Cases - Mitsui Babcock Energy Ltd v John Brown Engineering Ltd

Record details

Name

Mitsui Babcock Energy Ltd v John Brown Engineering Ltd

Date

(1996)

Citation

QBD 51 CON LR

Keywords

Contract amendment - performance guarantee - performance tests - construction of contract - formation of contract - void for uncertainty

Summary

John Brown Engineering employed Mitsui Babcock Energy to install two generators in a power station. It was agreed that the generators would be performance-tested to see whether they met their performance guarantees, but at the time of entering into the contract the parties were unable to agree on the nature of the tests, in particular the tolerances. The clause headed 'Performance tests' was struck out and a marginal note added 'To be discussed and agreed'. There was a dispute over the performance of the generators and Mitsui Babcock Energy argued that because no performance tests had been agreed, the contract was unworkable and void for uncertainty.

The court held that there was a binding contract and, in reaching its decision, was influenced by the fact that Mitsui Babcock Energy had acted on the contractual terms and in particular had been paid under the contract prior to the dispute arising. Failure to agree on the tests did not, therefore, render the contract as a whole unworkable or void for uncertainty.

The point is that, because of the failure to complete the contract properly, the parties wasted a great deal of time and effort on resolving the issue including legal fees. The case also illustrates the rule that, where possible, the court will try to find a contract where that would be consistent with the parties' presumed expectations. (See Trentham (G Percy Ltd) v Archital Luxfer Ltd (1993) Lloyds' Report 25 for the application of the rule to a case involving a letter of intent.)