It is in such sensitive areas that the standard forms of contract can perform a service to the industry by doing the unpleasant thinking for the parties. They can then feel assured that if the unthinkable does come about, their respective positions will be fairly catered for by the contract.
Lawyers know from bitter experience that when clients wish to invoke termination rights, there will be an excess of formalities to be observed because the courts insist that procedures laid down in our contracts are properly adhered to. JCT98 devotes no less than eight pages of concentrated print to this subject. The man or woman on the Clapham omnibus could be forgiven for thinking that those pages had said the last word on it. They might then be surprised to be told by a lawyer that alongside the rights spelled out in those clauses, the common law rule about "rescission" or "repudiation" of contract co-exists.
The common law rule is simple to state but difficult to apply to construction contracts. If a sufficiently fundamental breach of contract takes place, the innocent party has the right to treat that act as a repudiatory breach by the other party and elect to bring the contract to an end. How should that be applied to non-payment by an employer? How many failures to pay certificates would be regarded by the common law as sufficiently serious to justify rescission? One, two, half a dozen? The common law gives no precise answer.
It is because of this interplay of common law and contract rights that, whenever a determination is being considered, the possibility of treating the other party's conduct as a repudiatory breach justifying a common law determination as well as a contractual breach justifying a contractual determination needs to be considered.
Lawyers know that when clients wish to invoke termination rights, there will be an excess of formalities to be observed
A very recent example of confusion over the effect of a common law repudiation is illustrated in the judgment of His Honour Judge Bowsher in Northern Developments vs Nicholl (Part 4 [2000] BLR). In that case, a subcontractor had left site after a disagreement about payment. This was a repudiatory breach of contract that had been accepted. It was argued by the subcontractor that as a result, the contract had ceased to exist. Accordingly, the main contractor's claim based on repudiation could not arise "under the contract" and therefore did not fall within the jurisdiction of the adjudicator.
The judge explained that 60 years ago, in the House of Lords case of Heyman vs Darwins, it had been explained that acceptance of a repudiation did no more than bring performance of the contract to an end – but the contract itself still existed and all rights arising under it remained enforceable. No doubt JCT98 talks about determination "of the employment of the contractor" in order to emphasise that distinction.
The law books tell us that the courts will not grant relief against the forfeiture of building contracts, unlike the equivalent procedure in the law relating to leases. It might be thought that something similar would nonetheless have occurred as a result of determination clauses preventing notices being given "unreasonably or vexatiously". Opportunistic terminations, as they are sometimes called, do occasionally take place but there is no reported case where an English judge has struck down a determination as being unreasonable or vexatious.
Perhaps all that will change as notions of good faith, widely adopted in other jurisdictions, find their way into our contracts. If the parties are bound to each other to act in a spirit of trust and co-operation, it is difficult to see how a court would uphold a contractual determination based on a temporary stoppage of the works caused by the default of a subcontractor, as occurred in Jarvis vs Rockdale Housing Association (1986, Court of Appeal).
Postscript
Tony Blackler is a partner in solicitor Macfarlanes.
