One of the contract traps for anyone providing construction works is a fitness for purpose obligation.
This type of strict liability output obligation is rarely expressly included in a construction contract* (one of the arguments being that it is not covered by standard insurances). However…
Fit for furpose
Whenever I review design and build contracts and subcontracts, fitness for purpose is almost always lurking in the background. The contract may say:
- the contractor shall carry out and complete the works in accordance with the contract documents (JCT DB)
- the contractor provides the works in accordance with the scope (NEC4)
- when completed the works shall be fit for the purposes for which they are intended as defined and described in the ER or where no purposes are so defined and described, for their ordinary purpose(s) (FIDIC 2017 Yellow)
- ‘so that the design of the works and the works when completed… shall be wholly in accordance with this agreement and shall satisfy any performance specifications or requirements of the employer set out in this agreement’ (Hogjaard v Eon)
- ‘Any part of the works designed … shall meet the requirements described in the specification or reasonably to be inferred from the tender documents or the contract’ (Costain v Haswell)
- ‘The facade shall be designed such that it has a life expectancy of not less than 60 years for the primary elements’ (125 OBS Nominees v Lend Lease)
It is a rare design and build contract which does not require the contractor to carry out the works to meet a specification, technical or functional requirements, or a design life. All these have been interpreted as requiring more than the input standard of reasonable skill and care. They are all fitness for purpose, output standards.
Even if the technical requirements are impossible, the courts have stated that if the contractor has promises to meet those requirements, the employer is entitled to damages for its failure. Some contracts such as NEC4 attempt to resolve impossible requirements once the contract is signed, although it still better to find out that a project is impossible before you start!
Only applies to contractors?
In Costain v Haswell the court said
“…whilst it is true that usually a professional man in the field of construction only undertakes an obligation to this client of the exercise of all reasonable professional skill and care, it is perfectly normal, in any given case, for such a professional man to give express warranties which impose strict liability or a performance obligation such as that the finished building will be reasonably fit for a specified purpose. There is nothing in principle wrong or unusual in finding such provisions in professional engagements… I find it difficult to see the commercial sense or practicality in laying down strict tolerances as regards settlement in the Main Contract specifications but then to only require the Contractor to use reasonable skill and care to achieve those tolerances. That, it seems to me, would be to seriously undermine the purpose and intended effect of the Main Contract…”
Consultants can also be agreeing to design works so that they are fit for purpose.
Can you avoid fitness for purpose?
Essentially you need to borrow this type of clause:
the contractor does not warrant (promise) that the works will satisfy the employer’s requirements (MF/1)
Of course, an employer may wonder why it is paying over good money for something which may or may not suit its needs… It is difficult to resolve this sort of qualitative standard through simple legal language. It is even harder when the client’s design and functional requirements are not clear before the project starts.
What should you do?
To avoid disputes, and misunderstandings, your contract terms relating to quality need to precisely match the contract specification with its functional requirements.
Accuracy and clarity are needed to avoid the multi-authored set of quality standards bemoaned by the Supreme Court in Hojgaard and the ‘inconsistencies, ambiguities and infelicities‘ apparent in most construction contracts.
*Engineering contracts like IChemE and FIDIC sometimes contain express fitness for purpose obligations; these are backed up by extensive testing to check the works do meet output requirements, remedies for failing those tests and limits on the contractor’s liability.
Cases:Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC 3140 (TCC); MT Hojgaard AS v E.ON Climate and Renewables UK Robin Rigg East Ltd & Anor [2017] UKSC 59; 125 OBS (Nominees1) & Anor v Lend Lease Construction (Europe) Ltd & Anor [2017] EWHC 25
See also article from Fenwick Elliott.
