The Supreme Court decision in the Triple Point case has clarified two legal principles that are important for construction and other contracts. As ever, the interpretation of a contract depends on what it says. However, in the absence of any specific drafting to change the following position:
- Liquidated damages will be payable up to the point of termination where a contract is terminated, even though the work has not been finished before termination. The Court of Appeal had decided that, because liquidated damages covered the period from when work should have been completed to the point at which it was actually completed, and the fact that the work was not completed at all before termination meant no liquidated damages were payable. Termination then 'stops the clock' on liquidated damages for delay, at which point the employer would become entitled to general damages or, under certain contracts, e.g. NEC, a termination payment.
- A reference to 'negligence' includes a breach of the contractual duty to exercise reasonable skill and care - so a clause excluding liability for negligence from a contractual cap on liability meant that the contractor's liability for negligence was not subject to the cap. The Court of Appeal had said that the reference to negligence referred only to rights outside the contract in tort and did not include 'contractual negligence'.
The first of these restores the 'status quo' to what was generally understood to be the position before the Court of Appeal got involved. It is good news for employers, although many schedules of amendments to standard form contracts, including our own, consist of drafting to get around the Court of Appeal decision.
The second provides welcome clarity, but also highlights the need for care, when drafting or reviewing liability cap clauses and exclusions from them.
The Supreme Court decision in the Triple Point case has clarified two legal principles that are important for construction (and other) contracts.