Complaint within a reasonable time – consultancy agreement

Complaint within a reasonable time – consultancy agreement

Complaint within a reasonable time – consultancy agreement

The Diocese of Lund (Lund) and Astacus AB (Astacus) have entered into a consultancy agreement.

The assignment Astacus shall carry out pipe construction and must be completed by 30 November 2018 according to the contract.

However, the work was delayed and only completed on 24 May 2019, meaning that Lund became eligible for a penalty payment under the parties’ agreements.

The parties use the standard agreement ABK 09 according to which a penalty payment is to be imposed within three months of the completion of the assignment (Chapter 4, 7 §).

Since the work was due to be completed on 30 November and Lund’s penalty payment claim was made in July 2019, Astacus claims that Lund has declared its right to compensation.

The question in the case is therefore how the concept is completed in ABK 09 should be interpreted.

Is it the time of the completion of the work or the agreed completion date?

Delay Suite

As a starting point, the District Court (TR) notes that contract interpretation is about ascertaining the parties’ common will rather than looking at the literal wording of the agreement.

Since the common will cannot be clearly deduced from the agreement, the Court proceeds to interpret the linguistic meaning of the agreement.

Furthermore, it is considered that completed in general terms must be the same as completed, which suggests that penalty payment requirements must be produced no later than three months from the reported completion.

Furthermore, the Court argues that what contradicts such an interpretation is that limitation rules must be interpreted restrictively in accordance with practice.

Fulfilling interpretations of agreed limitation rules should only be accepted if there are clear points for it (NJA 2015 p. 862).

According to TR, the starting point should be that completed work coincides with completion under contract.

Therefore, the agreed end date must generally be the starting point for the limitation period for period of penalty payments.

If the work is not completed by the agreed date, the customer has reason to request a delay suite.

Finally, the Court makes a purpose interpretation of the agreement.

According to the Court, the purpose of the penalty payment is considered to be that it should act as a ‘welding flame’ which makes it urgent for the consultant to finish the assignment in time.

In view of the above reasoning, TR considers that penalty payment requirements should be produced in relation to the agreed date, which means that Lund’s request has been made too late.

Joint party intent

Like TR, the Court of Appeal (HovR) finds that it is not possible to ascertain a joint party opinion from the agreement, which means that the wording will be decisive.

HovR refers to the same practice as TR, which states that statutes of limitations must be interpreted restrictively because of their ‘drastic right-cutting effect’.

Since the Court considers that the wording suggests that the limitation period should be calculated to actual completion, it is considered, unlike TR, that it would rather be an extensive interpretation to determine that the limitation period runs from the agreed date.

Furthermore, the Court uses other provisions of ABK 09 for interpretative support of the concept of completion.

The agreement includes, among other things, a provision stating that the assignment is deemed to have been completed when the results of the assignment have been reported in the manner agreed by the parties (Chapter 4, Section 5).

The same paragraph as interpreted by that court in the case also states that the limitation period can be calculated from when the mandate has ‘otherwise ceased’, which refers, inter alia, to situations where the consultant has gone bankrupt or the contract has been terminated.

In such a case, the limitation period is calculated from the time the assignment ended.

According to HovR, this too speaks for the completion of the finished work.

In conclusion, the Court’s assessment is that the other provisions and systematics of ABK 09 suggest that the concept should be attributed to the actual completion.

Limitation period

Finally, the Court makes a reasonable assessment of how the concept is to be interpreted.

The parties’ agreement states that Lund would report data from Astacus’ work to a land register by 31 December 2018 and that the work therefore needed to be completed by 30 November.

It must therefore have been clear to Astacus that it was of great importance to Lund that the work was completed by the agreed date.

Since the parties have agreed specifically on a penalty payment, the court also considers that it must have been clear to Astacus what they risked in the event of a delay.

In addition, in certain circumstances Astacus was able to request a change in the timetable in accordance with the provisions of ABK 09.

Overall, HovR finds that the circumstances of the case suggest that the limitation period should be set in relation to the completed work.

Lund has thus presented its claim for a penalty payment in time and Astacus is liable for payment.