Liability of contractor had not been "reasonably incurred"

Water and Sewerage Authority of Trinidad and Tobago v Waterworks Ltd [2025] UKPC 9

In Water and Sewerage Authority of Trinidad and Tobago v Waterworks Ltd [2025] UKPC 9, the Privy Council held that a liability which a contractor had incurred to pay cancellation charges to a supplier of equipment for a construction project was not "reasonably incurred by the Contractor in the expectation of completing the Works" with the consequence that the contractor was not entitled to claim payment in respect of this expenditure under clause 19.6(c) of the Conditions of Contract for Plant and Design-Build ("the Yellow Book") published by the Fédération Internationale des Ingénieurs Conseils. The project was found to be at too early a stage to justify the contractor in entering into contracts for the purchase of equipment when final designs had not been approved and the details of the equipment were therefore subject to change. A further factor which weakened the contractor's case was that the cancellation charges were payable to the supplier even though no work had in fact been done under these contracts. The bargain which the contractor had thus concluded with the supplier was found to have been "a very bad bargain" and not a liability which had been "reasonably incurred".