Contract formation – a cautionary tale

The recent judgement passed in BNP Paribas Depository Services Ltd & Anor v Briggs & Forrester Engineering Services Ltd [2024] EWHC 2903 (TCC) (18 November 2024) acts as a cautionary reminder for professionals to remain wary of the contractual terms they agree to, even where the contract appears to reflect a standard professional form, such as, in this instance, a JCT Design & Build Appointment.

Case Summary

BNP Paribas Depository Service (BNP) entered into a design and build contract with Briggs & Forester Engineering Services (B&F) for the design and construction of stair pressurisation works in a high-rise block in Central Manchester.

The core issue in dispute was the scope of B&S’s work on the project.  Prior to the contract being entered into the parties knew that the building contained asbestos, and pre-contract documents indicated areas for asbestos removal. However, an issue arose when on site and further asbestos was encountered in areas in which B&F argued was outside of its scope. 

As a result, B&F refused to undertake the additional asbestos related works without instruction by BNP and additional payment.  B&F issued a suspension notice in January 2023 and a termination notice the following month, on the basis that BNP had failed to provide further instructions; BNP argued that the termination amounted to a repudiatory breach of contract.

The Dispute

B&F contended that its obligations were limited to only the removal of asbestos identified before the contract was entered into, relying predominantly on pre-contractual negotiations including a quotation dated 17 April 2020 from a specialist asbestos subcontractor. B&F argued that repairs to structural defects because of the additional asbestos uncovered did not fall within the agreed scope of work.

BNP contended that the scope of B&F’s services extended to the identification and removal of all asbestos relevant to the works conducted, relying bespoke terms that had been agreed in the signed contract,

The Court’s Position

In summary, the court ruled in favour of BNP, concluding B&F had incorrectly suspended their works and indeed, on a proper reading of the contract B&F clearly owed an obligation to BNP to undertake any additional asbestos surveys and associated removal works.  This is on the basis that B&F had been assigned and accepted full design responsibility for the completion of the project, in addition the contract had expressly excluded employer responsibility for this and included an express terms requiring B&F to inspect the site conditions.  The contract also included an express term that B&F would not be entitled to a price increase in the event of unforeseen conditions or risks.  As a result, B&F were responsible for any challenges encountered which would include the additional asbestos and the structural works needed. 

As a result, B&F’s suspension and termination was then unlawful, and they were responsible for all loses which arise from B&F’s failure to fulfil its obligations under the contract. 

Key Take Aways

The above case provides valuable insight into how the courts are likely to interpret construction contracts and indeed, the importance of reviewing bespoke terms; professionals should not assume that a standard form will always be suitable for them.

From a risk management perspective, it serves as a heavy warning that every contract needs to be scrutinised thoroughly regardless of whether it is in standard form.  Not only to ensure that you are aware of the obligations you are signing up to but also that the scope of work is in line with what you understand you are agreeing to do.  This sounds simple but as the case above demonstrates if you consider a task is outside of your scope make sure this is expressly addressed in the contract and don’t assume that it is the agreed intention of the parties.  Also ensure the wording of the contract allows you, in the event of unforeseen issues on projects (which is a common issue in construction) to adjust not only the scope of works agreed and the programme but also the price agreed.  

Further, it serves as a reminder that most contracts contain an ‘entire agreement’ clause which means that pre-contract documents cannot be relied upon.  Therefore, you need to ensure that all discrepancies and/or confusion around your obligations are ironed out before the contract is signed and are then accurately documented within the contract.   

It is also worth highlighting that if special conditions are being added to a standard form appointment, ensure that these have been considered carefully, as evidenced in the above case the court are likely to place more weight on these as they have been freely negotiated and inserted. 

From a Professional Indemnity perspective, careful consideration of contract terms is also required to ensure that you are not signing up to any onerous contractual terms for example, express warranties or blanket indemnities but also to prevent a situation where you unintentionally assume liability for work that has been or would be undertaken by a third party.  It is not always easy to spot when this widening of scope has been inserted which means every contract including enclosures it refers to are checked with a fine-tooth comb.  If not, you run the risk of an insurer declining to provide cover for a claim due to the market standard contract liability exclusion within policies.         

In summary, both as a risk management tool and protection in relation to professional indemnity cover it is important to:

• Ensure you have conducted a detailed pre-contract risk assessment; and
• Expressly defined the scope of work, any limitations in your role and include a mechanism for amendment to the contract for unforeseen issues on the project.