Thursday, December 06, 2007

I have a question...

But first, the background:

Company A does some work on Person B’s house, helping oversee the construction of an extension. The plans for the extension were drawn up by a now former employee of Company A and overseen by an external contractor, so Company A does not, strictly speaking, have anything to do with the construction itself. A few months after the extension is complete, a persistent and serious leak appears in the roof, the cause of which cannot be determined.

Despite many tests and inspections by Company A, and various exploratory repair works, water continues to get in. Person B has trouble finding a buyer for the house because of the leak. However, a specialist manages to finally sort out the leak and presents Person B a bill for a few thousand pounds for the work. Person B insists to Company A that the original plan drawn up by its former employee must have had a flaw, thereby allowing the leak to happen, and therefore the bill for the repair work should be paid by Company A.

Company A , however, insists that it cannot be proven that the plan was flawed, since the fault could not be satisfactorily determined. Also, the company was not directly involved in the construction or in overseeing it, so it was not liable for the repair bill.

However, Person B is adamant that Company A should pay the costs, and threatens to go to Court over it.

Finally Company A meets with Person B and the external contractor to try and negotiate a settlement. Which, eventually, ends in Company A agreeing to not charge Person B for the time spent on various inspections of the leak over the years, and also pay the entire cost of repair works.

A letter is then drawn up to confirm this settlement. The wording is “This offer is made without prejudice and without any admission of liability on the part of Company A”.

My question is: When Company A is willing to pay Person B a few thousand pounds AND waive its fees (amounting to at least a few hundred pounds), isn’t that already an admission of liability or guilt? I mean, why else would a business part with a large amount of money, if not to forestall having to spend an even larger amount of money after losing its case in Court. Is it possible in law that although Company A is obviously admitting liability by paying up, it isnt seen as liable because it says it is not admitting liability? How bloody childish an argument that is! It's like saying to someone: "Ok, since you're threatening me with court action, I'll give back your money, but I am not admitting that I took it or was in any way guilty."

Could any legal person who happens to come across this post please leave a clarification? I would be MOST grateful!


meerkat said...

i am not a legal eagle, but i will attempt to answer your question.

the reason company A has agreed to pay person B is because it cannot see a cut and dry case. i believes that it will take a long drawn out process to arrive at a judgement in court and that judgement might then be challenged by either party and the process can be very long and result in a lot of legal fees which might not be recoverable due to the court unable to arrive at a verdict

in view of this situation, company A decides to cut their losses and offer money through 'goodwill' meaning that they will cover the costs without admission of any liability because it is the cheaper option regardless of whether or not they are at fault

you can see this happening a lot in everyday life. for eg, you might purchase a new car and there might be part which is defective and has led to the car developing serious faults and a huge repair bill. googling it might reveal anecdotally that there are a number of such incidents reported by other people who bought this car leading you to believe that the manufacturer is liable for damages as they have apparently put in a 'faulty' part. but the actual task of proving this in court is very onerous and the car manufacturer will offer you a small payment of goodwill towards repairing the car without admitting liability to protect itself against future lawsuits as well as to avoid adverse publicity.

in sum, it is in many ways a better option to reach a satisfactory solution (as far as both parties are concerned) without recourse to too much acrimony and legal costs

that will be 100 pounds please ;-)


Shyam said...

Lawyers are slippery people, arent they? :) Thanks for the explanation, Meerkat!