Construction Contracts and Tort: A Legal Analysis

In March construction company Carlsen plc (“Carlsen”) began a development in the town of Chumley-on-Waver of twelve large private houses on an exclusive gated estate. They employed a famous architect, Xavier Xing, to design the houses. Xavier was keen to ensure that it did not become public knowledge that he was the designer,as he wished to be known only for his large public buildings. It was a term of Xavier’s contract with Carlsen that they were not to advertise the houses as having been designed by him without seeking his prior written approval.

At the beginning of April, Carlsen entered into separate contracts to sell houses to three customers: Liam McKee, Nuala Oberhauser, and Pamela Quirke.Nuala Oberhauser commissioned her house to have a mixed martial arts training gym.At Nuala’s insistence Carlsen agreed to have her house ready by the end of April.During negotiations Nuala had explained to Carlsen that she was planning to relocate her mixed martial arts training business, which she operates as a sole trader under the name “Chumley-on-Waver Cage Demons”, to the house. Nuala said that she would be terminating the lease on her current premises at the end of April, and did not want any interruption to her business.

Pamela Quirke, a famous interior designer, also commissioned her house for the end of April. During negotiations she told Carlsen it was essential that her house be ready by then, as she had made detailed arrangements to shoot a new TV show at the house from the beginning of May. Pamela explained how she planned that members of the public would enter a competition to join her at her house where she would give them instruction and guidance on making rooms look beautiful, with recordings of these encounters then being be broadcast as a series called “Quirke for a Living”. After she concluded her negotiations with Carlsen, Pamela paid another company to set up a competition phone line, and paid for a TV crew to be available from 1 May.

Liam “the cheetah” McKee is a famous basketball professional. At a cost of £7,650 he commissioned from Carlsen a full-size basketball court, to be laid out at his house as a mosaic depicting his mother. He said that being reminded of her support would help him to concentrate when doing his five hours a day of training on the court.Carlsen have now been advertising the houses as “Carlsen Houses, designed by Xavier Xing”, as a result of which other buyers have been prepared to pay Carlsen an extra £90,000 per house for the prestige of owning such distinguished properties. Xavier consulted his solicitors about obtaining an injunction against Carlsen, but the houses have all now been sold. Whilst the houses have been so well received by the public that Xavier’s reputation has actually been enhanced, Xavier still wants compensation.

Construction Contracts and Breach of Contract

In the middle of April, Nuala was concerned that Carlsen were behind schedule. She informed Carlsen that one of her world title fighters was threatening to leave the gym if it closed in April, and that if the fighter did leave, Chumley-on-Waver Cage Demons (and therefore Nuala) would lose a one-off £125,000 sponsorship deal.
 
Nuala’s house was not completed until the end of May. Nuala has had to close Chumley-on-Waver Fighters for a month, and wants compensation of £20,000 for the loss of profits she makes each month from running it. Nuala’s world title fighter did indeed leave the gym, and this has cost Chumley-on-Waver Fighters (and therefore Nuala) the £125,000 sponsorship deal. Nuala wants compensation for this as well.Pamela Quirke’s house was not completed until the end of May either, as a result of which Pamela has had to cancel the shooting of “Quirke for a Living”. Pamela is convinced the show would have made about £900,000 of profit in competition entry fees and sales to TV channels. She is looking to recover £900,000 in compensation,plus the money she has spent on preparations.

“The use of exemption clauses in bus iness-to-business contracts has the potential to produce a substantively unfair result. For this reason, the courts and Parliament have intervened in order to ensure that such clauses are reasonable. Judicial techniques have relied on the analysis of “incorporation” and “construction” of c ontractual clauses, but the need for these approaches has effectively been remo ved by the introduction of an explicit test of reasonableness in the Unfair Contract Terms Act 1977.”Explain and critically evaluate the above statement with reference to principles and decided cases on the analysis of contractual clauses, and to the detailed operation of statute.

Vikki recently held a pool party. She bought a new gas-powered barbecue and a new set of sun loungers from her local DIY retailer, Pitchblende Limited (“Pitchblende”). She also wanted to provide shelter for her guests in case of rain, but she did not want to buy an expensive item like a beach hut that she would not use very often. Instead, she hired a large open-sided linen canopy from Yarwood Limited (“Yarwood”), a party supplies specialist.

On the day of the party, Vikki used the barbecue for the first time. Carefully following the instructions, Vikki lit the barbecue and left it to heat up. Unfortunately, the barbecue then overheated and caught fire. As a result of the fire, the barbecue itself was burnt out and completely destroyed.Vikki suffered burns to her arms as she attempted to put out the fire. She required  medical treatment and was off work for a month, which lost her a substantial amount of net wages.

“When faced with potential novel duty sit uations the courts have only ever found a duty of care to exist where, and to the extent, it has been appropriate to do so. In particular, the th ree parts that comprise the Caparo ‘test’ for determining the existence of a duty of care in a novel situation have always been applied and interpreted by the courts in a consistent manner that has appropriately balanced the court’s various considerations.”

Critically evaluate the above statement with reference to decided cases in the law of tort. You should explain fully what the Caparo ‘test’ is, how the parts of which it is comprised have been applied by the courts and why, and your reasoned views on the resulting legal position.