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Unreasonable Building Contract Term Unenforceable

Contracts have to be reasonable to be enforceable, and that is one good reason why professional drafting is essential. In a case which clearly illustrates that point, the High Court has ruled that a clause which required notification of defects in building works within an unrealistically brief period of time was not worth the paper it was written on.

A contractor had subcontracted ground preparation and piling works in respect of a warehouse development to another company. The latter argued that the subcontract was subject to a standard term which required that it had to be notified of any alleged defect in its work within 28 days of its appearance and, in any event, within one calendar year of the completion of the project.

Nine years after the warehouse was built, its occupiers complained of settlement in the slab beneath the production area. A company which had an interest in the property duly launched proceedings against both the contractor and the subcontractor involved in its construction. In those circumstances, a preliminary issue arose as to whether the contract term was valid. If it were, the subcontractor would have a good defence to the claim.

In finding that the term fell foul of the Unfair Contract Terms Act 1977, the Court noted that defects in ground works are often disguised by the structures above them and can frequently take years, even decades, to appear in the form of cracking to a building's fabric. In those circumstances, the time limits purportedly set in respect of notification of defects did not satisfy the reasonableness test.

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