Beware of main contract conditions that are incorporated into sub-contracts

The case of Dawnus Construction Holdings v Amey LG Ltd [2017] EWHC B13 (TCC) reminds sub-contractors to be wary of a wide-ranging provision in a sub-contract that purports to incorporate all the terms and conditions of a main contract. Richard Millard, Construction & Development Partner explains more.

Amey was appointed as the main contractor on a project known as the Plymouth Eastern Corridor Integrated Transport Scheme, and subsequently sub-contracted part of the works to Dawnus. The sub-contract contained a clause that the terms and conditions of the main contract applied as if they were repeated in the sub-contract ‘save where the provisions…conflict or otherwise specifically require’ .

The sub-contract provided that any dispute could be referred to adjudication and the decision would be final and binding until it was finally determined by legal proceedings. However, there was no requirement to commence adjudication before issuing court proceedings to resolve a dispute.

The main contract provided that a party does not refer any dispute under or in connection with this contract to litigation in the English courts unless it has first been decided by the adjudicator in accordance with this contract. If, after the adjudicator notifies his decision, a party is dissatisfied, that party may notify the other party of the matter which he disputes and state that he intends to refer it to litigation. The dispute may not be referred to litigation unless this notification is given within four weeks of the notification of the adjudicator’s decision.

During the course of the Works there were a number of adjudications but it was only following completion of the Project that the sub-contractor decided to litigate the issues. It had not issued a notice of dissatisfaction within the prescribed time period stipulated under the main contract.
The Court found that the provisions of the main contract did not conflict or radically alter the terms of the sub-contract and therefore the condition precedent to serving a notice of dissatisfaction within 4 weeks of the adjudicator’s decision before litigation proceedings could be commenced was incorporated into the sub-contract. The sub-contractor was time barred from litigating any issues where more than 4 weeks from the date of the decision had elapsed.

Parties to a sub-contract that incorporate terms from another contract should be aware of any additional conditions or time periods imposed that affect the obligations they are under and when they are required to do something otherwise they might be prevented from pursuing a claim.

If you need assistance contact Richard Millard, Construction & Development Partner on 01908 689382 or email rmillard@geoffreyleaver.com.

Richard Millard | Managing Partner