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Indirect Contract Limitation Not Valid, Rules Court
A cunning attempt to invoke a limitation clause in a contract failed recently in court.
The case involved a building contract for cladding that was fitted to a leasehold building. The leaseholder had engaged a building firm to do the work. The contract between them contained a clause that any action in respect of defective work against the building firm relating to the cladding had to be brought within 12 years of the completion of the work.
The work was carried out in 2000, with the certificate of practical completion being issued in August of that year. The action claiming that the works were defective was brought in July 2013 and was brought against the engineers who supervised the works.
The engineers 'joined' the building firm in the action under the Civil Liability (Contribution) Act 1978 – a procedure that would allow them to seek a contribution from them for any damages they had to pay. A claim under that Act must be brought within two years of the notice of claim for which a contribution will be sought. The builders argued that the time limit for a claim against them had passed, because their contract had a 12-year time limit. They asked the court to dismiss the application.
The court refused. The limitation only limited the right of the owner of the property to sue the builders. They had not done so. They had sued the engineers. The engineers had taken action against the builder and there was no similar limitation placed on their right to sue in their contract. The builders could not 'contract out' of the Act.
This case illustrates that the courts are ill-disposed to attempts to wriggle out of obligations. Had the builders wished to limit their potential liability through time, they should have included a 'net contribution clause' in their contract with the engineers.