Here is my paper delivered at the Society Of Construction Law Conference a couple of weeks ago:
SoCLA National Conference 2022
“Getting Risk Right”
Hobart
5 – 7 May 2022
EXTRA-CONTRACTUAL RECOVERIES:
12 HIDDEN OPPORTUNITIES AND RISKS
Robert Fenwick Elliott[1]
Introduction
- As bespoke contracts have become lengthier, and more heavily laden with Queen of Hearts clauses[2] and “I Delay, You Pay”[3] arrangements, it has increasingly been the case that the contractual entitlement of contractors and subcontractors to commercially reasonable payment for their work is shut out by express contractual provision. They may read the contract once, twice, or 20 times, and find no express contractual route to payment. In those circumstances, it is necessary to turn to extra-contractual routes to recovery; that is to say routes to recovery that are not to be found in the express words of the contract.
- These routes have become all the more important. They are not much taught in law schools, and are frequently overlooked by claimants to whom they may be available. As such, they can represent hidden opportunities for claimants. They can also constitute hidden risks for employing parties – both owners and contractors who engage subcontractors – that may not become apparent until a legal case against them has been advanced in legal proceedings.
- Understandably, a good deal of what is said and written about construction law centres on construction contracts. This paper focuses on one aspect of construction law: what rights are available to a party which executes construction or engineering work to get paid? And understandably, people typically start looking at the express wording of the contract. And those who are to pay for the work typically assume that their liability to pay is limited to what the contract says.
- There are two particular problems with this approach. Firstly, there are numerous alternative routes to payment for work other than the express wording of the contract. This paper is intended to illuminate the overall landscape of extra-contractual recovery by looking at a dozen particular paths.[4] Some of them are very well established. Others are more speculative.
- The author has not made a precise count, but guesses that in about half of the recoveries in which he has been involved as a lawyer have involved[5] some element of extra-contractual recovery, often pleaded in the alternative to the contractual right.
- As one looks at these alternative routes, one sees a second problem. Very often, parties do not do what they have contracted to do. Conceptually, this is easily understood where the contractor does not build what he has contracted to build, and thus becomes liable for the cost of rectification, either under the contract or by way of damages. More complex is what happens when the owner, and/or the owner’ s agents, do not do what they are required to do by the contract. A number of the alternative routes to payment are concerned with the legal consequences of such failures.
- Clearly, these alternative routes to payment represent opportunities for contractors and risks for owners. They are not as well recognised as they might be, and it is in that sense that they might be characterised as hidden. For the parties who have undertaken work for which they have not been paid, notwithstanding their legitimate commercial expectation, the takeaway from this paper will be that it is worthwhile going through these alternative routes in order to see whether any of them are available. If you are advising an owner, the takeaway is not to be too myopic about the contract: the risks might well lie elsewhere.
