Mowlem PLC v Newton Street Ltd [2003]

Mowlem PLC v Newton Street Ltd [2003]

This case illustrates the difficulties which can befall a contractor who enters into a guaranteed maximum price contract. The work involved the conversion of a post office building built of reinforced concrete in 1910 in Manchester, into 104 residential apartments with an underground car park and commercial units on ground floor level.

The contract executed between the parties was an amended standard JCT form of contract.  Article 10 of the contract expressly stated that the parties agreed that the contract sum was a guaranteed maximum price and that the contractor acknowledged he had taken responsibility for all risks and responsibilities. Under a heading of contractor’s risk the contractor also became responsible for any incorrect or insufficient information given to him by any person whether or not in the employment of the employer. This represented a high level of risk in view of the fact that the work   involved the conversion of a building which was almost 100 years old.

Difficulties arose as a result of the issue by the employer’s agent of an instruction for the contractor to carry out concrete repairs to the existing structure. It was argued on behalf of Mowlem that as there was no specific reference in the Employer’s Requirements or the Contractor’s Proposals to the concrete repairs they were entitled to be paid for the work over and above the contract price. The lawyers who representedNewton Streetwere of the opinion that Article 10, which placed all risks onto Mowlem, deprived them of any right to additional payment. It was the view of the judge, in finding against Mowlem, that within the scheme of the guaranteed maximum price there was nothing to displace the ordinary and unambiguous meaning of Article 10 that the risk of unforeseen defects in the existing building was the contractor’s.