In a case heard by the Technology and Construction Court on 21 December 2012 a sub-contractor, Leander, had carried out work to a certified value but a withholding notice had been served by the Main Contractor, Mullalley. The reason stated for withholding the certificated interim payment was that Leander had not progressed as quickly as originally anticipated by the parties. Mullalley accepted there was no contractually binding programme but argued that Leander was in breach of an implied duty to generally proceed regularly and diligently.
One of the primary arguments put forward by Counsel for Mullalley was that as the contract contained a provision (as is commonplace) entitling the Main Contractor to serve a 7 day notice to terminate if the Sub-Contractor did not proceed regularly and diligently, it should be implied that there was a general duty on the sub-contractor to so proceed at all times. It was said that the parties must have intended that there would have been such a duty otherwise why allow the contract to be terminated for delay? Mullalley claimed that Leander was in breach of that implied duty and so it should be entitled to deduct damages from the certificated payment.
The Technology and Construction division of the High Court decided that in the absence of an express provision, considering past case law and on a proper interpretation of the contract there was no justification for the court implying such a term.
The right to serve a 7 day notice to terminate for delay (referred to by the Judge as a “Hurry Up!” notice) was purely a contractual mechanism that could be used to impose the time critical sanction of termination upon the sub-contractor if it failed to comply with the notice and there was no necessity to go further and imply extra words imposing a general duty to progress diligently. Rather than that provision being suggestive of an implied term the judge considered if anything the opposite to be true. Had there been no notice provision relating to the progress of the works the court might have been more prepared to imply an extra term to give the contract business efficacy but there was no need to do so here as the contract provided an agreed sanction for unreasonable delay.
The case highlights the importance of careful contract drafting by employers and main contractors to ensure that progress of works is sufficiently covered in the express wording of the contract. This can be done by an express duty to proceed with reasonable expedition and/or by ensuring there is a contractually binding programme of works.
Whilst there may be no implied term to at all times progress works diligently there is, as with all contracts for services, in the absence of words to the contrary an implied term that works will be completed within a reasonable time.
This case (Leander Construction Ltd v Mullalley & Co Ltd [2011] EWHC 3449 (TCC)) does not bring any radical changes to construction or general contract law but it highlights the need to ensure that your contracts are properly drawn and that particular thought is given by the employing party as to what weaponry it needs within the terms to ensure that the works are carried out on a timely basis to avoid irrecoverable losses due to disruption of the works as a whole.
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