It's All In The Drafting: Clearly Worded Contracts Make A Difference

Does the wording of your contract reflect your intentions? (Are you sure?)

Contracts should regulate how a project is carried out. They establish a legal framework for the parties' relationship that should also set up a mechanism for resolving any issues. At least, that's the theory...

In reality, most contracts are rarely consulted once agreed. That's fine if the parties get along on site. But if disagreements arise, the wording of the contract becomes all important. Unclear wording makes arguments more likely: goodwill can be soon lost, the project suffers and profits dwindle.

Example 1: unclear work scope and delay provisions for sectional completion

In Vinci Construction UK Ltd v. Beumer Group UK Ltd [2017] EWHC 2196 (TCC), the claimant (Vinci) was contracted to develop part of the South Terminal at Gatwick Airport for Gatwick Airport Ltd.

Vinci subcontracted various of the baggage handling system works to the defendant (Beumer) using a contract based on the NEC Engineering and Construction Subcontract (Third Edition) with amendments. The subcontract provided for sectional completion dates and the payment of liquidated delay damages if those dates were missed.

Delays occurred triggering the subcontract compensation events procedure. The parties reached a settlement agreement to extend the key dates but could not then agree on how to allocate delay damages under the subcontract in the light of that settlement agreement.

Beumer argued that the provisions for sectional completion and delay damages were, following the settlement agreement, "uncertain, inoperable and unenforceable" - and an adjudicator agreed. Vinci then went to court for a declaration on the proper construction of the subcontract as to whether the provisions were valid or unenforceable.

At court, the parties agreed on the overall scope of the subcontract works. However, they could not agree on whether certain of the works fell within section 5 or 6 and the defined scope of those works.

Vinci argued that the allocation was sufficiently identifiable from the subcontract as amended by the settlement agreement and the provisions were therefore operable and enforceable.

Beumer disagreed, arguing it was impossible to define what work would fall within section 6. The provisions were therefore too uncertain to be enforced.

How does a court go about interpreting a contract provision?

When asked to interpret a contract, a judge will always start with what the parties have actually...