| y"> | | | | work lacked "the necessary clarity of expression" |
| "Termination for convenience" clauses are | | | | to allow Abbey to act as it did. It only allowed |
| intended to allow parties to end construction | | | | Abbey to omit work which it considered was no |
| contracts for any reason at any time. | | | | longer required for the project. |
| But, in practice, do these clauses really allow | | | | However, the judge suggested that the other |
| employers to terminate contracts, or even to | | | | clause may have been a termination for |
| withdraw part of the works after | | | | convenience clause and might have permitted |
| commencement, and engage others to do it | | | | Abbey to suspend the works and re-tender. This |
| instead? | | | | interpretation would be commercially justified |
| Three judgments in the courts in 2002 and 2003 | | | | because the contract was a labour-only |
| shed some light on this question: they are of | | | | sub-contract, house building "is speculative", and |
| particular interest as the use of these clauses is | | | | the parties might be considered to share the risks. |
| now becoming increasingly common. | | | | Hadley Design Associates v Westminster LBC (9 |
| Termination for convenience clauses are | | | | July 2003) |
| particularly useful to employers undertaking | | | | Westminster appointed HDA as lead consultant on |
| speculative developments, where market | | | | a construction project. Westminster then |
| movements may make employers wish to | | | | terminated its contract with HDA. It relied on a |
| terminate the contract part way through, e.g. in | | | | one-month notice of termination clause that did |
| house building, where projects are often carried | | | | not require reasons for termination. Westminster's |
| out in stages. Similarly, "variations" (i.e. "omissions") | | | | motivation was to "market test the current level |
| clauses often allow employers to omit as much | | | | of professional fees", i.e. to appoint a cheaper |
| work as they like, when they like, for any reason, | | | | consultant. HDA had been appointed in 1987 and |
| e.g. in value engineering. | | | | by 1996, when Westminster served the |
| These clauses are also useful if there are | | | | termination notice, compulsory competitive |
| problems between the parties and both wish to | | | | tendering had become the norm and it wished to |
| go their separate ways. Most of the professional | | | | test the market for surveying services. |
| consultants' appointments promoted by the | | | | HDA claimed: |
| institutions include this type of clause on the basis | | | | |
| that if a professional relationship has broken down, | | | | 1. wrongful termination of contract, i.e. |
| it is not sensible to force the parties to work | | | | Westminster had promised HDA that it would |
| together. | | | | terminate the contract only if HDA defaulted or if |
| Rice v Yarmouth Council (6 September 2002) | | | | Westminster ran out of money and, either there |
| A small horticultural business had taken on a | | | | was a collateral contract to this effect, or, |
| complicated maintenance contract for the Council's | | | | alternatively, Westminster had made these |
| parks. The contract allowed the Council to | | | | representations to induce HDA to enter into the |
| terminate it for "any breach" however trivial. In | | | | contract and HDA had relied on them; |
| this case, the Court of Appeal refused to read | | | | 2. the contract included implied terms and/or |
| the contract literally, and decided that the | | | | terms for business efficacy which meant that |
| termination was wrongful because the alleged | | | | Westminster could only terminate in good faith, or |
| beaches were not sufficiently serious. | | | | when it was fair or reasonable to do so; and |
| Abbey Developments v PP Brickwork (4 July | | | | 3. HDA had contracted on Westminster's standard |
| 2003) | | | | terms, and the termination clause was |
| Abbey appointed PPB as a labour-only | | | | unreasonable and therefore unenforceable. |
| sub-contractor on a housing development. Abbey | | | | The case of Abbey Developments v PP |
| complained repeatedly about PPB's progress and | | | | Brickwork was not referred to in this case and, |
| eventually instructed it to limit its works to the | | | | surprisingly, it was not suggested that the clause |
| houses then under construction. Abbey said that | | | | was unconscionable, even though it did not |
| when these houses were completed, it would | | | | provide for compensation. There appears to be |
| terminate PPB's contract and appoint another | | | | no obvious reason for the difference in these two |
| contractor. Abbey requested a declaration that it | | | | cases, other than their particular facts. |
| had acted correctly. | | | | The judge rejected all of HDA's arguments and |
| The sub-contract indicated that Abbey could vary | | | | found in favour of Westminster. |
| the amount of work and renegotiate the rates or | | | | Conclusion |
| suspend the works and re-tender without | | | | It is clear that all three cases were decided on |
| terminating the contract. Abbey relied only on its | | | | their particular facts. However, some general |
| ability to vary the amount of work. | | | | points can be made: |
| The judge said that a "convenience" or | | | | |
| "omissions" clause needs "reasonably clear words" | | | | 1. a trivial breach may preclude termination; |
| to allow an employer to transfer work from one | | | | 2. the harsher the objective, the clearer the |
| contractor to another. He said that such clauses | | | | words used must be; |
| which did not provide for compensation risked | | | | 3. provision for compensation can be important; |
| being treated as "unenforceable as | | | | and |
| unconscionable". He considered the purpose of the | | | | 4. the courts question transfers of work between |
| clause allowing variation to be critical, saying: "if ... it | | | | contractors. |
| turns out that the variation was not ordered for a | | | | Termination for convenience and omissions |
| purpose for which the power to vary was | | | | clauses usually favour employers; contractors |
| intended, then there will be a breach of contract". | | | | should ensure that they are aware of the |
| He refused Abbey's application on the basis that | | | | consequences before they agree to them. |
| the clause allowing variation of the quantity of | | | | |