19 July 2016 in an appeal from the Supreme Court of Mauritius.
• The project was a thirteen-storey office building in the capital city, Port Louis.
• The main argument between the parties was whether the contracting method chosen was properly regarded as lump sum or measurement. One of the difficulties was created by the choice of an outdated English form of contract (JCT 80) of which, as the court noted, "developers and contractors in Mauritius have little experience".
• A final account dispute under the contract was referred to arbitration. The arbitrator decided that it was a measure and value contract, or alternatively that if it had been agreed as a lump sum contract it had been varied by the parties so that payment was due on a measurement and value basis.
• The Privy Council found that the terms of the contract, as amended, indicated that a lump sum payment was intended. However, they observed that there is some scope for flexibility in the valuation of additional or substituted work, even in a lump sum contract. Here the lump sum nature of the contract had been maintained by preserving the preliminaries unchanged, but the use of measurement and valuation to ascertain the sums payable for additional work need not be inconsistent with a lump sum contract. The challenge to the arbitrator's decision failed.
Conclusion
It is ironic that a contracting model intended to achieve certainty of financial outturn can itself give rise to doubts as to its identity. This need not be so if appropriate arrangements are made for the contract form, whether FIDIC's Yellow or Silver Books or bespoke alternatives. Problems occur, as the recent examples show, with bad choices and inadequate adaptations. It should not take the decision of an arbitrator or a judge to confirm the nature of the pricing model which the parties agreed.
Julian Bailey - Partner
Julian practises in the International Arbitration and Construction and Engineering Groups. He advises on contentious international construction and infrastructure projects across a variety of industries, including transport, energy, petrochemical, process plant and construction.
Julian is actively involved in construction law issues and was Chairman of the Society of Construction Law (UK). He is also the author of one of the leading books on construction law.
Michael Turrini - Partner
Michael specialises in all aspects of construction and engineering projects, from procurement and the drafting and negotiation of contracts through to dispute resolution. He has particular knowledge and experience of projects in the Middle East.
In dispute resolution, Michael advises on international arbitrations under all forums and rules, litigation, dispute board proceedings and alternative dispute resolution.