Contractual waiver of extra claims bars arbitration where claims were expressly given up for extension of time benefits.
A commercial contract must be read as a whole, so a lump-sum price clause does not by itself exclude adjustments for variations and compensation events. The arbitration reference was valid because the contractual precondition of prior adjudication was satisfied when the Adjudicator failed to decide within the stipulated period. However, a contemporaneous letter expressly waived extra claims in return for extension of time and waiver of liquidated damages, and the surrounding correspondence confirmed that accord and satisfaction. Those waived claims were therefore not arbitrable, and an award granting them was set aside as perverse and patently illegal. The tribunal's constitution was upheld, but that did not save the award.
Issues: (i) Whether the contract barred extra claims or permitted adjustment for variations and compensation events; (ii) Whether the reference to arbitration was invalid for want of prior adjudication; (iii) Whether the contractor's letter dated 10 January 2005 operated as accord and satisfaction barring the claims; and (iv) Whether the arbitral tribunal was validly constituted and could entertain the disputes.
Issue (i): Whether the contract barred extra claims or permitted adjustment for variations and compensation events.
Analysis: The contractual terms had to be read as a whole and not by isolating the clause describing the bid as a lump sum price. The agreement contemplated the Engineer's role in valuing variations and compensation events, permitted adjustment of the contract price in specified situations, and contained machinery for assessing the effect of such events. A clause stating that the lump sum price would not be adjusted could not be read in isolation so as to nullify the clauses providing for variation and compensation.
Conclusion: The contract did not impose an absolute bar on extra claims; the Tribunal was not right to treat the contract as excluding all adjustments, though this did not in itself sustain the award in favour of the contractor.
Issue (ii): Whether the reference to arbitration was invalid for want of prior adjudication.
Analysis: Under the dispute resolution mechanism, a dispute could be referred to the Adjudicator within the stipulated time and arbitration could follow upon the Adjudicator's failure to render a decision within the prescribed period. The reference made by the contractor was within time, the Adjudicator did not decide within 28 days, and the contractual precondition for arbitration stood satisfied.
Conclusion: The reference to arbitration was valid and was not premature.
Issue (iii): Whether the contractor's letter dated 10 January 2005 operated as accord and satisfaction barring the claims.
Analysis: The letter expressly recorded that, in return for extension of time and waiver of liquidated damages, the contractor would not stake any extra claim on the stated causes of delay. The contemporaneous correspondence showed that both sides understood the letter as a waiver of claims connected with those causes. The plea of coercion was not proved by evidence. The Tribunal's contrary interpretation ignored the clear language of the letter and the surrounding correspondence and was perverse.
Conclusion: The claims covered by the waiver were not arbitrable, and the award allowing those claims could not stand.
Issue (iv): Whether the arbitral tribunal was validly constituted and could entertain the disputes.
Analysis: On failure of one party to appoint its arbitrator within the contractual period, the institution empowered under the contract was entitled to make the appointment. The challenge to constitution on this ground therefore failed.
Conclusion: The tribunal was validly constituted, but this did not save the award from being set aside on the ground of accord and satisfaction.
Final Conclusion: The award was set aside because the contractor had waived the claims in question by a binding contractual adjustment, and the tribunal's contrary finding was unsustainable. The petitions succeeded and the impugned awards could not be sustained.
Ratio Decidendi: A commercial contract must be construed as a whole, but where a party has expressly waived specified claims in return for a contractual benefit, those claims cannot later be resurrected by arbitration, and an award contrary to that waiver is liable to be set aside as perverse and patently illegal.
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