Are net contribution clauses fair and reasonable?

West -v- Ian Finlay Associates (2014) Construction Industry Law Letter Court of Appeal

Facts

We have previously reported this case.  Mr & Mrs West had a house in Putney and they hired Ian Finlay Associates (IFA) as architects to redesign the property and administer the building contracts.  The architect's terms of engagement included a net contribution clause limiting IFA's liability for any loss or damage to the amount that it was reasonable for them to pay in relation to the responsibilities of other consultants and contractors appointed by Mr & Mrs West.  The High Court ruled that this net contribution clause was an Unfair Term in a Consumer Contract and therefore not applicable.

The Court of Appeal held

1. There had been equality of bargaining power between the Mr & Mrs West and their architect, and there was no ambiguity in the wording of the proposed clause.
2. There is nothing inherently unfair in a net contribution clause.

Commentary

Many professionals would argue that the net contribution clause is in fact completely fair in principle.  It obliges the claimant to pursue each of his contracting parties (builder, architect, engineer, etc) for a fair share of any problem rather than just giving each the risk of being dumped with 100%.  Certainly these clauses can be very effective to protect professionals and limit their exposure.

Damages for inconvenience, distress and discomfort – the court observed that there is a well established maximum figure for damages under this head of £2,000 per person per year, and reduced the amount that had been ordered against IFA in favour of Mr & Mrs West accordingly.

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