Supreme Court of UKSUPREME COURT OF UK ON WARRANTY UNDER CONTRACT

                                                                        Contract intelligence

The Supreme Court of UK has laid down a ratio that the Technical requirements have to be read together with the body of the Contract and not in isolation even if it is not forming the part of the body of the contract.

                                             SUPREME COURT OF UK

MT Højgaard A/S (Respondent) v E.ON Climate & Renewables UK Robin Rigg East Limited and another (Appellants)- [2017] UKSC 59

FACTS

E.ON had entered into a contract with MT Hojgaard A/S for installation of offshore wind turbines. The Technical requirements of the contract stipulated that the foundation of the turbines should have a warranty of 20 years whereas nothing of such sort was mentioned in the main body of the contract. The offshore wind turbines failed which led to a dispute between the two parties.

ISSUE

 Whether the detailed wordings of a technical schedule of a contract take precedence over the main body?

COURT OF APPEAL DECISION

 MT Hojgaard had contended that it had constructed the foundations in accordance with the relevant international technical standard, known as J101 but this standard (which had been developed by a third party) turned out to be flawed.

It further submitted that it can only be made liable for any negligence in the implementation of J101 and this was not a case here.

The Court of Appeal, agreed with MT Hojgaard, held that the wording of the technical requirements was “too slender a thread upon which to hang a finding that [MT Hojgaard] gave a warranty of 20 years life for the foundations.”

SUPREME COURT OF UK DECISION

The Supreme Court of UK overturned the decision of the Court of Appeal and held that the provisions of the Technical requirements would be binding on the parties.

The Supreme Court of UK rejected the argument of MT Hojgaard that

if the parties had intended a warranty or term such as is contended for by E.ON, it would not have been “tucked away” in para 3.2.2.2 of the TR, but would, for instance, have been a Key Functional Requirement in Section 1.6 of the TR. Section 1.6 is concerned with general provisions about the two proposed wind farms, and there is no reference in it to any specific component, in particular the foundations

and went on to decide that the Technical requirements document clearly had a binding effect on the parties and it cannot deny the warranty to the E.ON merely because it was not mentioned in the main body of the Contract.