to summarise...

"How can we limit our risk?" The legal answer may lie on an interpretation of the legal relationship between the parties whether determinable in contract or tort. The practical solution may be to avoid the risk by seeking proper drafting advice. These days contractors take responsibility for design and construction and hence are encumbered with warranties and professional indemnity insurance premiums. Developers have to be sure that the risk is covered both in the terms of contract and with insurance cover for the particular occurrence or event that may give rise to liability. This topic was recently debated in the Technology and Construction Court in the case of Shepherd Homes Ltd v. Encia Remediation Ltd and Green Piling Ltd (January 2006). The term in question stated that the specialist piling sub-contractor's liability was limited up to £100,000, this being the fixed cost of piling works for the manufacture and installation of 641piles for 94 housing units at Eden Park in Hartlepool. The Technology and Construction Court judge Mr Justice Clarke held that there was nothing unusual in such a price cap and this was neither unreasonable nor unfair. There was no particular need in such a commercial transaction to bring the term to the employer's notice because it was usual to find such terms these days. The Employer was in a superior bargaining position being a subsidiary of AIG Engineering Group part of the American International Group of companies, one of the largest insurance groups in the world. The Employer knew what Green's contract terms were and that other potential sub-contractors had similar terms. In addition Encia had negotiated an earlier start on site and more favourable payment terms.

in answer to the question...

When you are negotiating a contract bear in mind who is really best to bear the risk in terms of insurance and resources. Remember that our courts will not enforce unreasonable or unfair commercial terms where bargaining positions are unequal, nor will they permit tedious, unusual or extortionate terms, especially those hidden away in small print or on the reverse side of an order form. But neither will the courts save you from freely undermining your commercial interests. It is cheaper to bargain commercially than to litigate; Bargaining between equals makes sense: inequality does not; Commercial agreements come unstuck when nobody knows what was agreed: get it in writing. For the industry at large this case provides a sobering lesson to those who use unfair commercial bargaining to force sub contractors to accept a lower price or more onerous payment terms. by Michael P ReynoldsAlexander Bosher is the trading name of AWB Solicitors LLP Partnership No. OC305990.  VAT No.835 6857 85 DISCLAIMER: The above information should not be regarded as constituting legal advice in relation to particular circumstances.  If specific advice is required in connection with the above, please contact the office for assistance.