Construction contract

May 19th, 2017

Sutton Housing Partnership Limited (“SHP”) manage the housing stock of Sutton Council.   In SHP v Rydon Maintenance Limited (2017) EWCA Civ 359 SHP sued as employer under a construction contract.  The Defendant is a contractor which specialises in the repair and maintenance of housing.  SHP engaged Rydon to carry out maintenance and repairs to the housing stock which the Council owns.  The contract was based on the National Housing Federation’s standard form contract, 2011.  The contract conditions were expressed by reference to “Key Performance Indicators” (“KPIs”) and “Minimum Acceptable Performances” (“MAPs”), as measured by a KPI, as set out in the KPI Framework.  The KPI Framework was a contractual document.

The issue in the case was whether the MAP levels were contractual, expressly or impliedly. The Court of Appeal has held that the MAPs were contractual.  Both parties must have intended the contract to specify MAPs, applying the approach to commercial contracts mandated by the Supreme Court in Rainy Sky v Kookmin Bank (2011) 1 WLR 2900, (2011) UKSC 50 and Arnold v Britton (2015) UKSC 36, (2015) AC 1619.  That was the only rational interpretation of the “curious contractual provisions”.  The Council’s manager retained a valuable power to terminate for poor service.

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