Corporate law

The importance of written contracts in commercial transactions

Two business managers talking over a contract

The recent case of BDW Trading Ltd v Integral Geotechnique (Wales) Ltd 2018 is a timely reminder of the importance of comprehensive written contracts in commercial deals. The case concerned a Housing Developer “BDW” (commonly trading as Barratt Homes and/or David Wilson Homes) and its claim against a site investigation consultant “Geotechnique”. Geotechnique prepared a report for use by the seller of a development site, a Borough “Council”, which BDW relied upon when it purchased the site for residential development. BDW claimed that Geotechnique had failed to advise it about the presence of asbestos contamination and contended that its actual loss was circa £2.2m to clean up the site. 

The important detail here is that there was a contract between the Council and Geotechnique to provide the report. Under that contract rights of third parties in relation to the report were specifically excluded but Geotechnique did acknowledge that it may need to assign the benefit of the contract to the eventual potential purchaser. 

BDW took no steps to obtain an assignment of the contract. This meant there was no direct contractual link between BDW and Geotechnique. BDW was left with no choice but to assert that it was owed a duty of care by Geotechnique. The court didn’t agree and BDW was unable to claim for its losses. The Judge did go on to discuss the hypothetical loss BDW could have claimed had it been successful. He rejected that BDW could claim for its actual reasonable costs in decontaminating the site and commented that he would have awarded only circa £700,000 (taking into account BDW’s own contributory negligence) for the loss of chance.

If BDW had assigned the contract, obtained a reliance letter or a contractual warranty, any of which could have been drawn up by Tees Company and Commercial department with a quick turnaround, then BDW would have had a contractual claim against Geotechnique. 

This is a timely reminder to review your business relationships and consider whether the terms in place would be sufficient if you needed to claim at a later date. You can call us at Tees to discuss the best options for your business. 

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