LEGAL EAGLES
Eventually the engineer sent to MTH a variation request stating that E.ON had secured the services of an alternative vessel and requested MTH to examine the utilisation of the alternative to install the foundations in order to mitigate delays. It was proposed that E.ON would contract direct for the provision of the alternative vessel with a marine crew and that MTH would provide supervision on the vessel and manage and co-ordinate the overall foundation installation.
FORMALISED ARRANGEMENTS The contractual arrangements were formalised at the end of 2007, following a substantial delay.
The case essentially related to contractual interpretation, the principles of which are well known. Interpretation of a contract is the ascertainment of the meaning which the contract would convey to a reasonable person having all the background knowledge which would reasonably have been available for the parties in that particular situation which they were at, at the time of the contract.
The Court’s enquiry will start and usually finish by asking what is the ordinary meaning of the words used. Language however is flexible and the meaning of words is sensitive to syntax and context so that the natural meaning of words in one sentence may be quite unnatural in another. In choosing the appropriate meaning the contextual scene is usually of paramount importance. For these reasons individual words and phrases in a contract should be interpreted in the context of the contract as a whole.
COURT FINDINGS
The Court found that where in a commercial contract the words used can be said to have a normal or natural meaning and admit only one interpretation the Court will almost always adopt that interpretation even if the result seems unreasonable. However even in such a case the Court recognises that if the interpretation leads to a conclusion that “flouts business common sense it must yield to business common sense.”
The Court determined that what was permissible was to recognise that the parties were two substantial and sophisticated contracting parties. The Court also found it permissible to take the view that the contract was devised so as to provide a comprehensive statement of the rights, obligations and remedies of the parties and that therefore, the probable answer to the competing submissions of the parties was to be found within the four corners of the contract itself.
Contractually from the Court’s point of view it was of no concern of E.ON whether MTH had overpriced or underpriced or any part of the works.
The Court upheld the submissions of MTH and concluded that the engineer’s objective in adjusting the contract price under the bespoke contract was to ascertain and deduct the component of the original contract price relating to the provision of the jack up barge.
CONSIDERATION AND CARE From the above it can be seen that even when the parties are commercial, astute and familiar with operating within the field of activity to which the contract relates substantial issues – the difference in value between the parties was almost €40,000,000 – can arise.
Considerable care therefore needs to be taken in the preparation and drafting of these complex projects and the assessment of future risk.
Martin Collingwood Andrew Jackson
www.andrewjackson.co.uk Click to view more info
www.windenergynetwork.co.uk
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