Mt HØJGAARD A//S V E.ON Climate and Renewables [2014] EWCA CIV 710

KEYWORDS: HOW TO VALUE NEGATIVE VARIATIONS

KEY TAKEAWAY

Valuing negative variations or omissions in lump sum contracts is often fraught: should omitted works be valued on the basis of how much they would have cost the contractor to complete, or on the basis of the part of the lump sum price attributable to the works?

In this case, the English Court of Appeal considered this issue and held that:

1. negative variations in lump sum contracts should be valued on the basis of the part of the lump sum price attributable to the omitted works; and
2. to determine what part of the lump sum price was attributable to the omitted works it was permissible to examine the contractor's tender breakdown (even though the breakdown did not form part of the contract).