UK Supreme Court reverses radical reinterpretation of contract law
The UK Supreme Court has ruled that termination of a contract does not exempt a contractor from liquidated damage payments.
The judgement reverses a 2019 Court of Appeal judgement to the contrary that had been branded in industry circles as a ‘radical re-interpretation of case law’.
The verdict brings to an end a long-running legal dispute between US-based contractor Triple Point Technology and PTT Public Company, over the former’s failure to complete a series of works for the state-owned Thai oil and gas firm.
Having been contracted to provide software and software implementation services, Triple Point Technology quickly encountered difficulties and sought to terminate the contract having only completed part of the project.
In a ruling of January 2019 which, to put it politely, challenged conventional understanding of contract law, the UK’s Court of Appeal held that the US-based company was not liable for damages for its failure to complete agreed works as the contract had been terminated prior to the completion of the works.
This verdict was overturned today, with Triple Point Technology instead ordered to pay $14.5m in damages, with judges restoring the accepted position that businesses are liable for liquidated damages, being those purely in respect of delayed completion) in the event they fail to complete works, up to the point the contract is terminated.
Any other outcome, according to the presiding judges, would have essentially rewarded a business for its own default.
Bill Barton, construction specialist at the law firm Barton Legal, in comments provided to the City A.M. newspaper stated
“Many contractors will have found themselves in a position similar to Triple Point Technology and will have hoped that termination would act as a get out of jail free card”
The ruling by the UK Supreme Court, which is the final court of appeal for civil law cases from each of the UK’s legal jurisdictions, firmly quashes any such hope and restores the status quo that companies retain liability for failure to fulfil their contractual obligations.
A summary of the judgement presented by Lady Arden of Jeswell, a Justice of the UK Supreme Court, can be viewed here.
Neutral citation [2021] UKSC 29.
