We purchased a flat off-plan that was completed eight months late. It then took three-and-a-half months to do remedial work, during six weeks of which we were put up in a resident decant unit. I had to take 13 days of my annual leave while some of the work was being carried out and we incurred mortgage payments from completion.
There is a clause in the agreement to purchase that says the builder shall not be liable for any compensation or damages resulting in "remedial work" - but we didn't get a choice to negotiate as these were standard terms. Our out-of-pocket claim amounts to about £4700. In addition, we have claimed compensation of £4700 for loss of enjoyment of the property and also for inconvenience and stress. The final settlement offered to us in order to "avoid litigation" is £3500. Please advise.
We presume that you are contracting as a consumer with the builder and are protected by the Unfair Contract Terms Act 1977. Any attempt to exclude or limit liability must be reasonable to be enforceable. Your unequal bargaining position and the fact that it was a standard form would be relevant. Any attempt to exclude all liability by the builder would be held to be unreasonable.
The court only allows damages for losses that are reasonably foreseeable. The holiday pay is unlikely to be deemed reasonably foreseeable as a result of the late completion and remedial works. The courts are notoriously reluctant to award sums of money for non-financial losses. Your annual leave claim, for which you have been paid, will be seen as such, as will loss of enjoyment, stress and inconvenience.
Concentrate on recovery of the mortgage payments. The best approach is probably to claim these as delay damages arising from the builder's failure to complete on time. Delay costs are a recognised head of claim in building cases. You may well not succeed in getting the full three-and-a-half months and probably stand a better chance to recover the six weeks that you were not in possession of the property.
Try and negotiate up the settlement to between £4000 and £5000. We strongly recommend accepting an offer, as litigation will be disproportionately expensive and time consuming, with obvious risks attached.
"Without prejudice" clauses
Please could you advise on disclosing "without prejudice" settlement correspondence in an adjudication? Can there be situations where it is permissible to submit it without the other party's consent? The contractor in my case is not advising the subcontractor why money has been withheld throughout the project and a month after practical completion.
The "without prejudice" rule protects communications genuinely aimed at securing a settlement from being given in evidence in court proceedings. But it is likely that an adjudicator would feel constrained by this rule.
If this is correct, there are limited circumstances in which communications marked "without prejudice" could be passed to an adjudicator without the other side's consent – say, if they do not contain any genuine offers of settlement. If they contain admissions of liability, however, they should not be shown to the adjudicator.
Any disclosure of correspondence marked "without prejudice" may well produce vociferous complaints from the other side. If you choose to do this, it would be advisable to warn your opponent in advance and explain to the adjudicator your reasons for disclosure.
We do not know the circumstances of your case, but a contract subject to part two of the Construction Act imposes an obligation on the paying party to serve a notice of intention to withhold payment. Once the receiving party has satisfied the adjudicator that he has made an application for payment and the sum claimed remains unpaid, the burden passes to the paying party to prove it has served a withholding notice.
If your concern is that the contractor is attempting to delay an adjudication by stringing out fruitless negotiations, you would be entitled to draw this to the attention of the adjudicator.
Can I make a contractor pay for free wine?I am a project QS and my firm has recently completed a hotel on a design-and-build basis using the JCT98 With Contractor’s Design contract. Since taking possession, my client has discovered problems on the M&E side. Consequently, my client has had to compensate his guests with bottles of wine, free meals and holiday vouchers to the tune of about £5000. My client wishes to knock this amount off the contractor’s final account. Do you think that the contractor should be liable for these costs?
It does appear to be reasonable to deduct these payments from the final account and to do so under the general provision in clause 188.8.131.52. To the extent that these damages do not flow naturally out of the contractor’s breach of contract, it is reasonable to assume that the contractor was aware, at the time the contract was entered into, that defects in the completed works might lead to claims for compensation from hotel guests. The costs of the compensation are far less than the losses the employer would have incurred if the defects had led to cancellations and full refunds. This is of direct benefit to the contractor as the employer has effectively mitigated his loss.