Grain Communications Limited v Shepherd Groundworks Limited

A contractual variation may postpone the commencement of works where the contract defines a variation broadly enough to include a change to the period in which works are performed. The instruction need not use the word variation or postpone, provided its substance and surrounding communications objectively convey the change and comply with the contractual variation machinery.

An implied term cannot be added where express provisions already provide machinery for changing the timing of performance, or where the proposed term contradicts those provisions. A common-law damages claim cannot place the innocent party in a better position than performance of the contract would have done. Contractual exclusions of loss of profit and mobilisation costs may be reasonable under the Unfair Contract Terms Act 1977.

The claimant and defendant entered into a framework agreement for construction works and a Work Order for the Blyth Phase 3 project. After discussions indicating that work would not start immediately, the claimant emailed on 24 October 2023 stating that it intended to continue with the Work Order but was unlikely to commence the works before the end of 2023.

The defendant treated the communication as cancellation and pursued loss of profit and mobilisation and demobilisation losses in adjudication. The adjudicator concluded that the email cancelled the Work Order rather than varying it. The claimant brought Part 8 proceedings seeking declarations that it had not breached the contract and, alternatively, that the defendant could not recover the claimed losses.

The issues were whether Part 8 procedure was appropriate, whether the email was a variation or breach, whether a term restricting postponement could be implied, and whether the contractual provisions limited any damages.

1. Part 8 procedure. The application was suitable for Part 8 proceedings. The only material factual dispute concerned whether the defendant had undertaken planning, mobilisation and implementation work. That fact did not affect the contractual interpretation required to determine the declarations.
2. Variation. The contractual definition of variation included an addition, omission or other change in the works or in the period or order in which they were to be carried out. The claimant was therefore entitled to postpone commencement. Variation instructions were to be assessed by their substance and were not to be read strictly or pedantically. The email stated that the claimant intended to continue with the signed Work Orders, explained that commencement was unlikely before the end of 2023, and promised to keep the defendant informed about the programme. Together with the discussions on 23 October, it satisfied the written-confirmation requirement in clause 11.2.
3. Implied term. No term preventing postponement could be implied. Clauses 8, 9 and 11 provided machinery for varying the timing of performance. The proposed term was unnecessary for business efficacy, did not go without saying, and would contradict express contractual provisions.
4. Losses. Alternatively, even if postponement breached an implied term, the defendant could not recover more by common-law damages than it could have recovered had the contractual termination provisions applied. The agreed pricing included profit and mobilisation and demobilisation costs. Clause 18 excluded liability for costs, loss of profits and indirect or consequential losses, while permitting claims for sums properly due in connection with works carried out before termination.
5. Reasonableness. The relevant exclusion was reasonable under the Unfair Contract Terms Act 1977, having regard to the parties’ bargaining positions, the defendant’s experience of 68 similar Work Orders, its ability to decline a Work Order, and the contractual benefits and payment mechanisms available.
6. Disposition. The court granted the claimant’s declarations. The postponement did not breach the Blyth Work Order or framework agreement. Alternatively, the claimant was not liable for the defendant’s claimed mobilisation, demobilisation or loss-of-profit losses.