Be careful what you sign once you have a (construction) contract in place
A claim was made to the English Courts asking them to enforce an adjudication decision, seeking over £600,000 plus interest and the adjudicator’s costs.
The Defendant asked for a stay (delay) of the proceedings, on the basis of a challenge to the jurisdiction of the English Courts. Although the parties had entered into a standard form engineering and construction contract (NEC3), it did not set out which legal jurisdiction / Court would have the power to make legal decisions.
The Court looked at a letter signed by the parties which was intended to amend the value of the contract, but which also contained a clause agreeing that the resolution of disputes should be governed by the Laws of Scotland and dealt with by the Scottish Courts.
In addition to the content of the letter, the contract was performed in Scotland (i.e. the building that was being built was in Scotland) and the parties had elected in the contract that any arbitration would be in accordance with the Scottish Arbitration Code. The Court therefore agreed with the Defendant and decided that the Scottish Courts had jurisdiction to deal with the claim.
The case demonstrates the importance of ensuring that when parties to a contract sign separate documentation that they consider the implications upon existing contracts, clauses and crucially, as in this case, which jurisdiction will govern the contract. The letter was a variation agreement which ran concurrently with the NEC 3 contract. Its effect was that the jurisdiction for all disputes arising under the contract and the variation agreement was to be the Scottish Courts and the contract was not to be governed by the English Courts as may initially have been intended.
The simple lessons to be learned from the case are therefore:
- when entering into a contract you should always ensure the contract is clear as to which jurisdiction and country’s laws apply; also
- be very careful, and ideally seek legal advice, before signing any subsequent letters or documentation which could have unforeseen consequences to the original contract – including, as was the case here, which jurisdiction will apply.
If you have any questions in relation to an issue with a construction or other commercial contract or would like advice on a dispute generally, please do not hesitate to contact Simon Beasley in our Dispute Resolution team on 0207 288 4769 or email email@example.com.