Implied terms and building materials: Noreside Construction v Irish Asphalt

A building contract is a contract for services for the purposes of the Sale of Goods and Supply of Services Act 1980, of which section 39 (3) provides as follows:

‘Subject to section 40, in every contract for the supply of a service where the supplier is acting in the course of a business, the following terms are implied –

  • that the supplier has the necessary skill to render the service,
  • that he will supply the service will due skill, care and diligence,
  • that, where materials are used, they will be sound and reasonably fit for the purpose for which they are required, and
  • that, where goods are supplied under the contract, they will be of merchantable quality within the meaning of section 14 (3) of the Act of 1893 (inserted by section 10 of this Act).

Noreside Construction v. Irish Asphalt[1] concerned a contract for the sale of aggregates for use in the building of houses and apartments in Finglas, Dublin, that was entered into in 2003. Some five years after the sale of the aggregates, the defendant Irish Asphalt notified Noreside that aggregates from its Bay Lane quarry contained pyrite, and should not be used in building.

By 2008, a number of residential and commercial developments in Dublin and in surrounding counties had suffered significant damage due to excessive pyrite content in the aggregate used in their construction.   The effect of reactive pyrite in hardcore used as infill is that floor slabs and walls of the building can heave upwards, leading to cracking and extensive remedial works.

Noreside sought an indemnity from Irish Asphalt in respect of damage to the development in Finglas where aggregate from the Bay Lane quarry had been used, and where significant damage had occurred to the houses due to pyrite heave.   Irish Asphalt sought to rely on a limitation on liability in its standard terms and conditions; Noreside, however, claimed that it had purchased the aggregate on its own standard terms.   Considerable evidence was put before the court as to the exchange of correspondence between the parties, in order to establish what terms had been incorporated into their contract.

The court ultimately concluded that neither party’s standard terms and conditions of supply had been incorporated, and that the contract had in fact been formed when two senior employees of Noreside and Irish Asphalt had agreed, orally, for the supply of aggregate, and when a purchase order was sent by the plaintiff to the defendant. There were limited express terms in the order, no warranties and no limitation on liability.

The court held that the delivery dockets accompanying the aggregates did not create new contracts on each delivery, and were intended to record the volume delivered, and that the operatives in charge of those deliveries had no authority to vary the original contract.

The effect of the finding was that the defendant’s limitation on liability was not part of the contract; the Court accepted the plaintiff’s contention that the implied term of merchantable quality from s. 14 (2) of the Sale of Goods Act 1893 did apply, on the basis that there was no evidence to support the exclusion of that term.

Irish Asphalt appealed to the Supreme Court; the Court dismissed the appeal in late 2014. The appeal turned on Irish Asphalt’s claim that the trial judge had been wrong in finding that there was only one contract formed between the parties, and that the delivery dockets did not have the effect of varying the terms of the contract.

Instead, Irish Asphalt claimed that the contract entered into was a ‘master’ contract, but that separate contracts were entered into with each delivery of aggregates, which themselves were subject to terms and conditions referred to (but not included in) the delivery dockets accompanying each delivery of aggregates.  It then claimed that its terms and conditions, although not specified in the delivery dockets, were incorporated by reasonable notice, or a course of dealing between the parties.

The Supreme Court was prepared to accept that a separate contract was entered into with each delivery of aggregates; however, the court did not accept that the defendant’s terms and conditions were incorporated into each of those contracts.

One of the crucial points in the court’s analysis is that the inclusion of a reference to terms and conditions being ‘available on request’ was not sufficient to incorporate those terms and conditions into the contract between the parties.  This was the case notwithstanding the fact that the plaintiff’s site foreman or other representative would have signed the docket upon each delivery of aggregates.

This was a fundamental issue for the defendants; their terms and conditions contained a limitation on their liability, while the original contract agreed with the plaintiff for the supply of aggregates did not.

Noreside Construction v Irish Asphalt, [2011] IEHC 364 (High Court)

Noreside Construction v Irish Asphalt [2014] IESC 68 (Supreme Court)

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