If a contract contains a clause requiring reasonable care and skill and another stating strict design obligations, can once cancel out the other?

Ian Yule

Main contractors and consultants have one thing in common when negotiating conditions of contract relating to their design. They hate the words “fit for purpose”. Nearly as bad are “ensure” and “will meet the requirements of” - especially when used together. They prefer “reasonable care and skill”.

Contractors say, with some justification, that their professional indemnity insurance will not cover strict obligations. Nevertheless, it is still perfectly usual for contractors and consultants to promise that a design will achieve at least some outputs. Infrastructure contractors on the FIDIC Red Book conditions, for example, are obliged to design the works so that they are fit for any intended purpose specified in the contract.

Contracts often contain a “reasonable care and skill” clause and a “strict obligation” clause. The questions then are: can they be read together, and if so, how? Or does one override the other? Two cases illustrate this issue.

In Costain Limited vs Charles Haswell & Partners Limited, a consultant engineer was sued for alleged negligent design of ground treatment works and foundations for a new pumping station. The judge considered the effect of two contract clauses. The first said that any part of the work designed by the consultant would (if actually constructed) meet the requirements of the specification. These requirements included certain tolerances for settlement. The second clause required reasonable care and skill.

The judge said that there was no reason to see these clauses as being in conflict. The first was limited to one particular element of the consultant’s services. It entailed the consultant giving express warranties, but there was nothing odd about a professional man doing that.

That Costain may not have had to give similar warranties in its upstream contract was irrelevant. Meanwhile, the second clause was more general.

MTH had faithfully followed a well-respected international standard, as indeed it was obliged to by the contract. Unfortunately, and very unusually, there was an error in one of the equations in that standard

The other case is E.On vs MT Højgaard, heard in the Technology and Construction Court earlier this year. The contractor, MTH, was to design and install foundations for a generator on an off-shore wind farm. The foundations consisted of a steel monopile housed in a steel cylinder, with grout pumped into the gap between the two. Movement was later found to be occurring in the grouted connection.

MTH had faithfully followed a well-respected international standard for such connections, as indeed it was obliged to by the contract. Unfortunately, and very unusually, there was an error in one of the equations in that standard.

The contractor argued that it had used all reasonable care and skill to comply with the standard as the contract required - and the judge agreed. However, the contract contained another clause requiring the design of the foundations to be adequate for a lifetime of 20 years. That had clearly not happened.

This was not a case of deciding between two inconsistent clauses, said the judge - there was no inconsistency. He referred to a Canadian case where a contractor undertook work strictly to the employer’s plans and a specification and, as required, guaranteed the weathertightness of the roof for five years. The contractor later found that it could not meet the five-year guarantee because a specific roofing adhesive shown in the employer’s plans would never last that long. The court nevertheless held that the express obligation to construct the works so that they were capable of being weathertight for five years overrode the obligation to comply with the specification. The contractor’s claim failed even though it had followed the employer’s plans.

Similarly, in the E.On case, the court decided that MTH was stuck with the obligation to meet a 20-year design life, despite using reasonable care and skill - and despite complying with a standard that it was expressly obliged to meet. The case is scheduled to go to the Court of Appeal next year.

Contractors and consultants are rightly concerned about taking on design obligations that involve achieving a result. However, it is usually unrealistic to try to veto all performance requirements outright. A better line is to oppose the type of clause that requires them to carry out their design in accordance with wide-ranging performance requirements scattered across various documents, often from other contracts.

If a design is to meet certain performance requirements, the contractor is entitled to insist that these should be clearly identified.

Ian Yule is a partner in Weightmans