Unenforceable Conditions

When writing a contract, you may be tempted to use the kitchen sink approach ie shove in terms that you like… irrespective of whether they:

  • help you do business
  • build trust
  • create clarity
  • manage expectations
  • avoid disputes

One type of term, which surely meets none of these aims for a contract, is a term which is contrary to relevant contract laws.

Illegal or just unenforceable?

A contract term which contradicts a mandatory term implied by statute is at best a waste of words. The relevant statutory term will override it.

The damage is not limited to wasted words.

Anyone who knows the law will consider you untrustworthy, dishonest or disingenuous (at best). Anyone who does not know the law is being deliberately (or recklessly) misled.

For example, many car park signs say ‘the management will not be responsible for any damage caused to your vehicle‘. What they don’t say is that if the damage is caused by their staff negligence or involves death or personal injury, then the law (UCTA 1977) says the management might be responsible.

Here are some recent examples from construction contracts (and as I type them I am tutting loudly):

  • Retention shall be released following our receipt of payment by our client
  • Pursuant to s113 Construction Act 1996, the contractor’s obligation to pay any amount to the Subcontractor is conditional on the Contractor receiving payment under the Contract

These are both ‘pay when paid’ and were outlawed under the Construction Acts 1996 & 2009.

  • It shall be a condition precedent that both parties agree that the interest for late payments shall be no more than 3% above the Bank of England base rate

If this is not be a ‘substantial alternative remedy’ the courts can override the rate of interest under the Late Payment of Commercial Debts (Interest) Act 1988.

What should you do?

If you have to comply, why not just say so? Clarity is king after all.

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