Three great legal myths

In one of AP Herbert's "Misleading cases" written for Punch in the 1930s, a claim for damages is brought against a man who has an accident while driving on the wrong side of the road. His imaginative defence is that, at the time, the road had become so flooded that it was legally a waterway. Consequently, he argues, his car was a boat and therefore obliged by maritime law to proceed on the starboard. This defence is successful.

Although the misleading cases were fictional, some had such a ring of plausibility that many people, without knowing the true source, thought that they represented the law. In the same way, there are some fallacious arguments in contract disputes that seem to have acquired a life of their own through constant repetition. Here are three examples.

"If the architect fails to grant an appropriate extension of time, time becomes at large."

Not so. When time is "at large", the contractor's obligation to complete by a set date is replaced by an obligation to complete within a reasonable time. The employer then loses any right it might have had to liquidated damages. This can happen if the contract contains no mechanism for extending time for events that are not the contractor's fault. It does not happen merely because the architect fails to certify an extension when it should have. It is the role of the appropriate tribunal to correct the certificate.

"A contractor can claim a reasonable sum as an alternative to claiming the price/cost under the contract."

His defence is that the road was flooded and so legally a waterway. Consequently, his car was a boat and therefore obliged by maritime law to proceed on the starboard

Again, claim documents often argue that if the employer is in breach of contract, the contractor can disregard contractual rates and prices and claim a reasonable sum. The true position is that the contractor is nearly always bound to the rates and prices, whether the claim is for sums due under the contract or for breach of it. Things are different if the contract is not actually signed, say, because of a failure to agree an important term, in which case one can claim a reasonable price. The contractor may be able to make a claim if the contract supports it, as do the variation provisions in JCT98 (clause 13) which allow a valuation based on fair rates and prices in certain circumstances.

"Under the new rules, the winner no longer gets its costs – these are ordered on an 'issue by issue' basis." This is misleading, although it does contain an element of truth. Unless or until England adopts the US system, the rule is that the loser pays the winner's (reasonable) costs – the Woolf reforms notwithstanding. "Winner" here means "net winner". So it is generally no use an employer trying to resist a costs order in circumstances where it has proved £50,000 of defective work, but is still liable to pay £100,000 against a contractor's claim for payment. It is, of course, true that the courts and arbitrators have more discretion to penalise a winning party if it wastes time on an argument that should really never have been run. But this is a long way from saying that the winner should be deprived of costs for every issue or argument on which it failed. After all it, is rare to win on everything.

Arguments such as these are put forward by those preparing contractors' claims (sometimes even by lawyers). Many of them are never tested at trial, because cases settle. When they are decided, it is usually by arbitrators or adjudicators, whose decisions are not publicly available.