How far does a contractor's liability go for any design work that it does? The answer is, as far as the parties let it – each standard form defines it differently
Sometimes it is no bad thing to go back to basics and remind ourselves of some of the rather bizarre inefficiencies in the construction process. A particularly painful example arises in the way in which standard forms of contract used by the industry deal with the contractor's design liability.
The law is clear: a contractor that supplies materials warrants that they are of good quality and reasonably fit for the purpose for which they will be used – unless the express terms of the contract, or the surrounding circumstances, show that the parties intended to exclude either or both warranties. Clearly where the materials were chosen by the employer or its design team, the warranty of "fitness" may be displaced but not the warranty of good quality.
In design-and-build contracts, the work is designed by the contractor. This means that, even though the employer may employ architects or engineers to check and make recommendations on the contractor's design, the employer is essentially relying on the contractor, so a "fitness for purpose" warranty will be implied.
Consultants, on the other hand, are not involved in the supply of materials and therefore are only subject to a "skill and care" duty. The crucial significance of this is that it is much harder to sue for breach of a skill and care warranty, as negligence has to be proven. With a "fitness for purpose" warranty, it is usually sufficient to establish that a defect exists. If that can be done, a contractor is generally liable, regardless of whether the defect was its fault.
And how do the standard forms deal with the contractor's design liability?
JCT Standard Form With Contractor's Design 1998 The formulation set out in clause 2.5.1 is clearly intended to limit contractors' liability to that of a consultant. Is the limitation effective? Maybe – although express and unambiguous terms are usually necessary to exclude a fitness for purpose obligation, and ambiguities are construed against the person seeking to rely on them. But, for a client, it is better to delete that clause.
If the defect is established, whether or not the contractor was at fault, it is generally liable
ICE Design and Construct Conditions Here, too, the aim is plainly to exclude any implied fitness for purpose obligations, but again there is a doubt as to whether the clause achieves this. The ICE formulation also requires the contractor to "check" the design set out in the employer's requirements and to "accept responsibility therefore". The intention here, of course, is clear, but there may be counter arguments that preclude this transfer of responsibility having the effect intended.
GC/Works/1 This offers different levels of design responsibility: the basic clause provides a skill and care warranty and also requires the contractor to warrant that the design will comply with the relevant statutory requirements. It then goes on to provide two alternatives: the first of which is similar to the JCT drafting and the second includes an express fitness for purpose warranty. The parties are invited to make a choice as to which applies – and, presumably, to price accordingly. Unfortunately, this clarity is confused by other provisions of the form, which state that materials not selected by the employer must be "fit for their purposes" even where the first alternative is adopted.
Engineering and Construction Contract, Second Edition Here the approach is more subtle and perhaps less obvious to a layman. The only express provision in the contract conditions is that the contractor will carry out the design where the works information so states.
In other words, the form relies entirely on the implied fitness for purpose obligation – although a secondary option provides: "The contractor is not liable for defects in the works due to his design so far as he proves that he uses reasonable skill and care to ensure that it complied with the works information."