‘For a contractor, a fitness for purpose obligation tends to raise the hackles. But why?’
Not fit for purpose’ is the sort of term we hear used to describe a misfiring quango or government department shortly after a major public embarrassment. It’s a form of polite shorthand to mean “completely useless” or “totally incompetent”. We very rarely hear of anything being “fit for purpose”. Probably because when something is, it’s doing what it’s supposed to.
In construction law, however, “fitness for purpose” is a phrase that most of us will come across on a fairly regular basis. It means that a building will perform at a required standard. A fitness for purpose obligation may sit beside the more familiar standard which is for the contractor to exercise “reasonable skill and care” in carrying out the works.
For a contractor, a fitness for purpose obligation tends to raise the hackles. But why? Surely it’s just an obligation to build or design something that works; a building that “does what it says on the tin”?
The problem with a fitness for purpose obligation is that they are, in effect, a promise that what is being built will work even if the contractor or consultant could not have known that what they are designing or designing and building is incapable of working (i.e. even if they were using reasonable skill and care). This particularly tricky position was recently played out in the case of MT Hojgaard a/s v E.On Climate and Renewables UK Robin Rigg East Limited.
In light of the MT Hojgaard case, where a contractor or consultant is being asked to agree a fitness for purpose obligation, they should exercise renewed caution
Here, the contractor was contracted to design, make, and install the foundations for sixty offshore wind turbines. The contract contained both a reasonable skill and care clause and an obligation that the turbines would be fit for purpose. In this case, that meant that the foundations would have a minimum life of twenty years.
Sadly, the industry-wide, and universally accepted, independent, international standard for the design of such foundations turned out to be wrong - by a factor of ten! Despite exercising reasonable skill and care and following best practice, the contractor provided sixty sets of foundations that will not last twenty years.
The High Court ruled that in construction contracts it is acceptable for fitness for purpose and reasonable skill and care obligations to sit together. The judge stated that the two obligations are “not mutually inconsistent”. The judge decided that the contractor was in breach of the contract because the foundations were not fit for purpose, despite them having exercised reasonable skill and care. The cost of the remedial works? Estimated to be €26.25 million.
So, in light of the MT Hojgaard case, where a contractor or consultant is being asked to agree a fitness for purpose obligation, they should exercise renewed caution. A reasonable skill and care clause might not offer much protection to a contractor or consultant where it sits beside an absolute obligation to achieve a certain standard of workmanship. Unwittingly, building something “un”-fit for purpose can be a very expensive experience.
Stephanie Canham is national head of projects and construction at law firm Trowers & Hamlins