About that East Coast contract

Virgin Trains East Coast admitted overbidding after it pledged to pay £3.3bn to run the service until 2023, with passenger numbers failing to rise in line with expectations. Cancelled infrastructure upgrades by Network Rail meant that a significant number of additional seats on new trains expected after 2020 would not be operating, making the government partially responsible.

There’s some legal term for not performing your part of a contract isn’t there?

One which, in he vernacular, means that the other side doesn’t need to keep its promises either?

6 comments on “About that East Coast contract

  1. Whatever the legal term one would think that there would be various clauses setting out each sides obligations (especially one as fundamental as improvements to infrastructure) and recourse in the event of either party failing to fulfil its obligations. If not then Virgin are numpties.

  2. Why are they numpties? If there is no contractually agreed penalty then the parties will generally reach agreement, or if they cannot, will ask a judge to decide what the agreement should be.

  3. Tim, I think you are referring to breach of contract, pure and simple. The question is whether the contractual terms obliged Network Rail to provide those upgrades. If one side is in breach then there are 3 possible remedies : damages, an injunction, or sometimes specific performance. SP is rare but it might be possible to get a judge to agree here

  4. @ Diogenes
    There is a slight problem in that Network Rail is technically a private company, separate from the Department of Transport and it is Network Rail that has defaulted on an obligation to the DoT. I remember, years ago, a construction company getting hit by the DoT for £milions under a penalty clause for being late finishing a motorway contract because British Rail had defaulted on a contract to deliver aggregate needed for the hardcore base for the carriageway.

  5. BiG – leaving oneself exposed by signing up to a contract the profitability of which is dependent on the other party (or a third party) carrying out an obviously important piece of work and for there to be no recourse under said contract is surely an indication of negligence – why rely on a generic arbitration clause (assuming they bothered) for an obvious risk?

  6. The term might be privity of contract. You can’t force a 3rdparty to comply with a contract they haven’t signed.

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