Defects and delays justify termination

The Defendants undertook the design and refurbishment on the Claimants’ home. The Claimants alleged that the work done had been so defective that remedial work was required. The Defendants counterclaimed for money they alleged was outstanding. The second Defendant, LogicPlough Property Ltd. (LPL) was a small, family-run company providing a range of services, including delivering PlayNest bespoke homes. These homes offer a range of high tech solutions to security, such as drawing the curtains whilst the occupants are out.

At a meeting on 24 June 2005, the first Defendant gave the Claimants a proposal for the work on their home, which included a timetable which showed a completion date of 26 December 2005 and a specification room data sheet. The Claimants maintained that this had been a contract document, whilst LPL maintained that it was merely a brochure showing the different options available. The proposals stated that the Claimants would be provided with an easy-to-understand timetable so that they would know what was happening and when. This was stated not to be a “promise”, but a “contractual guarantee”. The proposal noted that the Contract would contain a penalty clause, and LPL would pay the Claimants £500 for every week’s delay.

When the Claimant questioned some of the omissions in the specification, she was told that all the agreed items would be included in the price. LPL provided other items which were not in the specification, and waived a provision which stated that the Contract excluded any works not specifically listed in the detailed specification.

The Claimant insisted that the works should be complete by the 26 December because they had had to vacate the house whilst the work was ongoing. The Claimants moved back into the house on 22 June 2006, but there were continuing delays, and the work dragged on until September 2006. On 21 September 2006, the electrical systems broke down. The Claimant’s instructed an independent surveyor to examine the works, and they relied upon is report as justification for terminating the contract. His overall conclusion was that the works were incomplete, with many of the fixtures and fittings missing. What work had been done fell well below the minimum NHBC standard and was defective. The decoration was poor, and the floor tiling and underfloor heating would require stripping out and replacing. So damning was the report that the Claimant’s terminated the contract and refused LPL access. The Claimant’s argued that the LPL’s cumulative breaches were sufficient to justify their determination of the contract. The LPL submitted that the termination had been unlawful.

The Parties’ Contract did not contain any liquidated damages provisions. The LPL argued that time had been at large, whilst the claimants maintained that they were not guilty of any acts of prevention.

Although the Contract contained neither a liquidated damages clause nor a fixed completion date, the Claimants had made it clear that completion was to be achieved by 26 December 2005, and even the second Defendant had accepted that this was the target completion date in his evidence. Two later completion dates were also missed. The Court accepted that some of the delays had not been LPL’s fault; there had been variations and additional work. However, nothing excused the delays until September 2006, by which time the Claimants were at the end of their tether. LPL had been on site far less than the Claimants had been entitled to expect, and the final straw had been the failure of the electrical system. By this stage, in the court’s view, they had had no option but to terminate the Contract, and had acted reasonably in doing so. They were awarded general damages because of the remedial works. LPL’s counterclaim was dismissed because, having examined LPL’s invoices, the court could not be satisfied on the balance of probabilities that LPL was owed any money.

(Eribo v Adekoyejo Odinaiya and Logicplough Property Ltd.) [2010] EWHC 301 (TCC))

Author: Ann Glacki

Date: March 2010

Commentary by Scott Milner

A party has the right to treat a contract as being at an end if the other party has breached its obligations under the contract (commonly referred to as a repudiatory breach of contract) and the breach is said to go to the root of the contract.

Determining what is a repudiatory breach is not any easy task, even for the experienced lawyers and the courts. Allied to this, is that if the innocent parties wrongful act of termination is the repudiatory breach.

This case provides support to the view that continuing failure to provide what was agreed in terms of quality and within the agreed time frame (or reasonable period if not agreed) will amount to a repudiatory breach and will justify the innocent party in terminating the guilty party's employment and claim for damages for cost of rectification and delay. However, it must be borne in mind that each case is decided on its own facts and cannot always be applied to another case.

It is in light of this doubt as to when a breach of contract will allow the innocent party to terminate most standard form contracts expressly provide the grounds and mechanism for termination. Therfore, to avoid being caught in the midst of uncertainty it is recommend that the parties set out in a contract in writing a detailed provisions for termination or use a suitable standard form contract which already includes such provisions.

For more information, please contact Scott Milner by telephone 0114 2180668 or by email scott.milner@alway-associates.co.uk

Scott Milner

back to index