In Strachan and Henshaw Ltd vs Stein Industrie Ltd and GEC Alsthom M Ltd, the Court of Appeal had to construe the meaning and extent of clause 44.4 of the MF/1 general conditions. This provided that the parties intended their respective rights, obligations and liabilities, as provided in the conditions, should be exhaustive.
Strachan employed a large number of workers and had to provide facilities for clocking in and out, and cabins for breaks. It had been agreed at a pre-contract meeting that the cabins would be on site. In the event, Strachan was instructed to put them half a mile away. This was said to have cost Strachan some £1.6m in wasted time walking to and fro.
Strachan claimed a contractual entitlement to have the cabins on site as a result of the pre-contract meeting and damages for breach. In the alternative, it claimed damages for misrepresentation. Both claims failed because of the wording of clause 44.4. The conditions said nothing about where the cabins were to be sited and no claim for breach of the alleged oral agreement could succeed. Equally, claims for misrepresentation were excluded.
Unless a contractual obligation was contained in the conditions, there was no remedy if it was breached
The comments made on this clause by the court are important. It said the clause excluded all implied terms and all claims for breach of obligations incidental to the main contractual obligations.
In other words, unless a contractual obligation was contained in the conditions, there was no remedy if it was breached. Some will be startled that the clause has this draconian effect. As counsel for Strachan put it, the effect could be said to reduce ostensible contractual obligations to little more than declarations of intent.
However, the court's view was that if parties wanted to reduce their liability in that manner, there was no reason why the law should prevent them doing so. Clause 42.4 of the FIDIC M&E contract arguably goes even further. To begin with, it is similar to clause 44.4, but it goes on to say that (save in the case of gross misconduct) the remedies provided under the contract for breach of contract and negligence are to be applied to the exclusion of any other remedy under the law governing the contract.
Tim Elliott QC is a barrister specialising in construction at Keating Chambers.