Contracts Act 1999 ENGLISH LAW
Contracts Act 1999 ENGLISH LAW
1st part : 750 words
2nd part : 2000
Contracts (Rights of Third Parties) Act 1999 written assessment
A commissioned B to build an office block. B made use of T as a subcontractor for the plumbing, with no contract in place as between A and T.
B gave A a guarantee on the offices lasting five years, after which A was to have no claim against B. Part of the guarantee given by B stated as follows:
“B’s liability in relation to the office block, after delivery of the office block, shall be limited to the obligations expressly set out in this article and B and its subcontractors and suppliers shall have no additional liability whatsoever nor in any event shall be liable for any consequential damage or expense”.
In the construction contract between A and B there was an arbitration clause, which stated: “If any dispute arises between the parties as to any matter regarding this contract, the matter in dispute shall be settled by arbitration by three arbitrators in London”.
After 5 1⁄2 years a serious problem with the plumbing occurred, causing significant damage to the offices. It was determined that the cause of the plumbing problems was negligence in designing and installing the plumbing in the office block.
A claimed against T before the state court that would ordinarily have jurisdiction to hear the dispute. T is challenging the jurisdiction of the state court on the basis of the arbitration agreement between A and B, claiming that it can benefit from the exclusion of liability following the five-year guarantee period in the contract between A and B.
Can T insist that the dispute with A be heard in arbitration? Give reasons (max. 750 words)
The following case should give guidance:
Use in particular sections 1, 2 and 8 of the Contracts (Rights of Third Parties) Act 1999:
A has a contract to sell coal to B under a Coal Sales Agreement (“CSA”). A ships the coal to B by using T’s ships under a contract of affreightment (“COA”). Both the CSA and COA are to run for a period of 12 years. There is a minimum annual quantity to be bought/sold under the CSA and given by A to T for transportation under the COA.
If this quantity is not met under the COA, A is to pay T USD 2.50 for every tonne below the minimum. If B fails to purchase the minimum quantity under the CSA, it agrees as aclause in the CSA to pay T USD 2.50 for every tonne below the minimum. The clause refers to T as the “shipowner” under the COA.
After five years in which the coal price is fixed under the CSA, A and B fail to agree a new price for the coal and agree to terminate the CSA. On that basis A terminates the COA.
Does T have an action against B where B will not buy any coal (and therefore be significantly below the annual minimum quantity for what would have been the remaining seven years)? Can T claim the missing quantities for the seven years and if so, can it claim now or does it have to wait?
Refer again to sections 1 and 2 of the Contracts (Rights of Third Parties) Act 1999 and in particular section 2.
This is an undecided point of law, so you cannot be wrong as such. Please set out all possible outcomes for a judge and what “may not” in section 2 could mean in practice. As there is no right answer, marks will be awarded for analysis of the problem and a discussion of the various permutations, with a conclusion as to what you think the most probable outcome is (max. 2000 words).