Some contracts are better drafted than others, but the courts are always keen to give effect to the intentions of the parties and are equally reluctant to find that provisions are void for uncertainty, especially where the contract has been performed.  Those points were clearly made recently, in a case concerning a subcontract to install a new airport baggage handling facility.

The main contractor was carrying out major works at the airport and had engaged a specialist subcontractor to design and construct the baggage handling facility.  The work was divided into sections, each of which was to be completed by a date specified in the contract – the contract also provided for payment of liquidated damages in the event of delay.

When delays did in fact arise, although the deadlines were extended by agreement, a dispute ensued as to the operation of the sectional completion dates and the delay damages.  The matter was referred to an adjudicator, who found that the delay damages provisions were so uncertain in their meaning, as to be inoperable and unenforceable.  As a result, the main contractor issued court proceedings, asking for declaratory relief as to the proper construction of the contract.

In ruling on the matter, the court noted that what mattered was the intention of the parties, by reference to what a reasonable person, with all relevant background knowledge, would have understood from the wording of the contract.  It was made clear that the subjective evidence of each party’s intentions, was to be disregarded - the delay damages provisions had to be interpreted in the context of the whole contract, with a view to achieving a harmonious reading of each clause.

Applying these principles, the court found that it was possible to sufficiently identify those works that fell within each of the sectional periods, and as a result the liquidated damages provisions were sufficiently certain and therefore enforceable.  The court made declarations in respect of the “true meaning” of the applicable contract terms.

A clear lesson to be learned from this case, is that a contract must be clearly drafted – important provisions, like liquidated damages clauses and anything related to them, must be carefully constructed and objectively interpreted.  It will not be possible to interview the parties after things have gone wrong, in order to decide how courts will judge the meaning of a particular clause in a contract – a solicitor with a good grasp of the English language, is now judged to be essential!

If you would like some advice about your Commercial Contract, please contact our Corporate and Commercial team on 0121 698 2200 or complete our online enquiry form.

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