Costain Limited (Claimant) v Tarmac Holdings Limited (Defendant) case law

Background

Costain company, the complaint selected Tarmac company, the defendant for the supply of

the concretes for the building of the safe barricade on a stretch of the M1 highway in the East

Midlands along the junction 21 to 31 (Construction Disputes, 2004). The appointment was

conjoined through a sub-contract, which encompassed the NEC3 Supply Short Contract terms

and conditions (Lloyd, 2008). The frameworks of the agreement, NEC3 came into existence

as a result of integration of two frameworks of sub-agreements (Lloyd, 2008); from which the

case emanated. One of the sub-agreements, was validated by the Secretary of State for

Transport (SST), for the transportation infrastructure projects (Clagett,1996). Consequently,

in the year 2013 via novation Costain company joint this. On the other hand, SST validated

the frameworks on behalf of Highway Agency in the year 2012, whose objective was for the

supply of concrete: The Tarmac company became a party of this. When the SST subjected

the Costain for the M1 project, the company further appointed the Tarmac company under the

sub-contract for the concrete tender (Chan et al. 2003).

The sub-agreements structure had incorporated the NEC3 Frameworks Agreements (2005)

and NEC3 Supply Agreement terms and conditions and are both amended in the by “Z”

clause conjoined with other documents (Lloyd, 2008). Close Z21, The Appointment of an

adjudicator, the Frameworks Agreement outline the right of the party to refer a disagreement

to a third party that is the adjudicator (Chan et al. 2003). Contrary, clause 93.3: firstly,

Dispute Resolution of the tendering agreement encapsulated time bound for giving out and

the management of the settlement, which brought a time constrains for the output of the

settlement. The Supply Contract also derived that the verdict that was recommended for
solving the issue, had not been settled via adjudication, rather arbitration. The dispute

emerged as a result of the implementation of the recommendations and the expenditure on the

supplement work used as a consequence of faulty concrete. Costain company responded this

dispute to adjudication, where the Adjudicator adhered to it with the Defendant for they were

a subjects to clause 93.3 of the tendering agreement, the time had expired for the referrals.

Within the clause 93.3, Costain company observed by providing proceedings in the

Technology and construction Court for a fissure of the agreement worth six million pounds.

Under section 9(1) of the Arbitration, the Defendant applied for a sojourn, however Costain

company alluded that it had a trial on the basis that the sub-contract emanated an additional

clause empowering adjudication, regardless of the time limits (Lloyd, 2008).

The NEC principles clause 10.1, necessitates that the parties will conduct the activities in this

pact and in a spirit of mutual and cooperation (Chan et al. 2003; Lloyd, 2008). Arguably,

which is tries the overriding of the good faith commitment into the agreement. The ambiguity

is enrolled in asking how the commitment to conduct in a spirit of mutual trust and

cooperation is applied in conjunction with the commitment to conduct as speculated in the

contract and what are the chances for the amendments in the future (Chan et al. 2003).

Therefore, the clause that aimed at mitigation of the inherent adversarial procedures often

found in the construction industry may be grounds for claimants. Consequently, needs

judicial clarification on the extent of the clause (Cheung, 2002).

The dispute resolution mechanisms are often not utilised in a sole manner, rather they are to

be conjoined and moulded as to confer with the requirements of a contract (Resolution,2013;

Cheung, 2002). At least, there should be a combination of requirements to attempt to settle

disputes via negotiation with dispute settlement via a third parties (Pena-Mora et al. 2003;

Edwin, 2005). Hence, dispute settlement clause should outline the procedure to follow. This
allows flexibility in the settlement of the disputes that the parties may encounter, the clause

can stipulate prior the resorting scheme before the arbitration (Cheung, 2002).

The decision of the court was under four main issues (Resolution,2013); the negotiation

agreement was valid and with a meaning to both parties in section 9(1) of 1996 Act. The

agreement under section 9(1) of 1996 Act, outlined the appropriate mechanism for the dispute

resolution in accordance to the claim. The arbitration agreement contained no defective

pursuant to section 9(4) of the Act of 1996. The coalition agreement was of no destruction

aims with accordance to section 9(1) of 1996 Act. It was necessary, for the contract contained

a default, though the subcontract advocated for immediate commence and later on there was a

realisation of the default. If both parties did not adhere to the terms, the contact called for an

immediate termination with settlement on both parties, but the defendant had defiled the

ethics of codes of supply. The approach of Technology and Construction Court, impeccably

settled the claim without any discrimination (Al-Sabah et al, 2002).

In the industry of construction has an array of alternative dispute resolution mechanisms that

are applicable in the creation and application of a contract (Pena-Mora et al. 2003).

Negotiation, this is among the most applicable method. The mechanism necessitates for

parties that are directly impacted by the dispute to seek settlement, via direct delegation

(Sourdin, 2008; Burton et al, 1990). This mechanism is the most effective, especially in the

constructing contracts. The other method is coming up with the dispute review board, the

method consists of one or more experts who periodically visit the site. The visits aid in the

identification of the potential wrangle sources (Fenn et al, 1997). The parties can authenticate

the board to even conduct informal on identifying arise of the disputes and subjects to

recommended that is not obligatory for the parties but may be used as grounds for further

negotiation. This method usually is applied for the renewal of the terms and condition of a

contract (Sourdin, 2008). Mediation mechanism, is a setting that a neutral person, mediator,
sees through communication amongst parties that are in dispute to enhance reconciliation.

Usually this method is applied when the contract is at the verge of termination (Sourdin,

2008).

The first step outlines the preventive measures., is to entirely conceptualise the contract and

attempt to layout the sources of the issues(Resolution,2013). As to succeed in preventing

disputes in a construction agreements and projects, it is important to comprehend the parties

of the project (Cheung, 2002). With such a stand, it is practical to integrate an unprejudiced

third party. Additionally, the productivity of building project and deterrence of dispute

entirely depend on how properly was the assessment of risk is conducted and countered.

Improper conduct of risk assessment may lead to immense changes and re-do of the work,

hence additional budget and delays. Amendments lead to sub-contractor’s claims. Whereas, a

well detailed contract lead satisfaction of the desire of the affiliation.

Conclusion

Costain v Tarmac case validate the significance of drafting dispute settlement clauses in clear

and mutual manners as to assure that the affiliation intentions are accurately understood. This

furthers, to confirming and elaboration of the settlement clauses and other details in depth,

especially where there is application of multiple methodology is use. On this claim the court

took the perspective that the language and the objective were of significance as commercial

mutual sense, when there was the questioning of contract building. More so, the mutual

adherence should not have been applied retrospectively. The aim of the frameworks was to

offer various benefits; provided comprehensive system that took emphasis in prevention of

wrangle settlement. Additionally, it encouraged settlement closer to the issue, involving the

parties in a proactive manner along with the third party. The preventive measures are

sustainable and achievable.

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