Belong v Seddon: Pre-Construction Services Agreement clauses survive main contract execution

In Belong (Construction) Ltd v Seddon Construction Ltd, the Technology & Construction Court (TCC) examined the relationship between pre-construction services agreements (PCSA) and subsequent main building contracts.

The TCC ruled that entering into a main Joint Contracts Tribunal (JCT) contract does not automatically extinguish historic liabilities incurred for breaches under an earlier PCSA, even if the primary obligations in the PCSA are not carried over into the final contract.

Case background

Belong (Construction) Limited (Belong) entered into a PCSA with Seddon Construction Limited (Seddon) in May 2020 to carry out pre-construction services for a care home project. Seddon replaced a previous contractor who had entered insolvency. Under the PCSA, Seddon was required to inspect and appraise the partially completed site.

The parties subsequently entered into a standard JCT Standard Building Contract (With Quantities), 2016 edition in December 2020.

During the main works, delay arose due to necessary air sealing works (ASW) done under the instruction of the Contract Administrator (CA). When Seddon applied for an extension of time (EOT) the CA refused the EOT on the grounds that the delay stemmed from Seddon’s breach of its PCSA obligations – especially, its failure during the pre-construction phase to open up and test the existing ASW.

The Adjudication

The matter was referred to adjudication by Seddon, arguing that:

The final JCT contract contained a modified clause that expressly removed any requirement for Seddon to “open up or survey” existing works beyond express contract requirements.
Under Clause 2.3 of the PCSA, the parties’ rights and liabilities under the PCSA were “subsumed into and… subject to” the executed JCT contract which did not contain an obligation to open up and test the ASW. Therefore, Seddon argued its liabilities under the PCSA were superseded and discharged by the JCT contract.

The adjudicator agreed with Seddon, determining that the JCT contract superseded the PCSA obligations and that Seddon was entitled to an EOT. Belong subsequently issued Part 8 TCC proceedings seeking a final ruling.

The Court’s ruling

The Court placed weight on the specific language drafted in clause 2 of the PCSA. Clauses 2.1 and 2.2 of the PCSA expressly governed the parties’ ongoing obligations during the pre-construction period, confirming that these active obligations ended upon execution of the main JCT contract. In contrast, clause 2.3 specifically addressed rights and liabilities being subsumed into and subject to the main contract.

The Court emphasised the clear distinction in English contract law between primary obligations and secondary obligations. When the JCT contract was executed, Seddon’s primary obligation to perform pre-construction services under the PCSA came to an end. However, its secondary obligations – meaning any continuing rights and liabilities after the PCSA period – remained intact. The Judge noted that because lawyers had drafted the PCSA, the choice to contrast “obligations” in clauses 2.1 and 2.2 with “liabilities” in Clause 2.3 was deliberate and reflected this distinction.

Interpreting “subsumed into and subject to”

The Court firmly rejected Seddon’s interpretation that the word “subsumed” meant historic PCSA liabilities were wiped out or replaced by the terms of the main JCT contract. Drawing on dictionary definitions, the judge explained that absorbing or incorporating one concept into a larger structure does not destroy its independent legal existence.

The Court considered that if entry into the JCT contract extinguished all standalone PCSA liabilities, then Clause 16, which provided that Belong could bring legal action against Seddon under the PCSA up to 12 years from the practical completion of the main contract works, would serve no purpose.

Instead, the Judge found that the true meaning of “subsumed into and subject to” is that pre-existing liabilities for breaches committed during the PCSA period survive execution of the main contract; but from that point forward, claims to enforce those liabilities are subject to the procedural rules, dispute mechanism, and limitation terms contained within the main JCT contract.

Scope of contractual default provisions

Under Clauses 2.28.6.5 and 4.20.3 of the JCT contract, the contractor is barred from claiming an EOT or recovering loss and expenses where the delay arises due to any “error, omission, negligence or default” of the contractor. The adjudicator had ruled that these terms applied only in relation to obligations under the main JCT contract itself.

The Judge held that the adjudicator’s reading was overly narrow. He held that the clauses do not restrict the threshold to only be a breach of the main contract, but rather use broad terms such as “error, omission, negligence or default”. Given the close functional connection between the PCSA and the JCT contract on the same project, the Judge concluded that a breach of the legal duties owed under the PCSA could be an error, omission or negligence considered under the terms of the JCT contract which could bar a claim.

Conclusion

The Court granted Belong the declarations it sought, holding that the CA’s original refusal to grant the EOT was correct and that the adjudicator’s decision was wrong.

This decision provides a crucial warning for parties negotiating construction projects across multiple contracts. Failure to consider pre-existing contractual documents will not automatically clear a contractor’s slate of historic pre-construction breaches unless explicit wording is included to compromise or release those pre-existing liabilities. Contractors and employers alike must ensure that transitional clauses clearly state whether historic rights are retained or discharged when entering the main building contract.

Key Takeaways

The judgment outlines the contractual distinction between primary and secondary obligations. In construction contracts, language stating that pre-construction rights and liabilities are subsumed into a main contract can mean those liabilities are incorporated into and governed by the main contract framework; it does not mean that pre-existing liabilities for earlier breaches are erased or discharged. Furthermore, standard clauses that disentitle a contractor from claiming extensions of time or loss and expense due to its own “error, omission, negligence or default” can encompass defaults that occurred under a linked contract that existed prior to execution of the main contract.

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