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| 3 minute read

Bristows’ SnippITs - A Lidl wording makes a big difference!

This post is part of the Bristows’ SnippITs series, which pulls together the key practical takeaways from recent court decisions for the tech sector and beyond.

In the recent decision of Lidl Great Britain Limited v Closed Circuit Cooling Limited t/a 3CL [2023] EWHC 2243 (TCC), the Court considered whether: (a) the requirements of a payment application were conditions precedent to the validity of the payment application; (b) if the requirements were not previously enforced, could they still be relied upon; and (3) the payment application was subject to the notices provision.

Key takeaways:

  • If you intend for a requirement to be a condition precedent (even for invoicing provisions), say so! Ideally, use wording such as “provided that” or “if”. “Must” or “shall be” is likely to indicate only a simple contractual obligation. Make clear the consequences of failing to comply with the requirement (e.g. that an invoice is invalid if content or evidence requirements are not met).
  • Beware that, if you do not enforce contractual provisions in your favour (e.g. to require invoices to be in a specific format or include specific information), you may not be able to in the future. Use them or lose them!
  • Look out for any unintended consequences of any notices provision. Where a party must provide documents/communications, consider whether the notices provision are intended to apply to these and, if so, update to reflect the intention. The Court was willing to reach a sensible outcome in this case, but that cannot be guaranteed in all cases.

Background:

Lidl and 3CL, an industrial refrigeration and air-conditioning contractor, entered into an agreement under which 3CL was able to apply for interim payments if it achieved certain milestones. The dispute concerned 3CL’s 19th payment application.

Lidl claimed that this was invalid because it did not comply with contractual requirements regarding its content, the provision of supporting evidence and service. 3CL maintained that none of these requirements were conditions precedent to the validity of the payment application and that, regardless, 3CL had complied with them and/or Lidl was prevented from arguing that 3CL had failed to do so because Lidl had accepted the previous 18 payment applications made on the same basis.

The Court’s conclusions:

  1. Were the requirements conditions precedent?

The Court concluded that the requirements were simple contractual obligations rather than conditions precedent. As a consequence, non-compliance may attract damages but would not render the payment application invalid.

While it is not necessary to use the words “condition precedent” or similar, words such as “provided always that” or “if” are strong indicators of a condition precedent.

“Must”, used in respect of the content and supporting evidence requirements, indicated that the requirements were mandatory, but not conditions precedent. There were no words making it clear that, unless the requirements were complied with, the payment application would be invalid. Some requirements were imprecise so there would be considerable uncertainty if they were disputed, and there was no compelling reason to require a condition precedent.

“Shall be”, used in the notices provision (if applicable – see below) which required service by hand/courier as well as by email, also indicated a mandatory requirement only. The provision applied to a wide range of communications and the Court considered it implausible that in this day and age all of them should have to be served in this way as well as by email.

  1. Did 3CL comply with the requirements and, if not, what was the impact of this?

The Court found that, whilst 3CL had not (or may not have – see below) complied with all the requirements, Lidl could not challenge the payment application based on these failures. 3CL’s previous 18 payment applications were on substantially the same basis (e.g. omitting the same supporting evidence and served in the same way) and none of them had been challenged by Lidl.

  1. Did the standalone notices provision apply? 

The Court saw that a payment application could be described as a “request” (and not a condition precedent), which was expressly subject to the notices provision.

However, the Court also said that, if that was wrong, it was not inconsistent for the Court to conclude that the payment application was not a “request” and so not subject to the provision. If that was intended, payment applications would have been explicitly listed in the provision. In any event, even if the provision did apply, Lidl would be estopped from challenging the payment application for not being served in line with the provision because it was served in the same manner as the previous 18 payment applications which were not challenged.

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