CITY INN LIMITED v. SHEPHERD CONSTRUCTION LIMITED [2001] ScotHC 54 (17th July, 2001)

CITY INN LIMITED v. SHEPHERD CONSTRUCTION LIMITED [2001] ScotHC 54 (17th July, 2001)

Clause 13.8.5 is not a penalty clause. It does not impose a penalty for breach of clause 13.8.1 but operates as a condition precedent to entitlement to an extension of time. The liquidated damages remain a genuine pre-estimate of loss for delay in completion, not for breach of clause 13.8.1, and the clause is a legitimate contractual allocation of risk. The defenders' averments that clause 13.8.5 is a penalty clause are irrelevant and should be excluded from probation.

Citation
[2001] ScotHC 54
Parties
Pursuer: City Inn Limited; Defender: Shepherd Construction Limited
Jurisdiction
Scotland
Procedural Posture
Commercial Construction Contract Dispute / Preliminary Issues on Relevancy of Pleadings and Construction of Contract
Outcome
Defenders' averments that clause 13.8.5 is a penalty clause are irrelevant and excluded from probation; pursuers succeed on this preliminary issue.
Legal Topics
Penalty Clauses, Extension of Time, Liquidated Damages, Contract Interpretation, Standard Form Contracts
Construction Law Contract Law Penalty Clauses Extension of Time Liquidated Damages Contract Interpretation Standard Form Contracts

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Parties

City Inn Limited

Pursuer

Shepherd Construction Limited

Defender

Procedural Posture

Commercial Construction Contract Dispute / Preliminary Issues on Relevancy of Pleadings and Construction of Contract

Legal Issues

  1. 1 Whether clause 13.8.5 of the contract is an unenforceable penalty clause
  2. 2 What triggers the contractor's obligation under clause 13.8.1
  3. 3 Whether the defenders' pleadings on clause 13.8 are relevant

Ratio Decidendi

Clause 13.8.5 is not a penalty clause. It does not impose a penalty for breach of clause 13.8.1 but operates as a condition precedent to entitlement to an extension of time. The liquidated damages remain a genuine pre-estimate of loss for delay in completion, not for breach of clause 13.8.1, and the clause is a legitimate contractual allocation of risk. The defenders' averments that clause 13.8.5 is a penalty clause are irrelevant and should be excluded from probation.

Court Disposition

Defenders' averments that clause 13.8.5 is a penalty clause are irrelevant and excluded from probation; pursuers succeed on this preliminary issue.

Orders

  • Exclude from probation the defenders' averments in answer 8(i) that clause 13.8.5 is a penalty clause.