Practical Law

From time to time, those seminal cases we all studied during the early parts of our career pop up in practice. We’re all familiar with them: the snail in the bottle in Donoghue v Stevenson; the spurious sounding flu remedy in Carlill v Carbolic Smoke Ball Co — the list goes on.

Of these key cases, one that has us continually reaching for the textbooks and considering in increasingly varied circumstances is the Court of Exchequer’s 1854 decision in Hadley v Baxendale. The scope of recoverability for damages arising from a breach of contract laid down in that case — or the test for “remoteness“— is well-known:

“Now we think the proper rule in such a case as the present is this:—Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.”

The proper application of the two limbs to commercial contracts has remained a hot topic ever since, with the Privy Council’s decision in Attorney General of the Virgin Islands v Global Water Associates Ltd being the most recent addition to a long line of such cases. Continue reading →

Question: What do the Oslo Picasso murals “The Seagull” and the “The Fishermen” and the Dutch De View Jaargetijden have in common?

Answer: They both have been subject to recent high cost, high profile litigation that dragged on for years and which concerned moral rights.

Yes “moral rights” caused all the trouble for these projects – not its more famous cousin, copyright which many regard as the chief culprit for construction IP disputes. Interestingly, moral rights don’t even get a mention in the commonly used standard form contracts such as JCT, NEC and FIDIC and yet they can often be a critical risk issue for many construction projects. Continue reading →

In the UK, the professional indemnity insurance (PII) market is hardening. It is becoming increasingly common to find that contractors and consultants do not hold (or are struggling to obtain) PII at the level and on the terms that were negotiated and agreed with their employers.

At the same time:

• There has been a proliferation of cladding claims against contractors following the Grenfell Tower tragedy in June 2017; and
• Other economic headwinds have caused insolvency to become more prevalent in the construction industry.

The combination of these factors has led to a perfect storm for employers: where developments are found to contain substantial defects (whether relating to cladding or anything else), the road to recovery of the employer’s losses is more challenging and outcomes are more uncertain. If the contractor or the consultant becomes insolvent, the employer might not have available to it the full amount of PII that was agreed, or (in respect of more recent contracts) the agreed amount might, due to market forces, be manifestly inadequate. Continue reading →