Article Loss Prevention

Duress or Commercial Reality?

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By Zita Mansi, BLM Solicitors

An AGS member queried whether he has any redress in circumstances where he is obliged to sign a contract with onerous terms in order to receive payment for work he has already carried out.  The onerous terms might include, for example, provision of a Limit of Indemnity of £5million where the fee is only £5,000, the risk of which had not been priced into the fee agreed for the work, or long payment periods of 60 or 90 days.

In such a situation, the member must choose between agreeing to the onerous terms or suing the client for its unpaid fees (which is often a commercially unattractive option).  The member queried whether this qualified as “duress”.

The necessary ingredients for a successful economic duress claim are:

  1. Pressure which is illegitimate;
  2. This pressure is a significant cause inducing the “victim” to enter into the contract; and
  3. The practical effect of the pressure is that there is compulsion on or a lack of practical choice for, the victim.

If the above ingredients are established then the victim of the duress is entitled to accept the term and later pursue a claim for undue influence in order render the contract void.

The courts have held, that “illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.”  Cases where pressure has been considered “illegitimate” are those where the perpetrator has committed a crime, a tort or a breach of contract.

Establishing that the victim had no realistic practical alternative but to submit to the pressure is also a high hurdle to overcome. In the scenario described above, the AGS member could (a) refuse to commence work until satisfactory terms are agreed or (b) carry out the work and then sue the client for payment if reasonable terms cannot be agreed.  Although these options are commercially undesirable, they are practical options nevertheless

Ideally, no AGS member would carry out any significant work unless and until satisfactory contract terms had been agreed in writing.  However, there are many reasons why this may not happen in practice.  For example, the works may be required urgently so that only the most basic terms, such as the scope of works, price and timescale, are discussed verbally beforehand.  AGS members would do well to have a set of their own standard terms and conditions that can be quickly adapted and sent to their clients before commencing work, for use in such situations.

Members can also refer their clients to the AGS Client Guide on Limitation of Liability Clauses, and Professional Indemnity Insurance which may assist their negotiations.

Article Business Practice Data Management Executive Loss Prevention

Sign off Responsibility

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It is common for Clients to request that their consultant obtains “sign off” of proposals for site investigation, risk assessment and in particular remediation verification reports.  In the Client’s mind, this means a letter from the regulator on their headed paper absolving the Client from any responsibility for additional investigations etc or from any further “interference” on their site subsequent to remediation works.

Often the consultant can be caught between a rock and a hard place as the regulator may often refrain from commenting upon such reports, let alone “signing them off”.  So what is reasonable for the Client to expect, the Regulator to agree and the consultant to deliver? In addressing this aspect in recent guidance (Ref 1), text was drafted, reviewed and eventually agreed by both Environment Agency and local authority representatives and is reproduced below.

Normally, on receipt of a Verification Report, the local planning authority will take advice from their environmental health / contaminated land officers (and the Environment Agency in some circumstances) and if satisfied, formally discharge the relevant planning condition by writing to the applicant.  If there is no such planning condition, the local authority or Environment Agency should nevertheless acknowledge receipt of the Verification Report. While liability remains with the developer / their insurers, they will often look to obtain ‘sign off’ of these reports by the relevant regulator(s). Regulators will not do this however, or issue their own verification of the works, but they may be willing to do one or more of the following:

  • indicate whether they have reviewed the report;
  • state whether they are satisfied with the level of detail provided;
  • confirm that it appears to be reasonable given the data presented;
  • make a statement about whether (based on the information supplied) they are currently considering the need for any enforcement action under various regulatory regimes.

It is important to understand that it remains the developer’s responsibility to ensure that they have met the remediation objectives, made the site suitable for use and adequately protected all of the relevant receptors.

It is therefore important when a consultant is agreeing a scope of works with a Client that any requirement for “sign off” in the contract is clearly framed along these lines.  Consultants should not promise to obtain a commitment from the Environment Agency and/ or the local authority contaminated land officer that are beyond these limitations.  Equally, it is in the interests of all parties that the positive engagement with the regulator on a project is recognised by written acceptance of a report by the regulator, along the lines set out above.

For those involved in the Remediation of a site that has been “determined” as contaminated land under Part IIA  of the Environmental Protection Act the expectations of sign off, should be even more constrained.  This is because in these cases the Statutory Guidance states that any person who has carried out remediation as described in a Remediation Statement can notify the local authority (ie by submitting a Verification Report) providing the details of the “remediation claimed to have been carried out”.  The local authority is then under a duty to include the details of the remediation which is claimed to have been carried out on its Register. The guidance then states that “Although Part 2A does not include any formal “signing off” procedure, the Enforcing Authority may wish to consider writing to the Appropriate Person, confirming the position with respect to further enforcement action.” – – – and that the local authority “might confirm that it does not consider that it needs to serve a Remediation Notice, which it would need to do if appropriate remediation had not been carried out”.

Ref 1.  Guidance for the safe development of housing on land affected by contamination.  R&D 66:2008. Available for free download