Disputes relating to the nature and interpretation of agreements continue to take up significant court time; clarity at the outset can reduce your exposure to these types of claims. In our latest alert, we focus on two recent cases arising out of the specifics of what was agreed (deliberately or not) and their take-away points.

Ensure amendments to standard wordings are clear and consistent

In our December 2015 Adjudication Watch, we reported on Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2015] from the perspective of the parameters of the adjudicator's decision when applying for summary judgment. Equally however, the decision demonstrates once more the shaky ground that you stand on when contract wording is unclear.

By way of recap, Imperial Chemical Industries Limited (ICI) brought a claim against Merit Merrell Technology Limited (Merit) to enforce an adjudicator's decision. Part of Merit's defence was to contest the jurisdiction of the adjudicator to make the decision at all. The argument stemmed from amendments to an NEC3 form of contract which led to ambiguity relating to the dispute resolution provisions.

One point that Merit tried to establish was that the correct interpretation of the dispute resolution provisions in the contract meant that the Royal Institute of Chartered Surveyors (RICS) was the specified adjudicator nominating body. As a result, Merit argued, the adjudicator in fact had no jurisdiction to make his decision, as the Chartered Institute of Arbitrators had been used as the nominating body (and not the RICS).

In the event, ICI successfully repelled the jurisdictional challenge. One of the reasons the challenge failed was that Merit's contended interpretation of the contract would result in certain inserted wording in a late Schedule of Amendments having "no purpose at all", despite an explicit contractual provision (and this was common ground between the disputing parties) stating that this Schedule of Amendments was to override all other terms of the contract.

The judge held that it was unlikely that the parties, "as reasonable businessmen", would have intended this - commercially, it would not have made sense for an amendment to be included in the Schedule of Amendments with no purpose at all.

Comment

We set out the key principles of interpretation in our recent alert Back to Basics: Contractual interpretation - this judgment again highlights the importance of clear drafting. In particular, when incorporating amendments to standard contract wordings (as happens with many building contracts), it is important that provisions are not amended or incorporated in a manner that creates contradictions with other wording in the document. Always check cross-references and the ramifications of each change in relation to the standard wording, and other amendments.

Although ICI was successful in defeating the jurisdictional challenge, both parties will have incurred significant costs and delay. Seek to avoid negative outcomes by precision at the drafting stage.

Provision of professional services - fee or free? Mainly irrelevant (in tort)

Turning to the nature of the agreement itself, the recent decision in Peter Burgess and Lynn Burgess v Basia Lejonvarn [2016] is an uncomfortable reminder that when considering allegations of professional negligence, the issue of remuneration to the professional is largely irrelevant. You may think you're just being a friend in need but you risk leaving yourself exposed to a significant claim.

The dispute arose out of the decision by Mr and Mrs Burgess to have their garden landscaped. At the time, Ms Lejonvarn, a professional designer, was their good friend and for no fee, she offered to find an appropriate contractor to carry out earthworks and related activities. The plan was that in due course, Ms Lejonvarn would provide some design input for specific elements for a fee.

In the event, this plan never came to fruition. The Burgesses were not satisfied with the work carried out by the contractor and completed the project using a different contractor and no further input from Ms Lejonvarn. They later started a claim against Ms Lejonvarn alleging that they had suffered losses (increased cost of the works) resulting from the advice she had given.

The court held that there was no concluded contract between the parties and this part of the claim was described by the Judge as "hopeless" - among other things, there was no clear intention to be legally bound, and no consideration.

In contrast and despite Ms Lejonvarn's contention that she was "merely involved as a friend who happened to have a professional background", the court held that Ms Lejonvarn did have a tortious duty of care to protect the Burgesses against economic loss. The relationship (in relation to the landscaping project) was described by the Judge as being "akin to a contractual one" and it was significant that Mr and Mrs Burgess were relying on Ms Lejonvarn in terms of the advice she provided.

The decision is specific to the facts in this case but the Judge himself described it as "something of a cautionary tale" and observed that "...in the absence of a contract it is important to exercise greater care in distinguishing between social and professional relationships...".

Comment

This is of course a re-statement of the existing position in that a professional duty can arise whether or not a fee is charged - in simple terms, the fee (or not) is largely irrelevant.

The safest approach is to err on the side of caution and ensure you do not venture into the realms of such help and advice. If nevertheless, you do choose to get involved, be clear in your own mind that it is likely that you will be judged as a professional in this context, rather than merely a friend, meaning that a duty of care may arise and liability could potentially attach.