Hills Electrical & Mechanical PLC V Dawn Construction Limited

Where one or more of the contractual payment terms of a construction contract failed to comply with the requirements of the Construction Act 1996, the appropriate provision in the Scheme for Construction Contracts was to be implied into the contract leaving the compliant terms unaffected
 
HILLS ELECTRICAL & MECHANICAL PLC v DAWN CONSTRUCTION LTD
 
Scotland, Outer House, Court of Session
Lord Clarke
7 April 2003

The contractor and sub-contractor disagreed as to the effect of the contractor’s terms and conditions of contract where it was common ground that they had been incorporated into the sub-contract. These terms and conditions provided for a final date for payment of sums becoming due under the sub-contract of 28 days after they became due. The sub-contractor contended that this 28 days period did not apply because the sub-contract did not satisfy some of the requirements as to necessary terms of a construction contract under the Construction Act 1996. The final date for payment under the Scheme was 17 days after payments had become due.
 
Lord Clarke held that where the contractual payment terms of a construction contract under the Construction Act 1996 failed to include one (or more) of the provisions required by the Act or included one (or more) provisions which did not comply with the provisions required by the Act, the appropriate provision in the Scheme for Construction Contracts was to be implied into the contract to make up for the omitted term or to replace the non-compliant term leaving the compliant terms unaffected. The correct approach was not to imply all the payment provisions of the Scheme to remedy one or more non-compliant contractual payment terms and thus supplant the compliant terms agreed by the parties. It was to be assumed as a matter of statutory interpretation that Parliament intended to interfere with parties’ freedom of contract only to the extent that such interference was express or clearly implied. Various provisions of the Act and the Scheme clearly envisaged that Parliament did not intend that expressly agreed terms relating to the matters covered by the Scheme were to be supplanted by the provisions of the Scheme simply by reason of the parties having omitted to provide for or deal adequately with one or other of the (other) required matters. The use of the word “relevant” in these provisions made it clear that the parties’ omission of or inadequate provision for any payment matter did not mean anything more than the implication into the contract of the Scheme’s provisions in relation to that matter. Paragraph 8 of the Scheme in dealing with the final date for payment stood alone and only came into effect when the parties failed to specify such a date for payments becoming due and paragraph 10 emphasised what could be termed the “sovereignty” of any agreed final date.
 
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