Yesterday the Court of Appeal heard the case of Balfour Beatty Regional Construction Limited (“BB”) v Grove Developments Limited (“Grove”).
Grove was a property developer who had engaged BB as a contractor to design and build a hotel and apartments. The dispute concerned whether BB had a contractual right to submit further interim applications for payment following the expiry of dates for doing so within an interim payment schedule (the “Schedule”) appended to the contract. The contract works had become delayed and the Schedule had not made provision for delay. The difficulty for BB was that it faced the proposition of completing the works without receiving further payment until the final payment mechanism under the contract was triggered – potentially a number of months down the line and after significant costs had been expended.
What did the Technology and Construction Court say?
Earlier this year, the Technology and Construction Court (the “TCC”) held that BB had no contractual right to submit further interim applications for payment in the absence of defined dates for doing so within the Schedule. The TCC held that BB should have negotiated with Grove to extend the Schedule and dismissed BB’s argument that the provisions within the Scheme for Construction Contracts 1998 (the “Scheme”) should apply in the absence of further interim payment dates within the Schedule. BB appealed against this decision.
The Court of Appeal’s decision
The Court of Appeal dismissed BB’s appeal. The Court of Appeal held that the parties had no agreement as to how interim payment applications would be dealt with following the expiry of the Schedule and that the parties needed to know the dates with certainty. The Court of Appeal also held that the Schedule had provided an adequate mechanism for defining payment dates and therefore the Scheme did not apply and it was impossible to ascertain any new agreement from the parties’ conduct following expiry of the Schedule.
The lesson to be learned from the case is that when contracts are drafted it is imperative to provide provision for delay when agreeing to a schedule for interim payment application dates.
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