City Inn Ltd v Shepherd Construction Ltd (Part II)

Any failure by the contractor under clause 13.8.1 to provide an initial estimate of the time and cost consequences of an instruction that, in the contractor's opinion, required an adjustment to the contract sum or would delay the completion date did not constitute a breach of contract
 
CITY INN LTD v SHEPHERD CONSTRUCTION LTD

Scotland, Inner House, Court of Session
Lord Justice Clerk and Lords Kirkwood and McCluskey
20 May 2003
 

Clause 13.8.1 of the special conditions of contract provided that where in the contractor’s opinion any instruction required an adjustment to the contract sum or would delay the completion date, the contractor was not to execute the instruction unless it first submitted to the architect an initial estimate of the adjustment, of the additional resources required (if any), of the length of extension of time to which it was entitled and of the direct loss and/or expense to which it might be entitled. Clause 13.8.5 provided that if the contractor failed to comply with any of the provisions of clause 13.8.1 and if the architect had not dispensed with such compliance, the contractor was not to be entitled to any extension of time. The issues for determination were whether clause 13.8.1 constituted a contractual obligation on the contractor’s part to provide such an estimate and, if so, whether the clause constituted a penalty on the basis that the contractor would potentially be liable for liquidated damages notwithstanding a prima facie entitlement to an extension of time by reason of being in breach of contract by failing to provide such an estimate.

 

Lord Justice Clerk held that any failure by the contractor under clause 13.8.1 of the special conditions of contract to provide an initial estimate of the time and cost consequences of an instruction issued by the architect that, in the contractor’s opinion, required an adjustment to the contract sum or would delay the completion date did not constitute a breach of contract and instead the provisions of that clause (merely) provided a procedure that the contractor was required to follow if it was to preserve its entitlement to an extension of time on receipt of an architect’s instruction. This was on the basis that any failure by the contractor to comply with its obligation to provide an initial estimate in accordance with clause 13.8.1 did not constitute a breach of contract.

 

Advice Note

Whilst this case involved the interpretation of non-standard contractual provisions, it nevertheless provides a useful insight into how the courts will regard such provisions requiring the provision of information before an extension of time will be granted.
 

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