The A to Z of construction law: Our instant course in legal concepts continues with some advice on how express terms can muddy the waters, and a guide to fitness for purpose obligations
E is for express
If a supermarket chain agrees with a contractor that it will build a supermarket to the size and standards set out in a set of employer’s requirements by a certain date for a fixed sum of money, a contract is agreed.
Yet, a standard construction contract can run to a 100 pages and be increased by a schedule of amendments. These are the “express” terms of the contract which are specifically agreed between the parties.
Some express terms just restate legislation and add little, and problems arise where reference is made to legislation that is out of date. Usually there is a further express term that says the parties must refer to the latest legislation but this detracts from the contract as a working document by pointing its users (who probably are not lawyers) in the wrong direction. Of course, properly drawn express terms can help the contract become a valuable management tool for the parties.
Other express terms set out to record terms somewhere on the scale allowed by statute (this is particularly common with payment and adjudication terms). This causes difficulties where the intended terms fall outside the permitted scale as the courts will strike out those express terms and replace them with the ones intended by the legislation.
If the common law changes, so does the corresponding implied term, but an express term will remain fixed, which can be useful (although many common law rights are longstanding and more likely to be substantively altered by legislation than by a change in the common law).
Some common law rights are commercially unacceptable and an express term replaces it with an agreed alternative.
Express terms record what has been agreed by the parties but there is a balance to be drawn with drafting that sets out terms unnecessarily or inadequately. Increasingly, clients are intolerant of anything other than a straightforward approach to contract drafting.
F is for fitness
At law designers are responsible for the exercise of reasonable skill and care in their design and, generally, this is what is covered by their professional indemnity insurance. If a contractor accepts an obligation to deliver a particular result, it is agreeing to deliver fitness for purpose, which is a greater responsibility than reasonable skill and care.
So, where a contractor agrees to construct a process plant that deals with a specified number of units per day, it is accepting a fitness-for-purpose obligation. This is common practice in large-scale engineering contracts and is reflected in standard forms of contract, such as FIDIC, that are used on these projects. Fitness for purpose is a risk that contractors are prepared to take but it is usually counterbalanced by caps on the contractor’s liability, both in terms of damages that may be recovered and the time during which the damages can be claimed.
If a contract says nothing to the contrary, a design-and-build contractor will usually be accepting a fitness-for-purpose obligation (implied by sale of goods and services legislation). However, many standard contracts make the contractor responsible only for exercising the reasonable skill and care of a professional designer in relation to the design for which it is responsible.
JCT design-and-build contracts are sometimes amended to reinstate a fitness for purpose obligation or an obligation close to it, by the express words “fitness for purpose” or by wording such as “complying with the requirements set out in the employer’s brief”.
That contractors cannot subcontract design services to professionals that will accept fitness-for-purpose obligations make contractors uncomfortable about accepting the obligation themselves. This characteristic of UK construction is driven largely by the professional indemnity insurance market, where it is difficult (some say impossible) for a contractor to buy fitness-for-purpose insurance.
In many cases, the intended purpose of a building is perfectly clear and it is questionable whether fitness for this purpose is, in fact, largely different from exercising the reasonable skill and care to deliver the building.
Michael Conroy Harris is a senior legal manager at Eversheds