Fit For Purpose in Construction Contracts

Fit For Purpose in Construction Contracts

Design and build contractors are required at common law to produce a building that achieves the contracted result (IBA v EMI Electronics and BICC Construction Ltd.) They are basically treated in the same way as any other manufacturer of a complex product, such as a car or a computer.

Again it is possible to alter this obligation by contract. Many standard forms of contract seeks to do this by watering down the contractor’s design liability to that of an Architect or other professional designer (that is, to reasonable skill and care only). But many Employers fail to see the logic in this. Why should some of the contractor’s obligations (like workmanship and materials) be subject to an absolute test and others (like design) be measured by a lower standard? After all, they are both steps towards the same end, namely delivery of a working finished product. In short, what the client wants and expects is a package deal: “design and build”, not “design” and “build”.

Contractors often plead that absolute design obligations fall outside the scope of their Professional Indemnity Insurance cover. This in some instances may or may not be the case, but many of the contractor’s obligations are not insurable, for example, to build in a good and workmanlike manner and to use suitable materials. But no reputable contractor would object to them for that reason alone. In other words, professionals and contractors are in a different position as far as design liabilities are concerned.

It is not the case that design and build contractors should not be seen as professionals with specialist skills in their own right but the overall service they offer is different, and it is right that the law reflects this.

In the absence of an express term in a contract for providing a design service there will be an implied term that the designer will use reasonable skill and care. This standard is not that of the hypothetical ‘reasonable man’ of ordinary prudence or intelligence, but a higher standard to his professional expertise. This was established in the case of Bolan v Friern Hospital Management Committee (1957). This was amplifies in the case of Wimpey Construction UK Limited v DV Poole (1984) in which the court held that the professional person has a duty to exercise reasonable care in the light of his actual knowledge not the lesser knowledge of the ordinary competent practitioner.

It is also relevant that the designers’ obligation to use ‘reasonable skill’ and ‘reasonable care’ is generally governed by the applicable standards in place at the time. These standards normally consist of Building Codes, Regulations, Malaysian Standards and similar authoritative published materials.

In the case of a contractor undertakes design works or the production of working drawings there is in the absence of any express term in the contract an obligation for the contractor to provide a product which is ‘fit for purpose’. The duty to provide a building ‘fit for purpose’ is an absolute duty of the contractor.

There is nothing inherently wrong with asking a contractor to produce a building that meets specified performance requirements. Indeed that is exactly what he is being paid to do in a design and build contract. What Contractors find objectionable is being asked to provide a facility that is suitable for any unspecified purpose that the client may choose to put it in future. It is unreasonable to expect an office building to serve as a process plant, any more than a family car is designed to negotiate the off road conditions. This is perhaps an extreme example, but it illustrates where fitness for purpose becomes a real problem. This problem is partially addressed by the courts ruling in Slatter v Finning (1996) in which it was established that where a party is not aware of the particular purpose for which the goods are intended or where the use deviates from the normal use.

To circumvent this problem contracts should clearly state what the Employer wants, and not allow the glib term “fit for purpose” to muddy the waters. This may not lie well with Employers who will have to rely on the accuracy of their documentation nor may the designers be happy with this situation as clearly compilation in the contract documentation will inevitably be their remit and it would seem a lot easier to sneak in the ‘fit for purpose’ clause in an attempt to pass this responsibility.

Judgments relating to fit for purpose.

Greaves Contractors Limited v Baynham Meikle & Partners (1975)

Donoghue v Stevenson (1932)

QV Limited v Frederick Smith (1998)

Young & Marten v McManus Childs (1969)

Slatter v Finning (1996)

MALCONLAW 2011