless
of the knowledge (or lack of knowledge) of statute law on the part of
those engaged in the construction industry.’24
In Lynch Roofing Systems v Christopher Bennett the key issue was whether the
agreement between the plaintiff sub-contractor and the defendant main
contractor incorporated an arbitration clause.25 Morris P adopted the
following statement of principle, as set out in the headnote in British Crane
Hire v Ipswich Plant Hire:
‘… where parties to a contract of hire were both in the trade and of equal
bargaining power the conditions habitually imposed in such contracts
would be incorporated into the contract on the basis of the common
understanding of the parties that the usual conditions would apply.’26
Morris P held that the arbitration clause in the standard RIAI building contract
applied, adding:
‘In the present case I am satisfied that each party was sufficiently
familiar with the trade so as to lead a court to conclude that ... the
defendants would be understood and presumed to say ‘of course that is
quite understood’. I would find it hard to believe that a large roofing
contractor would undertake this contract without the benefit of a
building contract.’27
23 Kincora Builders Ltd v Cronin (unreported, IEHC, 5 March 1973), page 21.
24 Tony Cox (Dismantlers) Ltd v Jim 5 Ltd 13 Const LJ 209 (OR), pages 211 and 212.
25 Lynch Roofing Systems (Ballaghaderreen) Ltd v Christopher Bennett and Son
(Construction) Ltd [1999] 2 IR 450 (IEHC).
26 British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd [1975] 1 QB 303 (EWCA).
27 Lynch Roofing Systems v Bennett (note 25), page 454.
7
‘It is well established that terms and conditions may be incorporated into
a contract by signature, reasonable notice or by a course of dealing’.28
McDermott explains:
‘Terms are implied in law where the contract is of a defined type ... such
as the relationship of seller and buyer, owner and hirer ... contracts for
building works and so forth. The terms so implied may be described as
legal incidents of the particular type or class of contract in question ...
There are two conditions which must be met before a term can be
implied by law:
(i) the contract in question must be of a defined type; and
(ii) the implication of the term must be necessary ...
In addition to the terms implied into contracts as a matter of law, the
court may also imply a term in order to repair what it perceives to be “an
intrinsic failure of expression” by the parties.’31
8
or perhaps more illuminatingly, such terms can in modern US
terminology be described as standardised default rules.’32
These terms apply to certain types of contract. In Lister v Romford Ice and
Cold Storage, Lord Tucker said: ‘Some contractual terms may be implied by
general rules of law’.33 In Liverpool City Council v Irwin, Lord Cross said:
But McDermott states: ‘This requirement of necessity for terms implied by law
is less strict than the test of necessity used for terms implied by fact’.36
In Siney v Dublin Corporation, it was held by the Supreme Court that, where a
housing authority was letting a house or flat, there was an implied warranty
that the dwelling was reasonably fit for human habitation.38
9
contractor will be liable to the employer for any loss or damage suffered
by him as a result of the goods, materials or installations not being fit for
the purpose for which they were supplied.’39
The courts will imply terms where they are necessary to make the contract
work – to give the contract business efficacy. In The Moorcock, Bowen LJ
said:
‘In business transactions such as this what the law desires to effect by
the implication is to give such business efficacy to the transaction as
must have been intended at all events by both parties.’40
39 Norta Wallpapers (Ireland) Ltd v John Sisk & Son (Dublin) Ltd [1978] IR 114 (IESC),
page 123; 14 BLR 49, page 61.
40 The Moorcock (1889) 14 PD 64 (EWCA), page 68.
41 Tradax (Ireland) Ltd v Irish Grain Board Ltd [1984] IR 1 (IESC), page 14.
42 Tradax v Irish Grain Board note 41, page 26.
43 Airscape Ltd v Heaslon Properties Ltd [2008] IEHC 82, para [55].
10
‘The officious bystander test was formulated in Shirlaw v Southern
Foundries Ltd [1939] 2 KB 206 where MacKinnon J stated [page 227]:
“Prima facie that which in any contract is left to be implied and need not
be expressed is something so obvious that it goes without saying; so that,
if, while the parties were making their bargain, an officious bystander
were to suggest some express provision for it in the agreement, they
would testily suppress him with a comment of ‘oh, of course!’
McDermott points out44 that this test has been cited with approval in a
number of Irish cases including Carna Foods Ltd v Eagle Star Insurance
[1997] 2 ILRM 499; Sullivan v Southern Health Board [1997] 3 IR 123
and Sweeney v Duggan [1997] 2 ILRM 211.’45
These were set out by Lord Simon in BP Refinery v Hastings Shire Council:
1. It must be reasonable and equitable;
2. It must be necessary to give business efficacy to the contract, so that
no term will be implied if the contract is effective without it;
3. It must be so obvious that it ‘goes without saying’;
4. It must be capable of clear expression;
5. It must not contradict any express terms of the contract.48
McDermott refers to BP Refinery and remarks that: ‘Whilst this may not be an
exhaustive test, it does provide a useful structure for analysing the case law’.49
11
In Meridian Communications v Eircell, O’Higgins J reviewed various
authorities and said:
‘The following principles emerge:
o before a term will be implied in a contract it must be necessary to do
so, and not merely reasonable;
o the term must be necessary to give business efficacy to the
agreement;
o it must be a term which both parties intended, that is, a term based
on the presumed common intention of the parties;
o the court will approach the implication of terms into a contract with
caution;
o there is a presumption against importing terms into a contract in
writing and the more detailed the terms agreed in writing the
stronger is the presumption against the implication of terms;
o if the term sought to be implied cannot be stated with reasonable
precision, it will not be implied.
The decision of the court in all matters where contractual terms are
alleged to be implied is based on those principles.’50
In Compass Group v Mid Essex Hospital Services NHS Trust, Cranston J said:
‘The test for the implication of a term in the contract is whether, without
it, the “consequences would contradict what a reasonable party would
understand the contract to mean”, the touchstone being the “reasonable
expectations of the parties”: Attorney-General of Belize v Belize Telecom
Ltd [2009] UKPC 10, [2009] 1 WLR 1988, [22]-[23].’51
Some implied terms will be rare in practice because they depend on the
peculiar facts of a case. In Keegan and Roberts v Dublin County Council the
contract dealt expressly with services within the site but it did not deal with
services outside the site.52 Ellis J held that there was an implied term that the
council should have provided services as far as the site in order to give the
contract business efficacy. The judge applied The Moorcock principle to the
unusual facts of that case: an example of a term implied in fact as opposed to a
term implied in law.
12
Two terms are implied in many contracts
That implied term has been adopted by the courts in cases such as Merton LBC
v Leach; Jardine Engineering Corporation v Shimizu Corporation; Allridge v
Grand Actual; and Nala Engineering v Roselec.54
In Merton LBC v Leach, Vinelott J referred to Mackay v Dick and said: ‘As
regards the second of these two terms it is well settled that the courts will
imply a duty to do whatever is necessary in order to enable a contract to be
carried out’.56 In Martin Grant v Sir Lindsay Parkinson, Lawton LJ said:
‘There is, for example, by implication of law, an obligation to co-operate with
one another’.57 In Rosehaugh Stanhope v Redpath Dorman Long, Bingham LJ
said: ‘It is very well known that the courts readily imply a Mackay v Dick
term’.58 Mackay v Dick has been reaffirmed by the Supreme Court of South
Australia in Alstom Power Ltd v Yokogawa Australia Pty Ltd (No 7).59
However, implied terms will not be allowed to replace express terms to the
same or similar effect. In Davy Offshore v Emerald Field Contracting, clause
33.1 of the contract stated: ‘Subject to the terms hereof, the Company shall not
by any acts or omissions delay or obstruct the Contractor in the performance of
the Work’. The employer, EFCL, contended that, having regard to the express
13
terms of clause 33.1 of the contract, there was no need for an implied term in
regard to co-operation on its part. Judge Thayne Forbes QC said:
‘I have therefore come to the conclusion that the contract is subject to an
implied term of co-operation, but only to the extent that such a term is
necessary to deal with circumstances not amounting to a breach by
EFCL of clause 33.1 of the contract.’60
Many of the terms implied in a construction contract are really no more than
particular applications of these two complimentary and fundamental implied
terms.62
In Brown v Norton, Davitt P held that the builder: ‘impliedly agrees (1) that he
will complete the building of the house ... and (3) that ... the work will be
carried out in a good and workmanlike manner and with sound and suitable
materials’.63
60 Davy Offshore Ltd v Emerald Field Contracting Ltd 55 BLR 1 (OR), page 59.
61 Airscape v Heaslon Properties (note 43), para [83]; from Hugh Beale (general editor),
Chitty on Contracts (27th edition, Sweet & Maxwell, 1994), para 24-027.
62 For a very comprehensive review of the law concerning these two implied terms, see
Aidan Steensma, ‘Implied Obligations of Non-Hindrance and Co-operation in
Construction Contracts’, Society of Construction Law Paper 162 (May 2010):
<www.scl.org.uk>.
63 Brown v Norton [1954] IR 34 (IEHC), page 56.
64 Julian Bailey, Construction Law (Informa, 2011), volume 2, para 11.14.
65 Bruno Zornow (Builders) Ltd v Beechcroft Developments Ltd (1989) 51 BLR 16 (OR),
page 31.
14
term of the contract that the plaintiff’s works would be completed within a
reasonable time from the date of commencement’.66 In Courtnay v Waterford
and Central Ireland Railway, Fitzgerald B said: ‘… an agreement to do works
as to the completion of which no time is stipulated is prima facie an agreement
to complete within a reasonable time …’.67
Is there an implied term that the contractor will proceed with due
diligence?
Hudson states:
‘The English standard forms provide that the contractor ‘shall ...
regularly and diligently proceed with the [works]’ ... but in fact, even in
the absence of such provisions ... there must be an implied term that the
contractor will proceed with reasonable diligence ...’69
‘... even in the absence of an express term for due diligence and of any
linked express termination clause, both such terms require to be implied
by law, in construction contracts and subcontracts generally, as a matter
of business efficacy.’70
‘Indeed, it is submitted that the universally accepted term
unquestionably implied by law for completion within a reasonable time
... can in practice only be given effect ... on the assumption that he does
perform with due diligence. The two concepts are ... inextricably
linked.’71
15
What is ‘due diligence’? In West Faulkner v Newham LBC, Judge Newey
said:
‘I conclude that ‘regularly and diligently’ should be construed together
and that in essence they mean simply that contractors must go about
their work in such a way as to achieve their contractual obligations. This
requires them to plan their work, to lead and to manage their workforce,
to provide sufficient and proper materials and to employ competent
tradesmen, so that the Works are fully carried out to an acceptable
standard and that all time, sequence and other provisions of the contract
are fulfilled.’73
In Allridge v Grand Canal Actual, it was conceded by the plaintiff and held by
the court that: ‘There were implied terms of the contract that the plaintiff ...
would ... carry out the works regularly and diligently’.74 However, in Leander
Construction v Mulalley, Coulson J reviewed both the textbooks and the case
law and concluded:
‘All the authorities point the same way: the courts have been very
reluctant to imply additional terms as to the timing or regularity of the
contractor’s performance prior to the contract completion date. In the
case most in point, namely Greater London Council v Cleveland Bridge
[34 BLR 50], both Staughton J and the Court of Appeal refused to imply
an obligation to proceed regularly and diligently, notwithstanding the
express words of the termination clause.’75
That view was endorsed by the Court of Appeal in the same case,77 and in
Leander Construction v Mulalley.78
para 6-021.
73 West Faulkner Associates v Newham LBC 31 Con LR 105 (OR), page 139.
74 Allridge v Grand Canal Actual, note 54, page 123.
75 Leander Construction Ltd v Mulalley and Co Ltd [2011] EWHC 3449 (TCC), [2012]
BLR 152, para [39].
76 Greater London Council v Cleveland Bridge and Engineering Co Ltd 34 BLR 50
(Comm), page 66.
77 Greater London Council v Cleveland Bridg (note 76) (EWCA), page 78.
78 Leander v Mulalley, note 75, paras [33]-[34].
16
Contractor will provide adequate levels of manpower, plant and
resources
Contractor will carry out the work in a good and workmanlike manner
and use sound and suitable materials
These two fundamental implied terms are often dealt with together. They have
been part of Irish law since at least as far back as Fitzpatrick v Brady.80 In
Brown v Norton, Davitt P held that the builder: ‘impliedly agrees ... that ... the
work will be carried out in a good and workmanlike manner and with sound
and suitable materials’.81
Contractor’s work and materials will be reasonably fit for the purpose
for which they are required
17
‘Sisk should be liable to Norta for the default of a nominated sub-
contractor where that default consists in the supply of defective materials
... the same principle will apply to bad workmanship on the part of the
nominated sub-contractor.’85
In the case of a house, the contractor will make it reasonably fit for
immediate occupation as a residence when it is complete
Contractor will use reasonable skill and care in the execution of the
works
Bailey states:
‘It is an implied obligation of a party who has undertaken to perform
work pursuant to a contract that it will use reasonable skill and care in
performing its contractual obligations. The term is implied at common
law.’90
85 Norta Wallpapers (Ireland) Ltd v John Sisk & Sons (Dublin) Ltd [1978] IR 114 (IEHC),
page 119; also (1976) 14 BLR 49, page 57.
86 Brown v Norton, note 63, page 56.
87 Viking Grain Storage Ltd v TH White Installations Ltd (1985) 33 BLR 103 (OR), page
117; and Independent Broadcasting Authority v EMI Electronics Ltd and BICC
Construction Ltd (1980) 14 BLR 1 (UKHL), page 48; also Maguire v Rowan: note 82.
88 Surrey Heath BC v Lovell Construction Ltd (1988) 15 Con LR 68 (OR), paras [91]-[92].
89 Equitable Debenture Assets Corporation v William Moss Group Ltd (1984) 2 Con LR 1
(OR), (1984) 1 Const LJ 131; and Victoria University of Manchester v Hugh Wilson &
Lewis Womersley (1984) 2 Con LR 43 (OR).
90 Bailey (note 64), volume 1, para 3.118.
18
‘I am satisfied, therefore, that under the term undoubtedly implied into
the contract that they would use reasonable care and skill in the carrying
out of their work, they had a duty to provide for and insist upon any
special precautions which were required during the course of their
work.’91
Contractor will handle plant with skill and care in a proper manner
In Kay Lim Construction & Trading v Soon Douglas, the High Court of
Singapore held that there was an implied term to the effect that the defendant
crane hirer would employ properly skilled and qualified labour and would
ensure that the dismantling and removal of a tower crane would be done in a
skilful and proper manner in accordance with any operating instructions for the
tower crane.94
As part of its obligation to use reasonable skill and care, the contractor must
take reasonable precautions to protect the works. In Dundalk Shopping Centre
Ltd v Roof Spray, Finlay P said:
‘It would be within the general knowledge ... of ... an experienced
builder that a roof in the process of being insulated or laid by any
method ... should not be actively damaged. ... If it was necessary to put
cat-walks or gang-planks across the roof so as to avoid any traffic on it
... it would have been an obvious act of care on the part of the defendants
... to ensure that it was carried out. None of these precautions were, in
fact, taken by the defendants nor is there any evidence ... that ... they
created any particular forms of cat-walks ... so as to preserve the roof
from traffic.’95
19
Contractor will provide reasonable site security
Bailey states:
‘The allocation of risk of loss or damage to the works (or other property
on the site) resulting from the acts of third parties, such as thieves,
vandals, protesters, squatters or other trespassers, is usually a matter for
the agreement of the parties to the project. An agreement on
responsibility for site security may be express or implied. ...
In the absence of agreement as to risk allocation, a contractor who has
control or possession of a site may be subject to a duty of care to the
owner of the site to take reasonable care to ensure that the owner’s
property is not damaged, destroyed or stolen by third parties.’96
See Blackpool & Fylde Aero Club v Blackpool.99 Both McDermott and
Hudson mention the Canadian concept of Contract A and Contract B, whereby
the proposed construction contract is Contract B and Contract A is formed
when a tenderer submits its tender on foot of an invitation to do so from the
employer. It is said that, under Contract A, the employer must duly consider
any valid tender that has been properly submitted.100
20
However, in Howberry Lane v Telecom Éireann, Morris P said: ‘Even if, as
counsel submits, this is a recognised emerging jurisprudence in Canada I do
not accept it as representing the law in this jurisdiction’.101 Notwithstanding
these dicta, McDermott states: ‘In the absence of a viable alternative
mechanism, the Contract A/Contract B analysis is still the most convenient
way to understand the case law on tendering’.102
101 Howberry Lane Ltd v Telecom Éireann [1999] 2 ILRM 232 (IEHC), page 239.
102 McDermott, note 12, para 1.48.
103 Harmon CFEM Façades (UK) Ltd v Corporate Officer of the House of Commons (1997)
67 Con LR 1 (TCC), page 169.
104 SIAC Construction Ltd v Mayo County Council [2002] 3 IR 148 (IESC), page 169. ‘The
directive’ is now Directive 2004/18/EC of the European Parliament and of the Council of
31 March 2004 on the coordination of procedures for the award of public works
contracts, public supply contracts and public service contracts OJ 2004 L134/114.
105 Scott v Belfast Education and Library Board [2007] NICh 4, 114 Con LR 209, para [6].
21
Trespass equally includes a violation of the air space above the
claimant’s land, at any rate at a height which would interfere with any
possible use of their land. Moreover, an injunction is obtainable as of
right and as a matter of course in the case of continuing trespasses ... it
will be irrelevant that the claimant has in fact suffered no damage.’106
The following two Irish cases illustrate the strict view that the courts take, in
regard to trespass. In Hanks v Arterial Drainage Co Ltd, the contractor was
employed by a drainage board to carry out drainage works.108 The contractor
entered the plaintiff’s land before the board had paid compensation to him.
The court held that the contractor was liable to the plaintiff landowner in
trespass for damage caused to his lands. In Monks v Dillon, the defendant
engineer designed drainage works, prepared plans and specifications, and
supervised the execution of such works on the plaintiff’s land before the
plaintiff had been paid compensation by the employer, a drainage board. The
court held that such actions constituted a trespass and that the engineer was
personally liable to the landowner for the trespass caused to his lands. In the
view of the court, the engineer had supervised unlawful works. Law C said:
‘The Defendant’s plans and specifications indicated the precise works to
be done on the Plaintiff’s land. ... But here the works which the
Defendant had himself planned, which he directed the contractor to
execute ... were wholly and absolutely illegal, no matter how they were
done, or what care or precaution were taken by all concerned in their
execution.’109
22
Employer will give the contractor full possession of the site on time
Where part of the site was occupied by a man, his wife and his dog as well as
an old car and packing cases, it was held that the employer was in breach of
contract in failing to give possession of the site: Rapid Building v Ealing
Family Housing Association.114
Where physically possible to do so, the site should not only include the
footprint of the buildings but also working space around it. In The Queen in
Right of Canada v Walter Cabott Construction, the court said:
‘It is fundamental to a building contract that work space be provided
unimpeded by others. The proposition of law is succinctly put by the
learned author of Hudson’s Building and Engineering Contracts, 10th
edition (1970), at page 318, as follows: “Since a sufficient degree of
possession of the site is clearly a necessary pre-condition of the
111 Arterial Drainage Co Ltdmpany v Rathangan River Drainage Board (1880) 6 LR Ir 513
(Exch Div), page 530.
112 Freeman v Hensler (1900) 64 JP 260 (EWCA).
113 Ductform Ventilation (Fife) Ltd v Andrews-Weatherfoil Ltd [1995] SLT 88 (CSOH).
114 Rapid Building Group Ltd v Ealing Family Housing Association Ltd (1984) 29 BLR 5
(EWCA), page 13.
23
contractor’s performance of his obligations, there must be an implied
term that the site will be handed over to the contractor within a
reasonable time of signing the contract ... and ... a sufficient degree of
uninterrupted and exclusive possession to permit the contractor to carry
out his work unimpeded and in the manner of his choice ...” This
statement of the law was adopted by Spence J, in the Penvidic
case115.’116 [emphasis added]
That view was endorsed by the Court of Appeal in the same case, and in
Leander Construction v Mulalley.120
115 [Author’s note] Penvidic Contracting Co Ltd v International Nickel Co of Canada Ltd
(1975) 55 DLR (3d) 748.
116 The Queen in Right of Canada v Walter Cabott Construction Ltd (1975) 21 BLR 42
(Federal Ct of Appeal – Canada), page 56.
117 Acrow (Automation) Ltd v Rex Chainbelt Inc [1971] 1 WLR 1676 (EWCA), page 1680.
118 Merton LBC v Leach, note 54, page 81.
119 Greater London Council v Cleveland Bridge and Engineering Co Ltd (1984) 34 BLR 50
(Comm), page 66.
120 Greater London Council v Cleveland Bridg (note 119) (EWCA), page 78, and Leander
Construction v Mulalley, note 75, paras [33]-[34].
24
Employer’s obligation to supply information and instructions
In Merton LBC v Leach, Vinelott J said: ‘It must have been in the
contemplation of the parties that the architect would act with reasonable
diligence and would use reasonable care and skill in providing this
information’.121
25
contract. Breach of this implied term will entitle the contractor to
damages at common law.’125
Architect/engineer will fairly hold the balance between the employer and the
contractor
In Nash Dredging v Kestrel Marine Lord Ross said: ‘It is plain ... that the ...
employers sought to give the engineer instructions as to how he should
perform his function as certifier. In my opinion they had no right to do so, and
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what they did constituted improper interference with the engineer’s
independence and function’.130
Where the certifier was required to refer to the employer in writing before (i)
allowing any extension of time or (ii) issuing any variation instruction worth
more than £1,000; and the contractor had not been informed of these
instructions; the court held that the certifier was in a position which conflicted
with his duty to act impartially and the contractual machinery had broken
down.131
Employer will ensure that the architect/engineer will do his/her job as
certifier
The Supreme Court of New South Wales held that there were implied terms in
the contract to the effect that (i) The employer would not interfere with the
Director of Works’ duties as certifier; and (ii) The employer would ensure that
the Director of Works did his duty as certifier.132
In Croudace Ltd v Lambeth LBC, a council’s chief architect retired and was
not replaced. Nobody would certify the contractor’s claims for delay and
disruption. The Court of Appeal held that there was an implied term to the
effect that a new architect would be appointed to act as certifier.133
In Compass Group v Mid Essex Hospital Services NHS Trust, Cranston J said:
‘Crucially the law reports are now replete with authorities where a term
has been implied in a commercial contract as a restriction on the
exercise of a contractual discretion: the discretion must be exercised in
130 Nash Dredging Ltd v Kestrel Marine Ltd [1986] SLT 62 (CSOH), page 66A.
131 Bernhard’s Rugby Landscapes Ltd v Stockley Park Consortium Ltd 14 Const LJ 329
(OR).
132 Perini Corporation v Commonwealth of Australia 12 BLR 82 (NSWSC).
133 Croudace Ltd v Lambeth LBC 33 BLR 20 (EWCA), page 34.
134 Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The ‘Product Star’) [1993]
1 Lloyd’s Rep 397 (EWCA), page 404.
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good faith, and not in an arbitrary, capricious or irrational manner. ...
The purpose of the implied term was to prevent the abuse of power; the
test was one of rationality ie whether no reasonable contracting party
would take the decision to exercise the discretion in the way it was
exercised ... More recently, in JML Direct Ltd v Freestat UK Ltd [2010]
EWCA Civ 34, Moore-Bick LJ held that the implied obligation not to
act in an arbitrary, irrational or capricious manner was ‘likely to be
implicit in any commercial contract under which one party is given the
right to make a decision on a matter which affects both parties whose
interests are not the same ...’135
Architect/engineer will adjust prime cost and provisional sums when the
true cost of the items concerned is known
This term will not be implied on small one-off jobs, known as entire contracts.
The construction of two dairies was held not to be an entire contract and the
contractor was entitled to be paid for the work he had carried out prior to
leaving the site.138
Bailey, Construction Law, states: ‘In the absence of agreement on price, the
contractor is entitled to be paid a reasonable remuneration for work which it
performs under the contract in question’.139
As authority for that statement, Bailey cites inter alia the decision of the
House of Lords in AE Farr v Ministry of Transport, in which Lord
MacDermott said:
‘If ... the parties were agreed that all reasonably required working space
excavation would be paid for, their intention ... must have been that,
where there was no appropriate rate or rates for the purpose, a reasonable
rate would be paid ... no other conclusion as to intention seems possible
and I would, therefore, imply a term to the effect stated.’140
135 Compass Group v Mid Essex Hospital Services, note 51, para [45].
136 Leslie & Co v Metropolitan Asylums District 68 JP 86 (EWCA), page 88.
137 Tuta Products Pty Ltd v Hutcherson Brothers Pty Ltd 46 ALJR 549 (HCA), page 553.
138 Lockhart v Collingwood Co-Operative Dairy Co Ltd [1920] NZLR 412 (NZSC).
139 Bailey, note 64, volume 1, para 2.21.
140 AE Farr Ltd v Ministry of Transport 5 BLR 94 (UKHL).
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Keating states: ‘If the contractor does work under a contract express or implied
and no price is fixed by the contract, he is entitled to be paid a reasonable sum
for his labour and materials supplied pursuant to an implied term.’141
Keating is referring to a situation where a contract exists, and the parties have
agreed that the contractor should carry out work, but no price is agreed. But
what if no contract has been concluded and the contractor subsequently carries
out work? In British Steel Corporation v Cleveland Bridge, Robert Goff J
said: ‘If ... no contract was entered into ... the law simply imposes an
obligation on the party who made the request to pay a reasonable sum for such
work as has been done pursuant to that request.’142
Quantum meruit will also apply if the pricing machinery in the contract breaks
down.143
Sub-contracts
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admitted in cross-examination that he was familiar with the ‘pay-when-
paid’ provision is neither here nor there to the pleaded case.’145
Although the sub-contractor had seen the contractor’s standard form on other
projects, he did not sign any such form in respect of the present project. He
contended that he had not agreed to a pay when paid clause in respect of the
present project. Cowan J found that the pay-when-paid clause could not be
imported into the agreement by implication as the sub-contractor had never
agreed to it and one payment had been made by the contractor without protest.
Conclusion
The courts will not make a contract for the parties where none exists. But
where an agreement has been concluded which does not expressly deal with
relevant eventualities, a court may, whilst exercising caution, implement the
presumed intention of the parties by the implication of suitable terms which
are necessary in the circumstances of the case.
The views expressed by the author in this paper are his alone, and do not necessarily
represent the views of the Society of Construction Law or the editors. Neither the
author, the Society, nor the editors can accept any liability in respect of any use to
which this paper or any information or views expressed in it may be put, whether
arising through negligence or otherwise.
145 Grand Choice Construction Co Ltd v Dillingham Construction (HK) Ltd, noted by David
Bateson at [1992] 9 ICLR 410.
146 Pro Star Mechanical Contractors Ltd v Farmer Construction Ltd (British Colombia
Supreme Court, 6 July 1994; CarswellBC 2016).
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