A concrete example

Design-and-build contracts are the flavour of the month. The RICS contracts-in-use survey for 2001 confirmed that design-and-build had captured 43% of the market. Most design-and-build contracts are now let on JCT With Contractor's Design 1998 but amended heavily by the employer's advisers. The dispute in Mowlem plc vs Newton Street Ltd involved just such a contract. Judge David Wilcox was looking at a point of law arising out of an appeal against an award made in an arbitration on the interpretation of such amendments.

The works in that case involved the conversion of a large reinforced concrete structure in Manchester, used as a post office sorting house, into a block of flats. The amendments concerned were mainly to the articles of agreement and provided in particular that the parties agreed that the contract sum "shall be the guaranteed maximum price … and is acknowledged to include the full cost to the contractor of all risks and responsibilities assumed".

Mowlem accepted "additional risk and responsibility" for divergences and discrepancies within the contract documents and relating to the statutory requirements. The contractor agreed that it was not relieved from any responsibility on the basis of any misunderstanding, insufficient information, the unforeseeability of any risk or the inadequacy of any drawings. And that a "change" meant only a "material alteration or modification" to the contract documents instructed by the employer.

The contractor was advised by structural engineers prior to the contract to undertake a further investigation into the concrete frame. It did not do this, and no provision was made for such investigation in the contractor's proposals submitted by Mowlem and included in the contract. The risk of concrete repairs was not referred to in the contract and no description of the repair work was included in any contract documents. Mowlem's argument was that such repair work could not form part of "the works". Mowlem accepted that the amendments in the articles imposed additional responsibility on it, but not for things outside the definition of "the works". Accordingly, it did not accept the risk of concrete repairs. The judge rejected this proposition: the articles imposed additional risk on the contractor, including the risk of unforeseen or unknown risks arising out of the condition of the existing building.

The fact that the wording of various amendments is different means that each case needs to be looked at individually

Another dispute arose in relation to discrepancies in the contract documents. At the date the contract was signed, planning permission had just been granted to increase the number of flats and the contract drawings included unamended elevation drawings. Again, the articles transferred responsibility for discrepancies to Mowlem, which it had to resolve at its own cost. The judge decided that the discrepancies did not involve "material" alterations to the contract documents.

Mowlem finally tried to argue that the employer had misrepresented the condition of the building and its suitability for the works, and argued that the amendments to the articles were so widely drafted that they could not satisfy the reasonableness test in respect of exclusion of liability for misrepresentation imposed by the Misrepresentation Act 1967. Again, the judge upheld the arbitrator's finding that the amendments were reasonable.

So despite the cavalier approach of many contractors to these sort of amendments, suggestions that they will never be enforced because they are not "fair" or "reasonable" are optimistic. The courts will look at what the words say and interpret them as best they can. The fact that the wording of all these various amendments is different means that each case needs to be looked at individually.