Court rules on construction contract dispute

Background

The case of Grain Communications Ltd vs Shepherd Groundworks Ltd was heard in the High Court, Technology and Construction Court, Leeds. The judgment, handed down by Her Honour Judge Kelly, addressed a dispute over a construction contract between the two companies, focusing on the postponement of works and claims for damages.

Case Details

The dispute arose from a framework agreement signed on 20 January 2022, under which Shepherd Groundworks Ltd was contracted to perform specialised construction activities for Grain Communications Ltd. A specific work order, Work Order Number: 11500, was issued on 7 September 2023 for works at Blyth Phase 3.

On 24 October 2023, Grain Communications informed Shepherd Groundworks via email that the works would be postponed, likely until 2024. This email led to a dispute over whether the postponement constituted a variation or a breach of contract.

Legal Arguments

Grain Communications sought declarations that the postponement was a variation, not a breach, and that they were not liable for damages claimed by Shepherd Groundworks, including mobilisation and demobilisation costs and loss of profit.

Shepherd Groundworks argued that the email amounted to a cancellation of the work order, constituting a breach of contract. They also contended that the case was unsuitable for Part 8 proceedings due to conflicting evidence.

Court's Analysis

Judge Kelly determined that the case was appropriate for Part 8 proceedings as the primary issue was the interpretation of the contract, not disputed facts. The court found that the email constituted a valid variation under the contract terms, allowing Grain Communications to postpone the works.

The court rejected the implication of a term preventing postponement, noting that the contract provided mechanisms for time variations. It was held that the contract's express terms precluded such an implication.

Decision

The court declared that Grain Communications was not in breach of the contract by postponing the works. Furthermore, even if there had been a breach, the contract limited Shepherd Groundworks' recovery to sums properly due under the work order, excluding loss of profit and mobilisation costs.

Conclusion

The decision highlights the importance of clear contractual terms regarding variations and postponements in construction contracts. It underscores the need for parties to ensure that their agreements explicitly address potential changes in work schedules.

Learn More

For more information on construction disputes, see BeCivil's guide to Resolving Construction Disputes.

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