Vinci v Beumer (2017)
Neutral citation: Imperial Chemical Industries v Merit Merrell Technology Ltd [2018] EWHC 1577 (TCC)
NEC contract topics: Certainty in contract terms under NEC3 Engineering and Construction Subcontract
Form of contract: NEC3 Engineering and Construction Subcontract, Option A
Main areas of law: Interpretation of contract terms, Enforceability of liquidated damages clauses, application of settlement agreements within ongoing contractual relationships
Background and the Dispute
In 2011 or 2012, Vinci Construction entered into a main contract with Gatwick Airport for development works at the South Terminal, including a new baggage handling system. On 8 November 2012, Vinci subcontracted Beumer Group to undertake the design, supply, and commissioning of the baggage system under an NEC3 Engineering and Construction Subcontract (ECS), Main Option A, with various secondary Options, including X5 and X7, and bespoke amendments.
The subcontract divided the works into defined sections, including Section 5 for “Baggage” with a completion date of 12 May 2015, and Section 6 for “Remaining Works” with a completion date of 27 May 2015. Liquidated damages were assigned per section.
Delays occurred, and by a Settlement Agreement dated 30 October 2014, the parties revised key dates, including extending Section 5 to 17 November 2015 and Section 6 to 14 December 2015.
A dispute arose concerning the allocation of specific work elements between Sections 5 and 6, as well as the enforceability of the corresponding liquidated damages provisions. The issue was first referred to adjudication, where the adjudicator found the provisions uncertain and unenforceable. Vinci subsequently issued Part 8 proceedings in the Technology and Construction Court.
Legal Issues
The central legal question was whether the sectional completion and delay damages provisions of the subcontract, as amended by the Settlement Agreement, were sufficiently certain to be enforceable. Vinci submitted that, properly construed, the subcontract identified the scope of Sections 5 and 6 with sufficient certainty. Beumer argued that it was unclear how the works were divided between those sections, especially in relation to the disconnection of redundant baggage equipment, rendering the delay damages provisions inoperable due to uncertainty. The court was required to determine the proper construction of the subcontract and the Settlement Agreement, and to decide whether the adjudicator's decision should stand.
Judgment
Mrs Justice O’Farrell concluded that the works within Sections 5 and 6 were “sufficiently identifiable and certain so that the sectional completion and delay damages provisions are operable and enforceable.” She reiterated the principles from Arnold v Britton (2015) and Wood v Capita (2017), noting that the meaning of contractual terms must be considered in their documentary, factual, and commercial context. The court must strive to interpret provisions to give them business efficacy and avoid finding them void for uncertainty.
The court found that Section 5 included works necessary to make the baggage system operational, including new installations within the new pier building, works within the existing building, and works connected to the Airport Operational Readiness (AOR) trials. Section 6 included post-operational activities, notably the disconnection of redundant baggage equipment and temporary carousels.
Mrs Justice O’Farrell rejected the adjudicator’s finding that uncertainty in the subcontract documentation rendered the delay damages provisions inoperable. She accepted that some disputes about the allocation of specific tasks may arise but found that these were evidential rather than conceptual and did not defeat the operability of the contractual provisions.
The court granted declaratory relief in Vinci’s favour, thereby reversing the adjudicator’s decision.
NEC contract learning points and implications for the construction industry
This case offers critical learning points for those using NEC3 contracts and other forms of construction contract. The court’s analysis reinforces the judiciary’s consistent reluctance to find contractual provisions void for uncertainty where there is any rational basis on which to give effect to the parties’ intentions. While the definitions of “Baggage” and “Remaining Works” were not provided within the subcontract documents, the court was satisfied that sufficient information existed within the works descriptions and agreed timelines to make sense of the allocation between Sections 5 and 6.
The decision also highlights the importance of aligning completion dates, sectional handover sequences, and liquidated damages provisions with clearly documented scopes of work. Even where contract drawings or specifications are incomplete or vague, other project documentation, such as the Works Information, may provide the necessary context.
Furthermore, it confirms that disagreement about the meaning of a contract does not itself render it uncertain. Disputes over the necessity of individual tasks to achieve sectional completion can be resolved by factual or expert evidence and do not defeat the enforceability of otherwise coherent provisions.
This ruling also emphasises that clear contractual drafting is essential when using sectional completion mechanisms in NEC contracts. The court will examine the commercial context, the behaviour of the parties, and surrounding project documents to give practical effect to agreed terms.