10/12/2018

A recent decision by the Technology and Construction Court (available here) serves as a reminder of the importance of carefully defining the scope of works in a contract, and giving due consideration to what documents are included in a contract bundle (particularly correspondence). Despite a sub-contract containing a wide transfer of sub-surface risk to the sub-contractor, and a priority clause overriding the attached contract documents, the TCC found that certain sub-surface risks were excluded from the “Works”.

The case concerned a sub-contract to excavate trenches and install pipework in central London. A few months after commencing the works, the sub-contractor discovered adverse ground conditions including underground brick walls and brick rubble. Another year later, it encountered a concrete heading which it found it could not safely excavate, and stopped work.

In short, the dispute was whether all sub-surface risk sat with the sub-contractor, or whether certain circumstances were excluded from the definition of "Sub-Contract Works".

The sub-contract was on a JCT Standard Building Sub-Contract with sub-contractor’s design (2011), with a negotiated schedule of amendments. One amendment included a wide transfer of sub-surface risk to the Sub-Contractor in relation to the Sub-Contract Works (with the usual statement that it had carried out all investigations and satisfied itself as to the risks in carrying out the Sub-Contract Works). The contract excluded any right of extension/payment for such risks.

The definition of Sub-Contract Works was "the works referred to in the Sub-Contract Agreement and described in the Numbered Documents to be executed as part of the Main Contract Works, including any changes made to such works in accordance with this Sub-Contract" (emphasis added).

"Numbered Documents" included (amongst other things) the Sub-Contractor's Proposals, post-tender clarifications, and minutes of a post-tender interview. The Sub-Contractor's tender and post-tender correspondence excluded items from the Contractor's Scope of Works, namely the removal of soft spots, hand digging, the breaking out of obstructions (including rock) in the trench and the diversion of mains and services.

The Sub-Contract contained the expected priority clause mentioned above, that in the event of any inconsistency the sub-contract was to override the "Numbered Documents".   However the TCC found that the "Sub-Contract Works" excluded the above matters and that there was no inconsistency (agreeing with the sub-contractor's position). It gave the example that if the Sub-Contract Works did not including breaking out of obstructions, then when the Sub-Contractor carried out its investigations and satisfied itself as to the risks for carrying out the Sub-Contract Works, this cannot include investigations relating to breaking out of obstructions because that is not part of the 'Sub-Contract Works'.

The Sub-Contractor would be entitled to a Variation instruction, if instructed to carry out one of the above excluded matters.

It is therefore important that all parties carefully consider the scope of the works set out in any contract, including any exclusions.