Thames Water wanted a new water mains in Shepherd’s Bush, London, involving 80-metre tunnels for water pipes of 600mm and 900mm in diameter. The GRP pipes were to be placed in two tunnels, which would be backfilled with foam concrete.
J Murphy & Sons v Johnston Precast, TCC December
Murphy tendered on 17 July 1998. A month later, Thames decided there would only be one tunnel for both pipes. Murphy accepted, and on 21 September 1998 the contract was agreed. Murphy issued preliminary drawings, which showed foam concrete only around the lower 600mm pipe, but not the larger pipe.
Murphy sent out for supplier quotes in February 1999. Johnston Precast was the cheapest and was the supplier that quoted for potable water.
On 21 April 21, Murphy faxed its order and referred to ‘conditions overleaf’, although these were not included. Johnston acknowledged the order on 22 April subject to its own terms and conditions. Clause 15 (ii) eliminated Johnston’s liability if Murphy did not give notice of claims within 28 days of delivery.
It was only on 26 April that Murphy sent Johnston Sequence Document No. 2, indicating that the tunnel was to be filled with foam concrete. Johnston replied that the proposal for installation appeared to be satisfactory.
The pipes were installed and surrounded with foam concrete by February 2000. On 13 November 2000, the 900mm pipe burst. Investigations showed a 21-metre void in the foam concrete around the burst and that the pipe had suffered an alkali attack.
An arbitration between Thames and Murphy was settled when Murphy agreed to pay £3.9m. Murphy then sued Johnston for that sum plus arbitration costs.
Murphy argued that as the pipe had burst under normal working pressure, it was defective and so Johnston had breached its contract. Also, the GRP pipe was not fit for purpose because it had been chemically attacked by the foam concrete. However,
the judge found that tests showed the pipe was not inherently defective.
The judge agreed that Johnston had a continuing duty to warn Murphy of any problems, but the firm had shown that its pipes had often been surrounded with concrete with no ill effects. There was nothing to suggest that the foam concrete, if properly installed, would be a menace to the pipe.
The judge found that clause 15 (ii) - that Murphy should give notice of claims within 28 days of delivery - was unreasonable. If Johnston had been found to be liable, this condition would have been excluded under the Unfair Contract Terms Act 1977. Murphy won this point, but it lost the case.
Ann wright’s analysis
To be successful in a claim for a breach of contract, a party must show that a specific term is included in the contract, and that the damage the claiming party has suffered is due to a breach of that term. If, on the balance of probability, damage was caused by other factors, the claim fails.
Where a company is supplying either goods or services, a duty to warn the customer of any risk factors or limitations associated with the product or the service can be implied into a supply contract. However, to show that a supplier has breached that duty, a claimant must show that there were circumstances which gave cause, or should have given cause, for concern at the time the parties entered into the contract.
A contract term designed to avoid liability can be excluded under the Unfair Contract Terms Act 1977 if it is held to be unreasonable. Whether or not it is unreasonable depends on the relevant facts of the case.
To determine them, a court will consider various factors, including the relative strengths of the bargaining power of the contracting parties, whether inducements were offered to agree a specific term, and whether the customer knew or should have known of the existence or extent of these terms.
The court would also look at whether it was reasonable, at the time of the contract, to expect that compliance with a particular condition would be practicable, and whether the goods were manufactured processed or adapted to a special order of the customer.
Ann Wright is an adjudicator and quantity surveyor. Tel: 01675 466 009