Fuzzy-edge disease’ strikes when a contract does not clearly allocate design responsibilities. Emcor Drake & Scull tried to inoculate itself, but it got caught out
It was all a bit last-minute. The first electrical subcontractor had gone. Emcor Drake & Scull (ED&S) was asked by Edinburgh Royal Joint Venture to bid and get on with the electrics at the Royal Infirmary. No thanks, said ED&S. My guess is that this experienced M&E contractor has previously burnt its fingers on a rushed bid. In any case there were 352 tender drawings.
But ED&S reconsidered. Its tender, though, contained an important statement: “Our bid has been prepared on the understanding that the tender drawings received are fully co-ordinated and approved for construction.”
Come on, then, all you contractors, lawyers and disputomaniacs, what is ED&S trying to protect itself from? It’s an ailment called “fuzzy-edge disease”. Heard of it? It’s the cause of umpteen disputes based on the allocation of design responsibilities. Folk like ED&S are quite capable of designing M&E works … given time. But given no time, they can only be the putter-upperers.
The ED&S bid also said: “The price quoted is based on the technical specification and drawings only. Any subsequent changes would be processed on receipt of a variation instruction.” Oh, before I forget, the bill for those variation instructions and breach of warranty about the drawings totted up to a shade under £5.5m.
“Shan’t pay,” said the joint venture. The judge at trial (Emcor Drake & Scull vs Edinburgh Royal Joint Venture [25/10/05] Scottish Outer House) said: “The two sides plainly had radically different views as to the terms of the contract and I must decide between those views.” He was talking about the intention of the parties by those words in the contract. The joint venture had agreed that the bid was prepared on that basis. But what does it mean to say “fully co-ordinated” and/or “approved for construction”? This case is all about how to construe the contract.
The fuzzy edge is where the line is drawn when the phrase “fully co-ordinated” is used. The architect provides the shell drawings. Then an engineer plots the building services. Then someone plots the relationship of services to services and then to building structures. Then someone identifies precise routes, avoids clashes and shows access points. Then someone gives the drawings to the lads on site and they do the putter-uppering. Where did you draw the line? What is a fully co-ordinated drawing?
ED&S had taken the drawings to be the putter-uppering work. That’s what it priced on. But the joint venture set out to persuade the judge that, using the rules for interpreting a contract, it didn’t matter a jot what ED&S thought the words meant. You construe a contract as the parties’ intentions by reading the terms in the bargain as a whole and by giving the words therein their natural meaning once placed in the context of a commercial relationship.
The joint venture pointed to other contract clauses, which indicated that ED&S had a duty to carry out co-ordination of services in the services engineers’ drawings, had agreed to “fine tuning” working details and had to satisfy itself “as to the position, dimensions and suitability of any previous works which may affect the ED&S works, also advise the joint venture if any previous work was out of position or unsuitable”.
The judge took the view that when reading the contract as a whole, ED&S was “expected to give detailed consideration to the positioning of electrical services”. ED&S was thereby prevented from making a claim on the ground of incorrect or incomplete information about the works. The “understanding” that the drawings were “fully
co-ordinated” was all very well but not enough to defeat the intentions of the contract as a whole. As to co-ordination, the judge accepted the argument that in M&E work there are two stages of co-ordination: one done indicating the runs in the shell and the other that identifies the actual installation.
Fuzzy-edge disease was first diagnosed by the Building Services Research and Information Association in 1994. But having identified the problem and produced pro-forma tick sheets to give certainty, they are not in wide use. ED&S knew what it meant to say but didn’t use the right words in the contract. Or did it?
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or email him on email@example.com.