Neutral citation: Caledonia Water Alliance v Electrosteel Castings (UK) Limited [2024] CSOH 87.

NEC contract topics: Frameworks and call offs.

Form of contract: NEC3 Option C: Target Contract (April 2013).

Main areas of law: contract formation and interpretation, law governing contract disputes, jurisdictional authority.

 

Caledonia Water Alliance (CWA), a joint venture between Morrison Water Services Limited and Aecom Limited, entered into an Alliance Agreement with Scottish Water in 2015. The Alliance Agreement, based on the NEC3 Option C: Target Contract (April 2013), provided a mechanism for Scottish Water to engage CWA through project orders.

The Alliance Agreement required CWA, subject to certain conditions, to procure goods and services from suppliers holding contracts with Scottish Water under a framework arrangement. Electrosteel Castings (UK) Limited became a framework supplier in 2016 under an NEC3 Framework Agreement for the provision of ductile iron pipes and related items.

As part of the South Edinburgh Resilience Scheme (SERS), CWA placed 60 orders with Electrosteel between June 2018 and May 2022. Each transaction followed a sequence involving a purchase order from CWA and an order confirmation from Electrosteel. A dispute arose regarding whether the contractual relationship was governed by Scottish Water’s Standard Terms (contained in the Framework Agreement) or Electrosteel’s own standard terms and conditions, which included a clause assigning jurisdiction to the English courts. The matter before the Court of Session was limited to determining jurisdiction.

 

The main legal issue was whether the 60 individual contracts were governed by Scottish Water’s Standard Terms, which assigned jurisdiction to the Scottish courts, or by Electrosteel’s terms, which assigned jurisdiction to the English courts. Each party had included its own terms by standard reference in their respective documents: CWA in its purchase orders and Electrosteel in its order confirmations. The court had to determine which, if any, set of terms had been validly incorporated.

Both parties accepted that the issue must be resolved by objective assessment of communications and conduct. The defender argued that the traditional approach should apply, where the “last shot” typically governs. The pursuer argued that, viewed in full context, the parties had mutually intended the Scottish Water framework to apply.

 

Lord Richardson concluded that all 60 contracts were subject to Scottish Water’s Standard Terms. The judgment was based on the conclusion that both parties knew they were operating within the context of Scottish Water’s framework arrangement, and that this included the application of its standard terms. Key findings included that both sides participated in framework meetings, had access to the Supplier Guide which confirmed there were no deviations from the standard terms, and used pricing from the framework. The judge noted:

 

“It was clear to both parties at the outset of their relationship that the supplies to be made... were to be made in the context of Scottish Water’s framework.”

 

Although both parties' documents contained boilerplate references to their own terms, the judge found these inclusions were a product of automated systems and not an intention to override the framework stating:

 

“I consider that a reasonable business person... would have understood that the parties’ relationship was governed by Scottish Water’s framework arrangements.”

 

On that basis, the court held that Scottish Water’s Standard Terms applied, and it had jurisdiction to hear the case.

 

This decision emphasises the importance of recognising when overarching framework terms prevail over conflicting boilerplate language in standard forms. The judgment illustrates that the mere exchange of order documents containing competing terms does not displace pre-agreed contractual structures especially where parties conduct themselves in accordance with those structures.

For the construction industry, this reinforces that practitioners should ensure that project-specific contracts and orders do not conflict with overarching NEC frameworks. The decision underscores that where a framework agreement governs procurement, automated references to bespoke standard terms, unless expressly agreed upon, are unlikely to succeed in displacing those agreed terms.