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September 22, 2017

Avoiding conflicting dispute provisions

Avoiding conflicting dispute provisions

In 2005, to be used when appointing one or more suppliers to carry out construction work or to provide design or advisory services on an ‘as instructed’ basis over a fixed term. It is intended to be used with any of the NEC3 suite of contract forms but it is important to ensure that the terms are consistent. 

The February 2017 decision in Costain v Tarmac [2017] EWHC 319 (TCC) provides useful guidance on the approach when there are conflicting provisions.

The contractual background 

The contractor was engaged by the UK Highways Agency to carry out works to the M1 motorway under the terms of a framework contract based on the FC, which required it to procure concrete from a supplier that had also entered into a framework agreement with the Highways Agency. The contractor therefore appointed the sub-contractor to supply concrete, to be used in new safety barriers at certain junctions of the M1. 

The sub-contract agreement was a one-page document, which stated that the terms of the sub-contract were based on the amended clauses of the FC and the amended terms of the NEC3 Short Supply Contract (SSC). The FC included an option Z clause which stated that the package order was subject to the jurisdiction of the courts. The SSC contract data however stated that the tribunal was arbitration.   

A dispute arose as a result of defects identified in the concrete and the sub-contractor argued that the scope of remedial works was much less than indicated by the contractor. When the matter was referred to adjudication, the adjudicator held that the claim was time-barred under SSC clause 93.3. 

The contractor sought to commence proceedings in court and the sub-contractor applied for a stay of the proceedings under section 9(1) of the Arbitration Act 1996, on the basis that the dispute had to be referred to arbitration.  

Arbitration or court?

The judge found that the contract was a single sub-contract, governed by two sets of contract conditions. It was held that, on its correct interpretation, a dispute under the framework agreement (e.g. about seeking quotations) would be referred to court while a dispute in relation to the supply of concrete would be referred to arbitration. 

Here the dispute concerned defects so it would be referred to adjudication and arbitration. In upport of that conclusion, it was noted that this was a deliberate decision, not a mistake or sloppy drafting, which reflected the two different elements of the parties’ relationship.

Conclusion

In this case the judge found that the parties decided to have two separate dispute-resolutions mechanisms as they had two aspects to their relationship. It would however seem preferable to agree a single tribunal to avoid any issues as to which provision applies. 

The case also serves as reminder of the time limit provision in SSC clause 93.3, which  may prevent a claim from being pursued. A similar provision appears in clause W1.3(2) of the NEC3 Engineering and Construction Contract.
 
POSTED BY KATIE MCCOURT, PINSENT MASONS
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