Rudi Klein Main contractors are increasingly insisting that specialists use materials supplied by a specified manufacturer – which can put them in a difficult and dangerous position. Here’s why
A recurrent refrain has grabbed my attention: “My main contractor has got into bed with a manufacturer. He’s demanding that I, a specialist contractor, only use products supplied by that manufacturer. Now I just supply trained labour to install this manufacturer’s products.” This complaint is now widespread. What’s going on?
It seems contractors are concluding deals with manufacturers on the grounds that specifying proprietary products leads to savings through economies of scale. Manufacturers think economies are achieved by high volume sales through distributors.
If so, are clients benefiting? And what are the risks for specialist contractors?
It’s difficult to understand how this offers a better deal for clients if it breaks up existing supply chains. Specialists understand product design and the best uses and properties of components and materials. They often research and improve products with manufacturers, creating value for the client.
What about specialist contractors? Since they are forced to use a manufacturer, their power to make decisions on the suitability of products is taken away. Does this reduce their liability? Of course not.
Under the 1982 Supply of Goods and Services Act, a condition is implied in all contracts for work and materials that goods supplied must be of satisfactory quality. If there is a comeback on the suitability of the goods, the specialist takes full responsibility.
In the case of Young & Marten vs McManus Childs (1969), a roofing subcontractor had been instructed to use “Somerset 13 tiles” on the roofs of a housing estate which, unfortunately, disintegrated in wet weather.
Specialists’ power to decide on the suitability of products is taken away. Does this reduce their liability? Of course not
The subcontractor was not aware of this defect and could not have predicted it. Nonetheless, the House of Lords held that it was in breach of the implied term of good quality. This was before the Supply of Goods and Services Act, but the outcome would have been the same after 1982.
Another case is Barnard Pipeline Technology vs Marston Construction (1991). Marston constructed a water main for Anglian Water, which had insisted that it use pipework manufactured by Barnard. This turned out to be defective. Marston refused to pay Barnard, Barnard sued and Marston counterclaimed for delays, disruption, and remedial work resulting from the defective pipework.
Barnard relied upon a disclaimer: Other than repair or replacement of goods, it had no liability for loss or damage caused by the defective pipework. Marston responded that, under the Unfair Contract Terms Act 1997, the disclaimer was unreasonable. The court disagreed. Marston had no choice but to use Barnard, but that appeared to be irrelevant.
Manufacturers and suppliers will invariably have a disclaimer denying liability for consequential losses from defective materials. The specialist has responsibility for all matters relating to the performance of the goods it supplies, even where it has no alternative but to use a particular supplier. Its ability to negotiate out disclaimers in its supply contracts is probably nil.
My advice is that if this practice is occurring on public sector works, notify your trade association. Make sure you challenge it, especially if you have a supply chain that delivers better value. Lastly, insist any disclaimer used by the manufacturer or supplier is replicated in your subcontract.
If you can’t achieve these, check the cost of additional insurance, particularly over consequential loss, and ensure that your main contractor sees this as a price component.
Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group
You can email him at RKlein@hvca.org.uk
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