Lost clauses

In Picardi vs Cuniberti, an architect's attempt to resolve a dispute with a householder through the RIBA's adjudication provisions was held to be unfair and unenforceable. The case threw up an unusual defence based on regulations originating from a European Commission directive. Although limited in its application, this marks another inroad into the effectiveness of adjudication.

The Cunibertis wanted work carried out on their house in west London. Mr Picardi was their architect but after a time the parties fell out. Picardi claimed outstanding fees and referred the dispute to adjudication. The adjudicator found for Picardi and he went to court for his money.

Picardi claimed that his contract with Cuniberti incorporated the RIBA conditions. Clause 9.2 of these conditions provides for the adjudication of disputes. Cuniberti's case was that he had not contracted on the RIBA conditions and, even if he had, clause 9.2 was an onerous clause that had not been brought to the party's attention and was therefore unenforceable at common law. Lastly, Cuniberti contended that clause 9.2 of the RIBA conditions should be declared unfair and of no effect under the Unfair Terms in Consumer Contracts Regulations 1999. This last point was a novel one.

Since statutory adjudication does not apply to contracts with a residential occupier, Picardi had to prove that the RIBA conditions applied in order to enforce the adjudicator's decision. If clause 9.2 of the conditions was not a contractual term there was no right to adjudication. After hearing evidence, the judge decided that the conditions had not been incorporated. This was enough to dispose of the whole case. However, he went on to consider the other two defences raised by Cuniberti: lack of notice and the unfair terms regulations. To a certain extent, the two were linked.

Basing himself on common law the judge said that where there is a tender of a contract that has particularly onerous or unusual conditions, they must be brought fairly to the attention of the other party to be binding. He held that the adjudication provisions in the RIBA contract were unusual terms. The RIBA guidance notes themselves recommend that an architect should explain a proposed agreement to his client. Picardi had not done this. Since the adjudication provisions were not brought to the attention of Cuniberti, he could not have relied on them even if they had been incorporated.

The Unfair Terms in Consumer Contracts Regulations 1999 apply to contracts between a supplier and a consumer. It was accepted that Picardi was a supplier and Cuniberti a consumer. Regulation 5 says that a contractual term that has not been individually negotiated is to be regarded as unfair if it causes a significant imbalance in the parties' rights and obligations arising under the contract to the detriment of the consumer. And regulation 8(1) says that if a term in a contract between a consumer and a supplier is unfair, it is not binding on the consumer.

The earlier 1994 regulations had been considered in Director General of Fair Trading vs First National Bank. In that case, Lord Bingham had applied this test when considering the words "significant imbalance": is the term weighted in favour of the supplier so as to tilt the parties' rights and obligations under the contract? Lord Millett had adopted a practical approach: if the clause had been drawn to the attention of the party, would it have accepted it? If not, this may suggest unfairness.

The judge found that the adjudication provisions were unfair and, since they had not been individually negotiated, unenforceable. The main factor that he took into account was that adjudication involved irrecoverable expenditure, which could be significant. Also he referred to the fact that in the absence of agreement the architect's own body, the RIBA, was to nominate the adjudicator. This could give the appearance of unfairness if not properly explained.

It remains to be seen whether or not this decision will be followed. Of course, if contractual provisions are individually negotiated, they cannot be attacked under the regulations. So when contracting with a householder, an architect should do more than simply incorporate the RIBA conditions if they want the right to have disputes adjudicated.