Limits on the Contractor’s Liability under MF/1

MF/1 is a balanced contract providing plenty of opportunities for the purchaser to check the performance of the works – through three series of tests – before the contractor is released from liability.  It also clearly sets out limits on the contractor’s obligations.

Limits on scope

If you are acting as the contractor, you are not responsible for:

  • Prime cost items unless you approve the supplier, work or materials (5.6)
  • Unexpected site conditions (5.7)
  • Cost increases due to changes in law (6.1) or labour, transport and materials (6.2)
  • Licences and consents (11.3)
  • Various onsite provisions such as buildings, foundations (11.4), lifting equipment (11.5), utilities, water and power (11.6 and 11.7)
  • Design provided to you, which you notify the engineer that you are not taking responsibility for (13.3); similarly written information and drawings provided to you (16.2)
  • Delays caused by interference with tests on completion (31.1) and delays to completion due to acts of the purchaser, industrial disputes, and circumstances beyond your control (33.1)
  • Purchaser’s risks as set out in clause 45.1.

Limits on liability

If you are acting as the contractor, you will benefit from these limits on your liability:

  • Agreed damages for delay (34.1) which are subject to an overall cap on those delay damages. As these damages are an exclusive remedy then the purchaser cannot bring other claims for losses arising due to late completion.
  • Agreed damages for failure to achieve specific guaranteed performance where the results of performance tests are nonetheless within specified acceptance limits (35.8(a)). Once these are paid the purchaser has to accept the works and can neither reject nor ask for a reduction in the contract price.
  • No liability for fitness for purpose of the completed project or the works (36.9) – performance is based on passing measurable tests within specific tolerances.
  • A 12-month defects period giving you the opportunity to repair or replace works (36.2). which is an exclusive remedy for all quality issues.
  • 3-year liability for latent defects (36.10) which prevents claims for defects which appear after this period.
  • A maximum cap on each claim under the contract (44.3) and an exclusion of the purchaser’s right to claim loss of profits or other consequential losses (44.2).

There is a also a contractual requirement (which mirrors the requirement at common law) for the purchaser to mitigate its losses i.e. to ‘take all necessary measures’ to minimise the losses, provided they can do so without unreasonable inconvenience or cost (44.1).

Constraints on your remedies

You are restricted in your remedies by:

  • A 30-day period for notifying the purchaser of any claims (41.1)
  • No right to recover profits except under specific listed clauses (41.2)
  • No general right to recover loss of profits or other consequential losses (44.2).

What should you do?

Check that the parties are both aware of any limits on the contractor’s obligations and liabilities – many disputes can be avoided where the expectations of the parties are clear at the very start.

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