Why the Triple Point Technology ruling matters for construction 

This is a dangerous approach: it is easy to step on a landmine when it is buried within reams of dense legal text. And this was the precise fate that befell Triple Point Technology when the Supreme Court ruled last month that it was liable for damages for its failure to complete works for its client, despite terminating the contract.

This ruling is doubly concerning for the sector. Firstly, as Lady Arden noted in her summing up, Triple Point Technology’s contract was dense, in every sense of the word, with the signatories seemingly being unaware of their contractual obligations. Crucially, though, the complexity of Triple Point’s contract is not atypical for the construction sector; and Lady Arden’s words – if not the ruling itself – ought therefore to serve as a shot across the bow of all those who have signed contracts but are not fully conversant with the terms.

Secondly, as we shall see, the Court, in one swoop, has removed the ‘get out of jail free card' of many struggling contractors facing damages claims, namely terminating the contract. Indeed, now the sector has had time to digest the Court’s ruling, it might not be the last of the summer heat causing the big contractors to sweat.

What happened?

The case in question began when Triple Point Technology had been contracted to provide software and software implementation services for the state-owned Thai oil and gas firm, but quickly encountered difficulties and sought to terminate the contract having only completed part of the project.

In January 2019, the UK’s Court of Appeal ruled that the US-based company was not liable for damages for its failure to complete the agreed works because the contract had been terminated before the completion of the works. This turned received wisdom on its head and appeared to grant contractors everywhere, facing the twin pressures of Brexit and Covid-19, an easy escape from their contractual obligations.

Late last month, however, this verdict was overturned, with Triple Point Technology being ordered to pay $14.5m in damages. The judges, put simply, restored the accepted position that businesses are liable for liquidated damages (being those purely in respect of delayed completion) in the event they fail to complete works, up to the point the contract is terminated. Any other outcome, according to the presiding judges, would essentially reward a business for its own default.

Why does this matter for construction

The eyes of the sector had been on the Court for the simple fact that many contractors have found themselves in a similar position to Triple Point Technology. In the last few months, after all, we’ve seen the materials and labour shortage apply ever-greater contractual pressure to a sector already trying to emerge from the shadow of the pandemic.

Where the lower court appeared to have granted struggling contractors a lifeline, this support has now been kicked away. And, with the Supreme Court questioning the extent to which Triple Point Technology actually understood its own contract, this raises the prospect of additional contractors being stung by terms they have not fully understood.

Indeed, Arcadis recently conducted a report on the UK construction industry’s disputes, noting that “it is not surprising that the average value of disputes in the UK increased significantly and that nearly three quarters of respondents had encountered disputes or claims specific to Covid-19. The most common cause of disputes in the UK was the parties failing to understand or comply with their contractual obligations.”

A lesson in contract law

A simple lesson for contractors from the ruling, then, would be: do not sign a contract without understanding the terms.

Triple Point Technology’s contract ran to over one hundred pages, and even Lady Arden noted the complexity of the legal language used. It was clear that Triple Point Technology was unaware of the meanings of the terminology, specifically regarding negligence, and had failed to understand the many clauses that were included.

In my years as a construction disputes lawyer, it is sadly very common to come across contractors and employers who are in similar positions. In a society where we are taught to ignore the t’s and c’s, it is easy to enter into a contract without having understood, or even read, the terms.

The case of Triple Point Technology has come at a crucial time for contractors who need to take notice and avoid a legal landmine that could be lurking in their contracts, especially when delays are so prevalent in the industry.

*Bill Barton is director of Barton Legal

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