Legal Developments In Construction Law: January 2016

1. Looking for the contract terms you can't see

   The first problem with an implied contract term is, of course, that you can't see it in the contract. One type is implied by statute or by the common law in certain categories of contract (unless expressly excluded). The other type, whose detection has challenged many distinguished judges over the years, is implied into a contract in the light of the express terms, commercial common sense and the facts known to both parties at the time of the contract. The UK Supreme Court's judgment in Marks and Spencer plc v BNP Paribas is the latest, and authoritative, contribution to identification of this second type.

   Some thought that Lord Hoffmann's Privy Council discussion of the identification of implied terms in Attorney General of Belize v Belize Telecom Ltd had changed the law. In Marks and Spencer, however, the Supreme Court made clear that it has not. The requirements to be satisfied before a term (of the second type) will be implied have not been diluted. Reasonableness is not a sufficient ground for implying a term; an implied term must, among other requirements, pass the test of business necessity or, alternatively, obviousness (the classic "officious bystander" test). The question whether a term is implied is also to be judged at the date the contract is made.

   Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd & Anor (Rev 1) [2015] UKSC 72

2. Court gives green light to asbestos exclusion and limitation clauses

   The appointment of a firm of engineers said that: "Liability for any claim in relation to asbestos is excluded." It also contained a limitation of aggregate liability for pollution and contamination to £5,000,000. English courts have, traditionally, taken a restrictive approach to interpreting exemption and limitation clauses but has that approach changed?

   In Persimmon v Ove Arup Mr Justice Stuart-Smith said that there is an increasing recognition that parties to commercial contracts should be left free to apportion and allocate risks and obligations as they see fit, particularly where insurance may be available. Exclusion and limitation clauses are subject to the same rules of construction as any other provision and the court's task is to identify what a reasonable person with all the background knowledge reasonably available to the parties would have understood the parties to have meant.

   The relevant agreement and associated warranties were examples of...