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Interpretation of Limitation Clauses

February 2017 - Issue 90

The recent case of McGee Group Ltd v Galliford Try Building Ltd [2017] EWHC 87 (TCC) confirms the court’s approach to limitation clauses in giving effect to their natural and ordinary meaning. It is a reminder that limitation clauses need to be drafted prudently to be clear and unambiguous.

Galliford Try Building Ltd (‘GTB’) engaged sub-contractors McGee Group Ltd (‘McGee’) to design and construct groundworks and substructures of a new £150 million Resorts World hotel and casino. The JCT Design and Build Sub-Contract was adopted and heavily modified to include a number of bespoke amendments.

The bespoke amendments included the following provisions in relation to the financial consequences of delay and disruption:

As a result of McGee’s delay and disruption in the contract works, GTB sought to claim damages for the direct loss and expense suffered. The initial sum claimed was £1,489,733 under clause 2.21B, which was subsequently recalculated to £3,318,124.29.

GTB sought to differentiate between the losses payable under clause 2.21 from the losses under clause 4.21 where the cap did not relate. GTB argued that £2,291,495.33 of the claim was pursuant to clause 4.21 and thus, not caught by the cap.

McGee argued that all of GTB’s claims in respect of the delay and disruption fell within clause 2.21B and were, therefore, capped at 10% of the contract value and sought a declaration to this effect.

Mr Justice Coulson, in interpreting the contractual cap, granted the declaratory relief to McGee for the following reasons:

This case demonstrates that care should always be taken when drafting limitation clauses to ensure they are clear and unambiguous and reflective of both parties’ intentions. Where there are separate limitation provisions scattered across a contract, particular care needs to be taken to ensure they work together.

Any bespoke amendments to standard contracts should always be checked cautiously to ensure provisions are consistent.

If you need assistance with drafting or amending standard JCT contracts, contact one of our team today.

Rebecca Palmer

Senior Associate

e rpalmer@prettys.co.uk

t 01473 298274

 

 

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