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When a contractor contracts with a client using a standard form like the JCT, the last thing he or she expects is for the client to be able to challenge the enforceability of that contract in the courts. After all, the terms of the JCT are well known and well used in the construction industry, and we all need to know we can rely on contract terms agreed with the client.

However, that is exactly the situation that faced the claimant contractor in the case of Steve Domsalla [trading as Domsalla ºÚ¶´ÉçÇø Services] v Kenneth Dyason. When Domsalla sought to rely on the JCT clause barring Dyason’s right to set off his claim for damages, the High Court ruled that the clause was unenforceable.

It is important to understand the background to the claim.

Dyason’s house was badly damaged by a fire. His insurer agreed to reinstate the property. They appointed loss adjusters, who recommended Domsalla undertake the works and, at his insurer’s request, Dyason entered into a JCT Minor ºÚ¶´ÉçÇø Works contract with Domsalla, which included the usual withholding notice clause.

After many months, the works were still not completed and Domsalla suspended work due to ongoing disputes with Dyason about the scope and quality of the works and the non-payment of certified sums.

Domsalla decided to refer those disputes to adjudication. Dyason argued that the adjudication and withholding notice clauses in the JCT were unenforceable according to the Unfair Terms in Consumer Contract Regulations 1999.

He also challenged the validity of the clause preventing him from setting off his claim for damages against Domsalla’s claim for unpaid costs.

The adjudicator rejected these arguments and made an award in Domsalla’s favour. However, when Domsalla brought a claim to enforce that award, the court refused to do so.

In its judgment, the clause entitling Domsalla to refer its dispute with Dyason to adjudication was perfectly reasonable and enforceable.

If Dyason was to be liable for payments due, the effect of the withholding provisions could substantially affect his rights

However, the court also then looked at the clause concerning withholding notices and concluded that, since Dyason was not entitled to issue these notices, yet he was personally liable under the contract, the effect of the withholding provisions could and did substantially affect his rights, so that the withholding notice clause was unfair.

While Dyason was the client as far as Domsalla was concerned, and Dyason had a legal liability to make any payments due under the contract, in reality it was his insurer and its appointed loss adjuster who controlled the administration of the contract, including any payment issues.

Dyason was not entitled to issue withholding notices as his insurer had full control over whether, when and in what terms any notices should be issued. It followed that, if Dyason was to be personally liable for any payments due under the contract, the effect of the withholding provisions could substantially affect his rights and was unfair.

The court concluded that the withholding notice clause fell foul of the Unfair Terms in Consumer Contract Regulations.

The court then came to consider the arguments about whether Dyason could offset his claim for damages against Domsalla’s claim for sums due under the contract.

In the court’s view, the adjudicator had been wrong to disregard Dyason’s defence of set-off. The adjudicator’s failure to consider the merits of Dyason’s claim was not only procedurally unfair but also resulted in him failing to decide all matters that had been referred to him for decision.

The adjudicator had therefore acted incorrectly, and the court gave Dyason permission to contest Domsalla’s claim.

This is an important decision because it shows that, just because a clause may appear in a commonly used standard form contract, does not mean it will necessarily be enforceable against a client.