BENNETT (CONSTRUCTION) LTD v CIMC MBS LTD (FORMERLY VERBUS SYSTEMS LTD)

[2019] EWCA Civ 1515, Court of Appeal, Civil Division, Coulson and Longmore LJJ and Snowden J, 30 August 2019

Contract – Whether “sign-off” of a particular stage complies with section 110 of the Housing Grants, Construction and Regeneration Act 1996 – Role of Scheme for Construction Contracts in the event that the contract term is not compliant with section 110

Section 110 of the Housing Grants, Construction and Regeneration Act 1996 requires every construction contract to contain "an adequate mechanism for determining what payments become due under the contract and when". The contract in the present case made provision for payment at various milestones which made use of the concept of "sign-off", which was not a defined term of the contract. For example, Milestone 2 provided for payment of "30% on sign-off of prototype room by Park Inn/Key". It was argued by the respondent that these provisions did not comply with the requirements of section 110 because the sign-off requirement envisaged an actual signing off of the works and that due payment could be circumvented by a deliberate decision not to sign off, or prevent others from signing off, the prototype or the units. Further, it was submitted that the contract offered no clear criteria for sign-off because it envisaged the involvement of third parties, such as the client, with no status under the contract at all.