Monday 24 May 2010

Get the Contract Right

Introduction

Appointing the correct adjudicator can be tricky if you don’t get the contract drafting right. Some contracts will name the adjudicator. The appointment of that adjudicator to deal with the particular dispute that has subsequently arisen between the parties will then be a straightforward matter. Many contracts do not contain provisions as to a named adjudicator. Instead, they will identify an adjudicator nominating body, such as the RIBA, RICS or TeCSA. In such case, the referring party will write to the relevant nominating body and ask for an adjudicator to be appointed. Unfortunately, badly drafted contracts can lead to confusion as to the identity of the correct appointing procedure, resulting in circumstances not intended by one of the parties. This situation arose in the case of Bovis Lend Lease Limited v Cofely Engineering Services Limited [2009].

The Court Case

Bovis engaged Cofely to carry out and complete the mechanical and public health works on the construction of the new Civil Justice Centre in Manchester. A dispute arose concerning Cofely’s claim for an extension of time, which they referred to adjudication and applied to the RICS for nomination of an adjudicator. Simultaneously, Bovis also referred its own notice of adjudication to Mr. Rob Smith named in the contract. The main issue before the court was as to the proper construction of the contract. The contract was in the form of DOM/2 with bespoke amendments. Part 1 of the appendix set out the entries in the main contract which showed that under the main contract the four possible adjudicator nominating bodies had each been deleted. Instead, Mr. Rob Smith was named the named adjudicator. Part 2 of the appendix stated that the nominator of the adjudicator shall be the RICS. Prior to the latest adjudications, there had been four previous adjudications between the parties and in each the same adjudicator had been appointed by the RICS. Bovis did not seek to challenge the jurisdiction of the RICS to act as the nominating body, or that adjudicator. The court found that the contract was unsuitably drafted and inappropriately cross-referenced, which could not be easily resolved. In such circumstances there are certain principles relevant to the approach to be adopted by the court. The court aims to - construe the contract as a whole and to give effect to each part wherever possible, apply a sensible and commercial interpretation of the words used.
Where those aims are not entirely reconcilable, written, stamped or typed words which are inconsistent with printed terms usually take effect by superseding the latter. Applying these principles the court held that the RICS had jurisdiction to act as the nominating body for two distinct reasons. First, clause 2.2 of the DOM/2 conditions, which determines document priority in cases of conflict such as this, said that the subcontract itself provides that the appendix was the most important document. Second, the appendix was the one document included in the contract which the parties had filled out themselves. In applying the principle as noted above, where there is a clash between manuscript and standard printed words, the former must prevail.

Comment

The amendments by Bovis could be seen as an attempt to move from a nominating body arrangement to one with a named adjudicator, but there was no doubt that any such attempt wholly failed due to poor drafting.