You may not be bound by a mistake in your tender.

Have you made a mistake in your tender that you are being held to under the contract? If so, you need to consider how you can avoid this liability.

In the case of Traditional Structures Ltd v HW Construction Ltd [2010], the Contractor insisted that the Subcontract price included for both the steelwork and the cladding, whereas the Subcontractor said that it had clearly made a mistake in signing the Subcontract as its tender price allowed for the steelwork only.

When this matter was referred to court, the court found that the Subcontract could be rectified, because of the unilateral mistake made by the Subcontractor, so that the Subcontract price only allowed for the steelwork and not for the steelwork and the cladding.

A key factor in this case was that the Subcontractor had made a genuine and obvious mistake, and the Contractor knew of that mistake, failed to notify the Subcontractor of the mistake, and attempted to take advantage of the mistake in a manner which “went beyond the boundaries of fair dealing”.

Therefore, even though the Subcontractor admitted that it had made a mistake in its tender, it was not bound by that mistake in the Subcontract.
If you face a similar situation to the above, or if you need any general advice regarding this area of law, you should contact us at Melbury Construction Consultants Ltd.

Contract terms you have not seen may bind you.

You could be bound by onerous contract terms and conditions that you have never even seen. Is this a risk that you wish to take?

In the Court of Appeal case of Rooney & Anor v CSE Bournemouth Ltd [2010] a Works Order had been issued which included the words “terms and conditions available on request”. The Court of Appeal found that those words had the effect of incorporating the employer’s standard terms and conditions of trading on the basis that the Works Order was a contractual document and because it was at least arguable that a reasonable person would have understood the words used as referring to contract terms under which the supplier had agreed to work.

Therefore, if you accept a Works Order which refers to standard terms and conditions as being “available on request”, but does not attach those said terms and conditions, you could nevertheless be bound by those terms and conditions, even though they may be onerous in nature. This is a risk that you cannot afford to take.

If you are affected by the above, or have faced a similar situation, you need to contact us (i.e. Melbury Construction Consultants Ltd) to find out what your contractual and legal rights and obligations are.

Ineffective ‘Pay When Paid’ clauses.

You may have a ‘Pay When Paid’ clause in your Subcontract which you may consider is effective in the case of Employer ‘Insolvency’. However, if your Subcontract is not up to date, that may not be the case.

Section 113(1) of the ‘Construction’ Act 1996, outlawed ‘Pay When Paid’ clauses in construction contracts apart from where such a clause was inserted that only had effect when the Contractor had not been paid the monies in question by its own Employer because the Employer had become insolvent. Many Contractors naturally inserted such a clause in its Subcontracts to give it protection in the case of Employer Insolvency.

However, as considered in the Court of Appeal case of William Hare Ltd v Shepherd Construction Ltd [2010], if the Contractor has not kept its Subcontract terms up to date, such a clause may be ineffective.
Subsection (2) of Section 113 of the ‘Construction Act’ 1996 makes it clear that an Employer (or any Company) would only become Insolvent when a court order had been made against it under Part II of the Insolvency Act 1986. However, the Insolvency Act 1986 was amended by the Enterprise Act 2002 such that Insolvency could occur both as a result of a court order and by way of a ‘self-certifying process’.

Many bespoke Subcontracts define Insolvency of the Employer occurring upon the making of a administration order against it under Part II of the Insolvency Act 1986. However, if the Employer’s Insolvency is as a result of a self-certifying process (as allowed for within the Enterprise Act 2002), this would not fall within the definition of ‘Insolvency’ within the Subcontract. Consequently, in such a situation, the ‘Pay When Paid’ clause in respect of the Insolvency of the Employer would be ineffective.

The consequences of an ineffective ‘Pay When Paid’ clause in respect of Employer Insolvency could be catastrophic to a Contractor, and it is therefore vital that bespoke Subcontracts are updated to suit changes in legislation.

If, as a result of the above, you feel that you have an ineffective ‘Pay When Paid’ clause, you need to take immediate steps to rectify the position; and you need to contact us (i.e. Melbury Construction Consultants Ltd) as we offer a Contract and Subcontract drafting / vetting service for many of our clients.

Peter Barnes hosts joint CIArb and ICES seminar

“Peter Barnes (Director of Melbury Construction Consultants Ltd) was the Chairman of a joint Chartered Institute of Arbitrators (CIArb) and Chartered Institution of Civil Engineering Surveyors (ICES) half-day seminar held at Downing College, Cambridge on Friday 8 October 2010.

The seminar was entitled ‘Adjudication In Principle and In Practice’ and the speakers at the seminar (apart from Peter Barnes) were Tony Bingham, Kevin Blatch and John Riches.

The seminar was very well attended with in excess of 50 delegates from both the CIArb and the ICES.


Peter Barnes is the Chairman of the East Anglia Branch of the Chartered Institute of Arbitrators and is also the Chairman of the Anglia and Central Region of the Chartered Institution of Civil Engineering Surveyors.

"A selection of photographs of the event are attached”.