Documents annexed to a building contract and whether they are contractually binding is proving to be a hot topic following a recent judgment in Scotland.  A dispute occurred about whether documents annexed to a sub-contract, being an Information Release Schedule and an outline programme, set out a contractually binding programme on the parties[1] .

To assist with his decision, the judge used the following passage [2] as his starting point:

Depending upon a true construction of the contract as a whole, certain documents may be intended not to bind the parties to their literal terms, but to have more limited effect. Thus, a programme setting out the contractor’s intended sequence of work, even though the contract may require its provision, will generally not constitute a contract document. Were it to bind the parties literally, the inevitable failure of one or both parties to comply in every respect would render one or both parties in breach. Where programmes are to be referred to in the contract documents, the obligation will generally be to produce and review a sequence of working, but not to comply with each detail. There will be other documents which are supplied to the contractor by the employer (or a member of the professional team) which form part of the background information available to the contractor…

Based on the facts of the case, the judge held that the programme documents did ‘regulate’ the sub-contract (as set out at Article 1.5 of the sub-contract) but they did not impose an obligation to complete the works in accordance with the programme set out therein. The following reasons were given:

  1. the purpose of an information release schedule is to show the earliest dates at which design information is to be expected to be released by the employer’s design team;
  2. the information release schedule did not contain various critical aspects of the sub-contractor’s works and also included many items which did even not relate to the sub-contract;
  3. the start and finish dates contained within the documents were inconsistent with the commencement notice and the required completion date.

The judge concluded that a reasonable person with the background knowledge available to the parties at the time of entering into the sub-contract would not conclude that the parties intended the two documents to be contractually binding, but would rather conclude that they were included simply to affirm the level by level, sector by sector approach to be adopted on the project. Therefore, including a document within a contract does not automatically mean the parties intend to be bound by it. This very much depends on the express provisions of the contract and the intention of the parties.

Whilst this judgement was decided in Scotland, it does give the construction industry in England and Wales a useful reminder that we need to be careful when incorporating documents and information into a construction contract.

Steps to take to reduce the risk of a similar dispute

  • If interim deadlines need to be met then clearly set this out within the contract, e.g., by agreeing to carry out works with sectional completion dates or inserting an additional provision to state that interim programme dates are to be adhered to by the contractor.
  • Ensure the contract documents and the information contained therein are back-to-back. 

…and finally

On a related note, one golden rule should not be forgotten when assembling a construction contract: that is sometimes, less is more. Do not simply add more terms or annex more documents to a contract thinking it will protect your position. If these are not back-to-back with the rest of the contract then it only increases the risk of a dispute occurring.

For more information, email blogs@gateleyplc.com.

[1] Martifer UK Ltd v Lend Lease Construction (EMEA) Ltd [2015] ScotCS CSOH_81

[2] Chitty on Contracts

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.