Waiver and Estoppel: Working with contractors to resolve issues - case comment

BT Cornwall Limited underperforms

Cornwall Council (the "Council") is severely let down by the service provided by BT Cornwall Limited ("BTC"). This was the verdict following the case of BT Cornwall Limited v Cornwall Council [2015] EWHC 3755.

Case Summary

The Council entered into a contract with BTC for the provision of services. The contract was valued at £160 million and the scope of the agreement was far reaching. It included not only telecommunications services but also health, transport and public safety.

Whilst the intricacies of this case are not discussed here the crux of the matter was that BTC failed to meet Key Performance Indicators ("KPIs"). Consequently, the Council (after working together with BTC) notified BTC that it was in breach of contract for failing to meet the agreed KPIs and intended to terminate the agreement for "material breach".

BTC sought an injunction to prevent the Council from terminating the agreement.

During the contract an Executive Forum was set up to monitor performance following the breach of KPIs. It was agreed at the Executive Forum that the backlog of work would be performed. The contract contained detailed provisions for varying the contract and had express terms allowing the Council to waiver KPIs resulting from service failures if the Council was satisfied that a remedial plan was in place. BTC argued that this agreement implied that the KPI failures would not be taken into account.

Performance Management: Take legal advice early on but don''t be put off from engaging with contractors to resolve failures!

The court found that BTC was merely honouring its existing contractual obligations by clearing the backlog and more importantly the Council should not be penalised for trying to work collaboratively with BTC when KPIs were not met.

Local authorities need to be careful to ensure that their actions do not signal or imply a waiver of KPIs or breach of contract, however the court looked favourably on the actions of  the Council in seeking to work in collaboration with BTC to rectify the many problems.

Terminate or try to resolve contractual failings? 

The case highlights the dilemma facing many local authorities; do you terminate the contract or try to resolve contractual failings. This case has shown that local authorities should not be put off from engaging with contractors early on to try put things right and if this is done correctly will not affect their right to later terminate the contract if performance isn''t improved. However local authorities must make sure that their actions do not constitute a waiver of any of the contractual obligations of the other party.

This article was written by Lucy Woods.

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