Civil engineers – Subcontract – Formation – Subcontract for drilling works incorporating IChemE Form of Contract: Subcontract for Civil Engineering Works (Brown Book) – Parties asking court to determine applicable terms and conditions – Whether Brown Book terms and conditions taking precedence over those of claimant subcontractor – Preliminary issues determined in favour of defendant
The defendant contractor, by way of novation, stood in the shoes of G, which had South West Water Ltd had engaged to carry out engineering works at a water treatment plant. Those works included directional drilling to install 600m of water main. The claimant was a specialist engineering contractor that G had engaged as a subcontractor to carry out the drilling work.
Ground conditions delayed and disrupted the claimant’s work, for which it claimed to be entitled to compensation under the terms of its subcontract. However, no formal subcontract had been signed and, although the parties accepted that a subcontract did exist, they differed as to its terms and conditions.
G’s invitation to tender had referred to the subcontract as being in the IChemE Form of Contract: Subcontract for Civil Engineering Works (Brown Book). The claimant’s tender contained its own terms and conditions, which, it argued, should form part of the subcontract; included a clause concerning ground conditions.
At a pre-contract subcontract meeting, a record of the interview was completed that described the form of contract as the “IChemE Brown Book”. When the claimant received the subcontract agreement for completion, it included the IChemE form or Brown Book.
Preliminary issues arose as to whether: (i) the claimant’s terms and conditions, in particular the ground condition clause, had been incorporated into the subcontract; and (ii) the Brown Book terms and conditions took precedence over those of the claimant.
Held: The preliminary issues were determined in favour of the defendant.
In the context of a commercial contract such as the instant one, it was necessary to adopt an objective interpretation of what the parties did and said. Conduct, in terms of possible acceptance, was to be construed upon an objective basis. A course of dealing and conduct, thus construed, could amount to acceptance, in contractual terms of an offer made by a party. A contractor that commenced work after receiving an order to commence might therefore have its conduct in beginning the work objectively construed as an acceptance of the order because, objectively, sensible business people would expect that commencement, without reservation, suggested acceptance of the order: Brogden v Metropolitan Railway Co (1877) LR 2 App Cas 666 applied; G Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 considered.
The claimant had failed to discharge the burden of proving that its terms and conditions were to apply. On any count and by whatever route, the parties had agreed that the general conditions in the Brown Book should be incorporated. Those conditions set the priority to be applied, which involved the general conditions having precedence in interpretation terms over the quotation. As a matter of business or common sense, parties could be taken to have intended their contract to make sense and, where ambiguities arose in circumstances in which parties had provided for a precedence, as in the instant case, that precedence should apply. The fact that the general conditions were referred to in one of the schedules to the sub-contract could not have been intended to involve the demotion of the general conditions in precedence terms. The Brown Book was expressly predicated on the basis that 15 schedules formed part of the subcontract.
Accordingly, the court would make declarations to the effect that the documents enclosed with the defendant’s letter accepting the claimant’s tender were incorporated in and formed the subcontract between the parties and that the terms and conditions of the Brown Book (2nd ed) 2004 took precedence over the terms and conditions of the claimant’s quotation where the two conflicted.
Rosemary Jackson QC (instructed by Glovers LLP) appeared for the claimant; Marcus Taverner QC (instructed by Wragge & Co LLP, of Birmingham) appeared for the defendant.
Eileen O’Grady, barrister
