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Determination without tears is not guaranteed by default

legal matters

Architects tend to be naturally wary of contractual provisions entitling the employer to determine a building contract; and rightly so. Prematurely ending a contract - whether it is the contractor that downs tools or the employer that boots them off site - is a high-risk strategy. It usually ends in tears, or worse, for the stakes are high. A wrongly evicted builder is entitled not only to payment of the proper value of their work (which was probably the source of the argument in the first place), but also the profit they would have made had they been allowed to complete the job. A wrongly deserted employer is entitled not only to the cost of remedying any defects or liquidated damages (ditto), but also the extra over cost of engaging a replacement contractor to complete the job.

Not for nothing do discontented employers and construction professionals persevere against the odds rather than bring the contract to an untimely end.

The different roles of the architect and the employer further complicate matters. A typical determination clause sets out the defaults that trigger the entitlement to determine and require the architect to serve a default notice, giving the contractor a fortnight to mend their ways. Only if the contractor persists can the employer determine their employment by issuing a further notice.

These notices require careful drafting and should ensure that the contractual requirements, as to the default, the time for putting it right and the consequences of failure, are complied with, to the letter, if the determination is to be successful.Not surprisingly, therefore, most right-minded people avoid the topic completely.

In West Faulkner Associates v London Borough of Newham (1994), the claimant architect would not serve a default notice on recalcitrant contractor William Moss Construction for failure to proceed regularly and diligently with the works. It failed, even though it was obvious to all concerned that the contractor had simply thrown the programme out of the window and muddled along as best it could. The architect argued that as Moss turned up on site every day, it could not be said to be failing to proceed 'regularly'. Furthermore, the architect was concerned about the consequences to the employer of wrongful determination.

Without the necessary default notice the defendant council was powerless to act against the contractor and instead had to broker an expensive deal to get it off site.The council claimed these costs against the architect. The Court of Appeal found the architect to be negligent for not issuing the notice and for attempting to construe the determination provisions on its own without legal advice.

More recently, in Robin Ellis v Vinexsa International (Judgment 13.6.03), the claimant contractor and defendant employer fell out and the contractor withdrew its labour from site. The employer's architect issued a default notice and the contractor promptly restored its labour. Things did not improve, however, and a month later the contractor again left site. The architect, no doubt heartened by the success of previous tactics, issued a further notice, but then had second thoughts and sought to withdraw it. The contractor failed to return to site and the employer subsequently determined the contract. Predictably, the parties then argued about whether the contractor had rightly jumped, or was wrongly pushed, off site. The situation was not helped by service of the second default notice. Did the architect have power to issue it? If so, could they withdraw it? In the circumstances, was the employer's determination reasonable?

An arbitrator found against the contractor, which appealed to the Technology and Construction Court. Judge Thornton QC found that, although the determination provisions of the contract were to be construed strictly, they should be given their natural meaning.

Accordingly, one default notice was enough to cover the original default and any repetition of it. The architect had no power to issue a second notice, which, as it was not valid, could not be withdrawn. On the basis of the original notice and the contractor's repetition of the original default, the employer was entitled to determine the contract.

And the moral of the story? If you want to determine a building contract successfully, without tears, make sure you get it right.

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