Must compliance requirements in a contract be expressly set out to have contractual effect?

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Carbon Smart Limited v Prevista Limited [2015] EWCA Civ 668

Facts

The dispute concerns a claim by Carbon Smart against Prevista for unpaid monies for work done by Carbon Smart on an environmental training project.  Prevista was responsible for the delivery of environmental training to small and medium sized enterprises, under a project operated by Croydon City Council.  Prevista was running behind on the project, so it subcontracted some work to Carbon Smart to try and improve performance.  Carbon Smart would be responsible for conducting site audits and providing training workshops.

The contract incorporated a Service Level Agreement, which included a number of ‘evidence requirements’ with which Carbon Smart had to comply.  During negotiation, there were various emails, meetings and phone calls between the parties in which various requirements were discussed.  One email stated that “workshop contents will have to be provided (ie presentation slides etc)” (sic).

Ultimately, Carbon Smart did not provide any presentation slides (although it provided a great deal of other supporting information).  Prevista refused to pay on the basis that Carbon Smart had not provided requisite evidence of the work done.  Carbon Smart commenced a claim.  At first instance, the claim failed as the judge considered that the contract required Carbon Smart to provide evidence of the actual content of the workshops, which it had not done.  Carbon Smart appealed.

Held

The Court of Appeal (CA) allowed the appeal.

The CA decided that the parties had intended their relationship to be governed by the Service Level Agreement.  However, the matters mentioned in the negotiations between the parties, which included the email referring to presentation slides (mentioned above) were not incorporated as part of the Service Level Agreement and therefore not part of the contract.

Comment

This case is a reminder of the importance of clear and unambiguous drafting.  If a party to a contract wants the other party to comply with a requirement by providing evidence, then those evidential requirements must be set out explicitly.  Otherwise, it runs the risk of being lost in what the court described as the merely incidental ‘back and forth’ between the parties in the run up negotiations to conclude a contract.

More generally, this case highlights the need to pay particular attention to the practical aspects of an agreement.  Often, the negotiation of the legal terms of a contract takes precedence over the technical information and requirements that are to be set out in the Schedules.  In actual fact, these are often the most important parts because they govern what the parties are actually going to do.

The ultimate lesson here is if there is something that you want a party to do, make sure it is expressly set out in the contract.

For more information, help or advice please contact Rob Langley on 0191 211 7975 or [email protected].