Building subcontract — Supply of specialist labour — Suspension of work — Alleged wrongful determination of contract — Claim for balance of moneys — Whether contract lawfully determined under contractual condition or at common law — Preliminary issue decided in favour of plaintiff subcontractor
By a contract of July 1985, the plaintiff company as subcontractor agreed to supply specialist labour only to the defendant. The defendant was the main contractor for installing window units at Richmond Terrace, Whitehall, London. Under condition 20 of the subcontract, the plaintiff agreed to have labour on site during stated hours, the condition stating: “Leaving site without prior warning to the Main Contractor may lead to suspension of the Sub-contract”. Condition 8 of the subcontract provided that the defendant, as main contractor, could terminate the contract by notice in writing in stated circumstances. Certain of these circumstances were at condition 8(c): “the Sub-contractor wholly suspends the Works or fails to proceed with the Works expeditiously … or to remedy defective work and remains in default for seven days after being given notice in writing thereof by the Main Contractor”.
On September 20 1985 the defendant company gave a notice by letter that it required the plaintiff to comply with condition 20 regarding the length of the working day; the defendant maintained that this letter constituted a notice of default for the purposes of condition 8. On August 21 1986, the defendant telexed a notice of termination of the contract “By reason of your withdrawal of labour …”. The plaintiff contended that the notice of termination of August 21 1986 amounted to an unlawful repudiation of the subcontract; the defendant contended that the subcontract had been terminated, either under condition 8 or at common law by way of an implied provision to the effect that the contract could be terminated by one notice.
Held 1. The telex of August 21 1986 was not a lawful termination of the subcontract pursuant to condition 8. Where a contract provides for its termination by a warning notice followed by a termination notice, and two such notices have been served, a party can rely on that provision only if an ordinary commercial businessman can see a sensible connection between the two notices both in content and time. Condition 8(c) required a warning notice for each of the events adumbrated therein; the defendant’s submission that either the letter of September 1985 was a proper warning notice or no such notice was required in the event of a withdrawal of labour was not accepted.
2. However, the telex of August 1986 was a lawful termination of the subcontract at common law. At common law, unless the contract expressly or impliedly provides that the contract may be terminated only by exercise of a contractual right, a party to a contract may treat the contract as discharged by reason of the other party’s repudiation or breach of condition.
Goodwin & Sons v Fawcett
(1965) 195 EG 27 considered.
Hugh Evans (instructed by Neil F Jones & Co, of Birmingham) appeared for the plaintiff; and Michael Stimpson (instructed by Evershed & Tomkinson, of Birmingham) appeared for the defendant.
