Barratt could be forced to pay £9.5m after losing a landmark lawsuit over a development it shelved during the downturn
In the ruling, which lawyers said could hold implications for hundreds of other developers and contractors, Mr Justice Coulson said the housebuilder could not use the recession as a defence for mothballing the scheme.
Gold Group Properties sued the housebuilder after Barratt delayed work on a site in Surrey that it had agreed to build homes on, and from which Gold and Barratt would share a profit.
The agreement was signed in August 2007, but house prices fell shortly afterwards, and Barratt did not start work.
Coulson said the agreement had not been “frustrated”. A contract is frustrated when an unforeseen event renders contractual obligations impossible.
Lawyers described this as a pivotal decision for the construction industry. They warned that many companies would rely on the recession being accepted as a frustrating event, to allow them to be free of contractual obligations.
Rupert Choat, partner at law firm CMS Cameron McKenna, said: “This shows using the downturn as an excuse will not be enough.”