Building disputes often focus on the question of whether a breach of contract was so serious as to justify early termination. That was the central issue addressed by the High Court in a case concerning the construction of an iconic bus garage.
The strikingly modern garage was designed to serve as a prestigious local landmark. Its construction was, however, plagued by significant cost increases and delays. The council ultimately dismissed the project’s main site contractor and engaged another building company to complete the works. The contractor asserted that the contract had been wrongfully terminated and launched proceedings against the council, seeking almost £1.8 million in damages.
Ruling on the matter, the Court found that the contractor was entitled to an extension of time and that the contract had therefore been precipitately terminated some weeks prior to the date on which completion of the project was required. The council had also failed to follow the correct contractual procedure as regards service of the notice of termination.
However, the Court ruled that the contractor was, by that point, in such serious and significant breach of the contract as to entitle the council to terminate it. An impasse had been reached in that the contractor was unable and unwilling to complete the garage by the due date. It had substantially suspended works on the site and the council was entitled to grasp the nettle and bring the contract to an end.
Any entitlement that the contractor might establish to compensation to reflect the value of works carried out prior to termination was more than extinguished by the council’s right to recover the cost of having the project completed by a replacement builder. The contractor’s claim therefore failed on the basis that it had no prospect of recovering anything in the litigation.