Subcontractor Indemnity Clause Construction

Document Sample
Subcontractor Indemnity Clause Construction Powered By Docstoc
					                                                                2




                                          Indemnity Clauses
A recent NSW Court of Appeal case1 highlights the subtleties of indemnity clauses.
An indemnity clause in a construction contract provided that the subcontractor was to indemnify and keep indemnified,
the joint venture (which was the main contractor):
            “…against all claims…arising as a result of any act, neglect or default of the subcontractor, its employees
            or agents elating to its execution of the Works.”
An employee of the subcontractor fell over some pipes lying on the floor. The joint venture submitted that the act of
                 s                                         act”                               any
the subcontractor’employee in tripping and falling was an “ falling within the meaning of “ act, neglect or
        in
default” the indemnity.
The majority of the Court of Appeal held that the words “           and default”
                                                           neglect” “          involved a breach of legal duty. There
                                                                        act”
was no rationale or practical reason for the contract to treat the word “ as providing an obligation to indemnify
irrespective of whether the breach was tortious, contractual or statutory.
                                            act”
The majority accordingly held that the mere “ of tripping was not sufficient to create a liability under the indemnity.
                                         act”
The dissenting judge held that the word “ was neutral and did not connote a breach of duty.
Lesson
If you want to draft an indemnity which creates a liability for any act irrespective of whether it is tortious or negligent,
you need to make that clear in the clause.
We also draw your attention to Andar Transport P/L v Brambles Limited2 in which the High Court held that where an
indemnity is ambiguous, the principles of construction require the provisions to be construed in favour of the surety,
i.e., the person giving the indemnity.


Article by Harold Werksman
Partner
t: +61 2 9234 4405
e: harold.werksman@holdingredlich.com.au




Disclaimer
The information is this publication is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information
in this article is accurate at the date it is received or that it will continue to be accurate in the future.


1   F&D Normoyle Pty Ltd v Transfield Pty Ltd 2005 NSWLR 502
2   2004 217 CLR 424 at 437

				
DOCUMENT INFO
Description: Subcontractor Indemnity Clause Construction document sample