April 16, 2012

In contract or not in contract? That was the question.

The wrong answer could be costly. If you think you aren’t in contract when you are, you may need to reach for your cheque book.

The scenario can go like this. You thought you were merely in negotiations with a number of companies. You opted for an alternative provider only then to receive a claim for "services rendered" from one of the other bidders. You refuse to pay and find yourself at the receiving end of a Notice of Adjudication alleging breach of contract and claiming damages. What can you do?

Our client was a main contractor on a project and was faced with just this issue. It needed to employ a subcontractor to carry out certain works. It approached company "A" and received a quotation on company A's terms, but not strictly in line with the invitation to tender. An alternative supplier was suggested. The alternative supplier was approached, quoted favourably and was duly appointed. Seems straightforward, but company A then tried to accept the original offer (it hadn’t been “formally” cancelled), claimed breach of contract and claimed loss of its profits. Sneaky? But potentially effective.

Adjudication moves fast. Our client needed to decide quickly whether it was in the right or wrong. We provided our rapid assessment of the risk – and a firm recommendation about the right course of action. Getting it wrong would have exposed the client to an immediately enforceable decision on damages and the adjudicator's fees.

Our advice was our client wasn’t in contract. We were successful in the adjudication proceedings, forcing the adjudicator to resign. The sub-contractor was left to pay the adjudicator’s costs. Our responsive and decisive approach ensured an outcome that protected our client from a six-figure dent in bottom line profit.

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