One of my favourite standard forms is MF/1 the IET Model Form of Contract for the design, supply and installation of electrical, electronic and mechanical plant.
It is clear, logically ordered and user-friendly. [It used to be printed on pink paper but that’s not why I like it.]
This post outlines some of the aspects you need to consider when choosing MF/1 as part of your contract strategy.
The standard form MF/1 is a contract for the design, supply and installation of electrical, electronic and mechanical plant (2014, Revision 6, published by IET and IMechE). It is designed for projects with a large element of mechanical, electronic or electrical plant.
I have helped clients use it for amphibious boats, airport security systems, automated clothing supply centres to chemical or power plants. Because these projects have a shorter life-cycle, MF/1 reflects this (see below).
MF/1 is suited to projects with extensive commissioning – whilst JCT can include testing regimes in the Specification, it does not contain relevant remedies or obligations.
The key players are the purchaser, contractor and the engineer – who administers the contract and designs the works.
As an engineering standard form, MF/1 has some major differences to typical construction standard forms eg JCT:
- Variations: the right to vary the works is limited to a specific percentage of the contract price (clause 27.2) and only relates to the works (not conditions of working, the location of site huts, or other items usually associated with changes under JCT)
- Fitness for Purpose: unlike the IChemE contracts, MF/1 excludes any liability of the contractor for fitness for purpose (clause 36.9)
- Testing: MF/1 contains three different series of tests (see below).
- Completion: The works are not passed to the purchaser when completed, but when they meet certain criteria (against which they are tested). This is known as take-over and afterwards, the contractor’s role is limited.
- Defect Periods: MF/1 provides for a new defects period when plant is repaired or replaced due to defects. This means there can be multiple defects periods for one plant running simultaneously.
- Latent Defects: there is no long-term liability for latent defects, as the majority of defects are discovered either during testing or the first year of use.
- Engineer: the contract administrator may be an employee of the purchaser, rather than an independent consultant. This makes design approval easier but confuses the aspects of the role as agent and impartial certifier.
- Construction Acts: some of the projects to which MF/1 applies are excluded from the provisions of the Construction Acts 1996 and 2009. Recent cases highlight the need for caution.
- Claims Period: like FIDIC and NEC3, the contractor has a strict period (a condition precedent) to notify the purchaser of any claims, 30 days (clause 41.1)
- Liability limits: MF/1 contains clear limits on the contractor’s liability (see below).
MF/1 is not based on inputs (ie reasonable skill and care) but on checking that the plant meets the required outputs (through testing). It requires the parties to carry out a series of tests:
- Pre-installation tests – these contractor tests check whether the plant meets the specification (clause 23.1).
- Tests on completion – these contractor tests prove that the plant satisfies the completion criteria and the works can be used as intended; they are certified by the engineer before taking-over (clause 28.1).
- Performance tests – these purchaser tests confirm performance after taking-over (clause 35.1).
Each set of tests results entitles the purchaser to distinct remedies including re-testing, liquidated damages or rejection.
Limits on liability
Unlike IChemE Silver Book, MF/1 has a clear series of limits which help balance the single chance the contractor has to make a profit and the profit-making capabilities of the plant.
There are three monetary limits (in addition to the claims notification period and a three-year latent defects period):
- No indirect or consequential loss: Liability for loss of profit, loss of use, loss of production and all other forms of economic or indirect loss is excluded for both parties. In Strachan & Henshaw this clause disentitled the contractor to claim financial loss due to the removal of its facilities away from the site (clause 44.2). Profit is only recoverable under the circumstances notified in clause 41.2.
- Limit on any claim: The contractor’s maximum liability for any one claim is limited to the contract price, or some other expressly agreed amount (clause 44.3).
- Exclusive remedies: The parties’ express contract remedies are exhaustive of their rights. Rights to claim without an express contractual remedy, e.g. under an ‘implied’ term or for misrepresentation are excluded (clause 44.3). This exclusion of all other remedies was considered with approval in Strachan & Henshaw.