Problem: Damages Claim for Breach of Contract
I am a self-employed architectural technician trading as a sole trader and recently undertook some detailing for a small scale fabricator.
The fabricator has now come back saying that they are claiming against me for over £68,000 due to errors, lost work and being kicked off the job through late issue of drawings etc. No programme was ever agreed, whilst the information was hit and miss from the fabricator. When the claim came through, I requested a breakdown but nothing came.
Drawings were issued to which the fabricator responded they were not as they wanted. I asked for them to clarify what they wanted, only to be told that they will sort the amendments out.
They are even stating that the director of the fabricator lost his house. Can I be liable for him losing his house? He has said that they had to pay liquidated damages. I did not sign up for any liquidated damages so am I liable?
Response: have you got professional indemnity insurance?
First and foremost, have you got professional indemnity insurance? If not, why not! If you do have PI insurance, you will need to inform your broker and underwriter in writing that you have a potential claim against you. However, be aware that under the terms of your policy, there will be a requirement for your insurer to have had immediate notice of a claim otherwise you may find you have no cover.
Regarding the claims, essentially what they emanate from (if my understanding is correct), are errors in the drawings and late delivery. Therefore, it will be down to the fabricator to show that you were negligent in the production of the drawings and you also failed to meet the agreed delivery dates, the result of which caused the losses now being asserted.
I am unaware whether your contract included any written terms and conditions, but in all probability you would have been required to undertake the work using reasonable skill and care (which will also be a term implied into your contract if you have no written terms as to standard), and if you fell below this standard, then you would have breached your contract. That does not mean that the fabricator has a claim against you as he must show that his loss was one which resulted from the breach.
Regarding delivery dates, if the contract is silent, then there will be an implied term for you to have delivered the drawings within a reasonable time and if you can demonstrate this, then the fabricator’s claim will fail (against this head of claim).
Even if you are in breach and the loss can be shown to be a type of one which resulted from the breach, the loss claimed must not be too remote and be in the reasonable contemplation of the parties. For example, if you were unaware of the liquidated damages between the fabricator and his client, then how can you be responsible for such a loss?
Regarding the loss claimed resulting from lost work, the fabricator must prove that he had firstly secured the works but as a direct result of your breach, he subsequently lost the work. In other words, to succeed, the claim cannot be speculative.
Finally, the fabricator will also be under a duty to mitigate his losses. He cannot just sit back and watch his business fold and house taken away and do nothing!
If you do not have PI insurance and because you are a sole trader, I suggest that it will be money well spent to instruct a competent solicitor to give you advice and take this on, but I suspect that you will be able to successfully defend most, if not all of the claim. If you do not have PI, lesson learnt, and you should seriously consider forming a limited company.
© Michael Gerard 2015
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.