Government caught out in contract dispute

Posted: 5th November 2012

In a case which underlines the wisdom of employing legal professionals to draft commercial contracts, a company which provides information technology consultancy services has triumphed in a substantial debt claim against the Department for Communities and Local Government.DC&LG

The dispute over the correct meaning of various terms of the agreement between E-Nik Limited and the department arose because the contract between them was ‘not drafted by lawyers’ and the language employed was ‘not always elegant or apt’. The absence of professional drafting resulted in a lack of clarity in several areas, including whether figures quoted were inclusive or exclusive of VAT.

The company sued the department for £760,920 in respect of unpaid invoices and the High Court accepted, inter alia, that, during the currency of the contract, the department was obliged to pay for at least 500 days of consultancy work at a rate of not less than £850 per day and that interest was payable on the sums outstanding.

The department’s arguments that E-Nik’s consultancy services were not available for the entire period to which the invoices related and that the debt amounted to an unenforceable penalty were rejected by the court. However, the court was persuaded by the department’s arguments that the quoted daily rate of £850 was inclusive of VAT. Summary judgment was entered in favour of E-Nik for the sum claimed, less VAT.