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Construction & Engineering

What if it doesn’t do what it says on the tin?

The law gives primacy to the terms of a written contract, and the court will only look at pre-contract correspondence in certain circumstances. This is because when a court tries to construe a contract, it seeks to give effect to the objective meaning of contractual terms rather than the parties’ subjective intentions.

When can the court go beyond the confines of the contract and consider any pre-contract correspondence? The leading authorities are Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28 and, in the construction and engineering context, Chartbrook v Persimmon Homes Ltd and others [2009] UKHL 38. In each case the leading judgment was given by Lord Hoffman, and these essentially provide that a court can look at pre-contract correspondence, when it has to:

  1. construe a contract term, and in order to do so needs to establish that a fact, which may be relevant as background, was known to the parties; or
  2. adjudicate on a claim for such remedies as Rectification or Estoppel.

Rectification is a type of claim for a court order to re-write a contract to conform to the parties’ intention. Estoppel is a bar to a party taking certain steps because to do so would be inequitable i.e. unfair to the other party. Both remedies are subject to separate legal tests, and can be defeated by such devices as ‘entire agreement clauses’, which exclude consideration of pre-contract statements, and ‘non-waiver clauses’, which seek to preserve a party’s contractual rights when they fail to exercise them in a timely fashion.

Each of these deserves an article in its own right, so watch this space. In the meantime, be thankful that most construction and engineering standard forms do not include such clauses. Ensure that you keep a written chronological record of pre-contract correspondence and statements arising from your negotiations in case you need to rely on Rectification if you’re bringing a claim, or Estoppel to defend one.

As ever, timely and incisive pre-contract legal advice can help avoid such disputes by ensuring that your contract is drafted with precision and corresponds to what you’ve actually agreed.

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These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.

 

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