1. Contract performance hit by force majeure event? What you do, and don't, have to do
A force majeure clause relieves a party from its contract performance when a specified event or state of affairs occurs. But that is not the whole story, as such a clause commonly provides, or it is implied, that the clause cannot be relied upon if the effects of the event or state of affairs could be avoided by the party affected exercising reasonable endeavours. But do those reasonable endeavours require the affected party to accept an offer of non-contractual performance from the other contracting party?
A freight shipping contract required payment in US dollars but, when sanctions applied by a US authority affected payment in dollars, the shipowner invoked the force majeure clause, claimed it was entitled to suspend performance and refused to nominate vessels for the contract, although performance was subsequently resumed, payment of euros was accepted and the euros converted to dollars on receipt. Should the shipowner have accepted the offer of payment in euros, plus any additional costs or exchange rate losses in converting euros to US dollars, and not suspended the nomination of vessels?
The Supreme Court said it is well established that a force majeure clause will generally be interpreted (or a similar term will be implied) to apply only if the party invoking it can show that the event or state of affairs was beyond its reasonable control and could not be avoided by the taking of reasonable steps. The underlying principle, one of causation, is that if the affected party can reasonably prevent the failure of performance, the cause of the failure to perform will be the affected party's inadequate response to the force majeure event, rather than the event itself.
Contractual performance means performance of the contract according to its terms and the relevant question in the case was whether reasonable endeavours could have secured the continuation or resumption of contractual performance. The reasonable endeavours proviso was, however, not concerned with the steps that could or should have been taken to secure some different, non-contractual, performance. The object of the reasonable endeavours proviso is to maintain contractual performance, not to substitute a different performance.
Would the exercise of reasonable endeavours by the shipowner have enabled the payment of US dollars to be made without delay? Making arrangements for non-contractual payment did not enable the contract to be performed. Freedom of contract includes freedom not to contract; and freedom not to contract includes freedom not to accept the offer of a non-contractual performance of the contract.
The shipowner had a right to insist on payment in US dollars and to refuse payment in any other currency and the Supreme Court said that one may regard it as a general principle of contractual interpretation that parties do not forego valuable rights without it being made clear that that was their intention, also noting the importance of certainty in commercial contracts.
RTI Ltd v MUR Shipping BV [2024] UKSC 18
2. Omissions – no tort duty of care, unless…?
The common law does not impose liability in tort for what are called pure omissions, but sometimes, where there is an added ingredient, it does. The theft of a yacht from a marina dock caused the Privy Council to revisit the law on omissions and if, and when, a duty of care might arise.
The Privy Council noted that, for a duty of care to arise, grounding liability for a failure to confer a benefit, restrictive principles going beyond foreseeability and proximity must be applied. To establish liability for a failure to confer a benefit (which is the exception rather than the rule) one of the recognised exceptional principles must be established. One of those principles is that in the tort of negligence, a person A is not under a duty to take care to prevent harm occurring to person B through a source of danger not created by A, unless A has assumed a responsibility to protect B from that danger.
For instance, a duty of care may arise from a relationship between the parties, which gives rise to an imposition or assumption of responsibility upon or by the defendant, as in Stansbie v Troman where a decorator, left alone on the premises by the householder's wife, was held liable when he went out leaving the door on the latch, and a thief entered the house and stole property. Such responsibility might well exist in other cases where there is no contract, for example where a person left alone in a house has entered as a licensee of the occupier. A duty of care might also be owed where a defendant negligently causes, or permits to be created, a source of danger, and it is reasonably foreseeable that third parties may interfere with it and, sparking off the danger, thereby cause damage to persons in the position of the pursuer.
In the present case, the owner and operator of the marina, which did not have the keys for the vessel, had not assumed responsibility for locking up the vessel nor any responsibility in relation to the vessel's keys and, consequently, owed no duty of care in respect of the theft.
3. Implied contract duty of cooperation? The Court of Appeal goes back to 1881
Some things stand the test of time, for instance an old Scottish case about a steam excavation machine. The judgment in Mackay v Dick involved good old-fashioned cooperation, a principle that, in the 143 years since, has been a basis for a number of court judgments. Most recently, the analysis of Lord Watson in Mackay had to be considered by the Court of Appeal in KIng v Ridgebury, which involved a failure to provide documents for the release of contract deposits.
Lord Blackburn in Mackay said that, as a general rule, where parties to a contract agree that something should be done which cannot effectually be done unless both parties concur in doing it, the contract is to be construed as requiring each to do all that is necessary to be done on their part for the thing to be carried out.
The Court in King, however, concentrated on Lord Watson's reasoning in Mackay and the case law, to the effect that, if a party wants to rely on the non-performance of a condition precedent, they must do nothing to prevent the condition from being performed, and, if there is anything that they must do to make performance of the condition possible, failure to do what is required will disentitle them from insisting on performance of the condition.
The case law also confirms that this principle of English law applies to conditions precedent to the accrual of debts, not merely conditions precedent to the payment of accrued debts, so that failure to comply with the condition is no defence to a claim for a debt.
The principle arises from the concept that a person should not be permitted to take advantage of their own wrong, but that is not a freestanding universal principle, even in contract law. Damages are generally compensatory and, except in limited circumstances, do not involve disgorgement of profits. The legal basis of the rule is that it represents the presumed contractual intention of the parties.
A party cannot therefore rely on the failure to fulfil a condition precedent to its debt obligation where its breach of contract has caused the failure, at least where the condition is not the performance of a principal obligation by the other party, nor one which the other party has to plead and prove as an ingredient of its cause of action, and unless, and to the extent that, a contrary intention is sufficiently clearly expressed, or is implied, because the nature of the condition or the circumstances make it inappropriate.
King Crude Carriers SA & Ors v Ridgebury November LLC & Ors [2024] EWCA Civ 719
4. JCT 2024 Intermediate contracts launched
The 2024 JCT Intermediate Building Contract family has been released. The documents included are:
- Intermediate Building Contract 2024 (IC 2024)
- Intermediate Building Contract with contractor’s design 2024 (ICD 2024)
- Intermediate Building Contract Guide 2024 (IC/G 2024)
- Intermediate Building Contract 2024 Tracked Change Document (IC 2024 Tracked) (hard copy only)
- Intermediate Building Contract with contractor’s design 2024 Tracked Change Document (ICD 2024 Tracked) (hard copy only)
- Intermediate Sub-Contract Agreement 2024 (ICSub/A 2024)
- Intermediate Sub-Contract Conditions 2024 (ICSub/C 2024)
- Intermediate Sub-Contract with sub-contractor’s design Agreement 2024 (ICSub/D/A 2024)
- Intermediate Sub-Contract with sub-contractor’s design Conditions 2024 (ICSub/D/C 2024)
- Intermediate Named Sub-Contract Tender and Agreement 2024 (ICSub/NAM 2024)
- Intermediate Named Sub-Contract Conditions 2024 (ICSub/NAM/C 2024)
- Intermediate Named Sub-Contractor/Employer Agreement 2024 (ICSub/NAM/E 2024)
- Intermediate Sub-Contract Guide 2024 (ICSub/G 2024)
In addition to the main contracts, sub-contracts, and guides from the Intermediate Building Contract family, there are also the IC and ICD 2024 Admin – Contract Administration Model Forms (digital only).
See: Intermediate Building Contract (jctltd.co.uk)
5. JCT guidance note on the BSA
The JCT has produced a guidance note on the Building Safety Act 2022 which focusses on the particular parts of the Building Safety Act most relevant to those considering the carrying out of construction works and preparing contracts for carrying them out.
See: https://www.jctltd.co.uk/docs/The-Building-Safety-Act-2022.pdf
6. CIOB AI playbook published
The Chartered Institute of Building’s Digital and Innovation Advisory Panel has published a playbook on the use of Artificial Intelligence (AI) in the construction industry.
Written for built environment organisations of all sizes, it includes ways to evaluate the effectiveness of AI, while also considering matters such as ethics, cyber security and data protection. There is also a checklist to support new entrants, early adopters and experienced AI practitioners in making decisions about their use of the technology.
The playbook can be downloaded free at: https://ciob.me/AIPlaybook
See: https://www.ciob.org/news/new-playbook-on-ai-in-construction-published-by-ciob
7. RIBA 2024 Building Regulations Principal Designer Contract
The RIBA has published a new contract for the appointment of a Building Regulations Principal Designer under Part 2A of the Building Regulations and for commissions procured through any form of procurement for commercial projects of any value, including design and build pre-novation, in which the building works will be carried out using bespoke or standard forms of building contract.
The contract is not, however, suitable for the appointment of a Principal Designer on non-commercial work undertaken for a consumer client or for the appointment of a CDM Principal Designer.
See: RIBA Building Regulations Principal Designer Professional Services Contract 2024 | RIBA Books
8. The RIBA Principal Designer Guide
The RIBA Principal Designer Guide provides architects with the guidance required to understand the Principal Designer duties under the Construction (Design and Management) Regulations 2015 and Part 2A of the Building Regulations 2010, and includes guidance relevant to higher-risk building projects. To support individuals in demonstrating the necessary competence to be a Principal Designer, the RIBA has introduced a specialist register for this role, entry to which includes a comprehensive assessment of individuals’ skills, knowledge, experience and behaviours, as described in the guide.
See: https://www.ribabooks.com/riba-principal-designers-guide_9781915722201 and
https://www.architecture.com/working-with-an-architect/join-the-riba-principal-designer-register
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