Discrepancies Again –The Vanishing Trims!

“If there is an ambiguity or inconsistency within the Site Information (including the information referred to in it), the Contractor is assumed to have taken into account the physical conditions more favourable to doing the work.” - NEC3 ECC Cl. 60.3

“A compensation event which is an instruction to change the Works Information in order to resolve an ambiguity or inconsistency is assessed as if the Prices, the Completion Date and the Key Dates were for the interpretation most favourable to the Party which did not provide the Works Information.” -NEC3 ECC Cl. 63.8

But what is an ambiguity or inconsistency in the context of NEC3 Engineering and Construction Contract?

In my earlier article published in the CIArb, Arbitration, The International Journal of Arbitration, Mediation and Dispute Management, Volume 84 Issue 4 November 2018, Sweet & Maxwell, pp. 350-352, I looked at RWE NPower Renewables Ltd v J N Bentley Ltd [2014] EWCA Civ 150, [2014] CILL 3488 where a construction contract having apparently different requirements for completion of work stated in Part 1 of the Contract Data and the Works Information. The Court of Appeal took the view that the two provisions would be expected to complement each other and that it would only be necessary to resort to the order of precedence argument in circumstances where different provisions on their true construction “imposed different obligations in relation to the same subject matter”. This decision demonstrates that the courts are able to easily interpret NEC3 clauses by adopting a commnon sense approach to the language that is used, having regard at all times to the facts of each case.

In Northern Ireland Housing Executive v Dixons Contractors Ltd [2019] NIQB 19, the NEC3 Term Service Short Term Contract was adopted in a construction contract for windows replacement with new double-glazed units. The dispute matter centers in an alleged ambiguity/inconsistency between the Code of Practice – Specification, Survey and Installation of PVC-U Windows and Sidelights which states that “Finishing Trims are to be Cellular extruded PVC-UE Trims” and a few contract drawings which do not provide that finishing trims requirement.

The construction contract was amended to include an order of precedence provision, which states:

“This Contract (including all Appendices) will be read as a whole, provided that this Contract shall be interpreted in a manner that is consistent with the provisions of Appendix 12 (Clarifications). However, in the event of their being any conflict, divergence, discrepancy or inconsistency between any provision of one of the documents comprised in this Contract and any provision of another document comprised in this Contract, the relevant conflict, divergence, discrepancy or inconsistency will be resolved by applying the following order of precedence (in descending order of priority) such that the provision of the document with a higher priority prevails in each case…”

Once again, the court took a broader approach. The court looked “at any difference in the context to the entire contract in order that it can judge whether there is in fact an inconsistency and/or an ambiguity” and considered that it was purposeless “if the sole aim is to determine whether or not there is a difference between the Code of Practice and the Drawings if this difference does not give rise to an ambiguity and/or inconsistency in terms of the overall context of the contract. The fact that there may be a difference between two parts of the contract is irrelevant and of no consequence if that difference has no contractual significance.” The court was “not determining whether there is a difference between the Code of Practice and the Drawings, because there clearly is one. Rather it is this court’s task to determine if there is an ambiguity and/or inconsistency as a result of the difference between the Code of Practice and the Drawings.”

The court decided that the overall context of the contract had no ambiguity or inconsistency by also looking at the notes to tenderers, scope of service, drawing notes, service descriptions and price list. Even the parties clearly inserted an “order of precedence” provision in the contract, the court did not give effect to it by adopting a broader approach to the matter in dispute. This ‘vanishing trims’ case signifies the importance of understanding the true intention of parties entering into the NEC contract by not looking at the contract documents in isolation.

Jurisdictions: 

Hong Kong Institute of Construction Adjudicators (HKICAdj)

Chartered civil engineer, chartered project management surveyor and construction arbitrator.  He is currently Honorary Secretary of the YMG of the Chartered Institute of Arbitrators (East Asia Branch).  He is also regularly appointed as construction adjudicator and mediator in the East Asia region.