Many projects are procured on a design and build basis, but what exactly does this mean in terms of the contractor’s design liability? The positions adopted across standard contracts and common bespoke drafting are far from uniform.
Take the JCT Design and Build Contract, 2011 edition (DB11) for example, clause 2.17.1 states:
“The Contractor shall in respect of any inadequacy in such design have the like liability to the Employer… as would an architect or, as the case may be, other appropriate professional designer… who… has supplied such design for or in connection with works to be carried out and completed by a building contractor who is not the supplier of the design.”
Bolam v Friern Hospital Management Committee is still the starting point for a professional’s duty of care and applies to designers as much as to doctors, requiring at common law that services are carried out with reasonable skill and care. Under this JCT clause, whether the contractor is negligent in its design of the works will, therefore, depend on whether it failed to exercise the standard of skill and care expected of a competent architect or professional designer.
Contrast this with clause 10(2) Alternative B of the GC/Works/1 Single Stage Design and Build General Conditions (1998), which states that:
“…the Contractor warrants to the Employer that the Works will be fit for their purposes, as made known to the Contractor by the Contract.”
Under this clause (or a similar clause warranting the works will be suitable for the purpose for which they are required by the employer), the contractor is warranting that the Works (which are defined to include design) will, when complete, be fit for their purpose. Unlike a reasonable skill and care obligation, breach of a fitness for purpose obligation does not require proof of negligence and is a higher standard. Where the required standard is fitness for purpose, it is no defence that the contractor conformed to established practice for professionals and was not negligent. The contractor’s design must effectively meet the employer’s stated requirements, whatever they may be.
Now consider a further alternative, not unusual in the context of a bespoke contract:
“Insofar as any design of the Works is required to be carried out by the Contractor, the Contractor shall carry out and complete such design using the reasonable skill and care of a properly qualified and competent design and build contractor.”
So what is the standard of care expected of a design and build contractor?
Commercial contracts and implied terms
The Sale of Goods Act 1979 (SGA 1979) applies to goods sold in the course of business and implies a term into commercial contracts that the goods will be reasonably fit for any purpose expressly or implicitly made known to the seller. In relation to contracts for the transfer of goods (including the provision of services and contracts for the supply of services alone), the Supply of Goods and Services Act 1982 (SGSA 1982) implies a similar term to the SGA 1979, but also implies a term that the supplier will carry out the services with reasonable care and skill.
From an analysis of these implied terms, determining the standard of care owed by a design and build contractor presents quite a challenge given the dual role of the contractor in both:
- Designing, or at least completing the design of, the works (that is, providing a professional service).
- Building the works (that is, delivering a finished product).
As the courts have struggled to grapple with this question, a body of case law has developed supporting the view that where the contractor is both the designer and the contractor, in absence of an express contractual term to the contrary, the design and build contractor assumes a fitness for purpose obligation in respect of the design of the works. The case law on this point does not provide a single overarching principle on why this should be the case, but commentators have offered the view that, because a design and build contractor is responsible for delivering a finished article (the completed works), a contract for the design and construction of a building is essentially a sale of goods contract subject to the sale of goods law. This makes it a contract which implies a warranty that the goods will be reasonably fit for any purpose that is expressly or implicitly made known to the contractor.
Reasonable skill and care or fitness for purpose?
Having considered the options, which is better from an employer’s perspective: a contract containing a reasonable skill and care clause relating to design, or a contract with a fitness for purpose obligation?
On the face of it a contract with a fitness for purpose obligation looks more beneficial from an employer’s perspective. However, professional indemnity insurance policies only cover a contractor or designer for failure to exercise reasonable skill and care. A fitness for purpose obligation may, depending on the insurance terms, void a professional indemnity insurance policy, in which case the employer will not be able to avail itself of the contractor’s professional indemnity insurance.
Possible solutions
Whether the contractor should be required to warrant that the design will be fit for purpose is a commercial point for negotiation and there are circumstances where this might be appropriate, such as process plant contracts. However, there are concerns with this where the contractor is not able to obtain insurance that covers it for a non-negligent error. One option for an employer is to adopt a clause with a higher reasonable skill and care test than that prescribed in the standard form contracts such as:
“The Contractor acknowledges that it has exercised and will continue to exercise in the design of the Works all reasonable skill and care as may be expected of a properly qualified designer of the appropriate discipline(s) for such design, experienced in carrying out works of a similar scope, nature, timescale and complexity and on a similar site or at a similar location to the Works.”
Such a clause can easily be incorporated into a schedule of amendments to a standard form contract or in a bespoke contract. Other amendments can also be made to transfer design risk (including risks to price and time) to the contractor.
As a Contractor I have a clause in an invitation to tender that states “The Contractor shall be ultimately responsible for ensuring that his designs meet the functional requirements specified” The design has been done by the Employer but the Contractor is to “verify the design”.
This looks like a fitness for purposes clause that you refer to in the article, do you agree?
with kind regards
Under a design and build contract, where the architect has designed the initial building pack and then novated the practice over to the contractor, what kind of responsibility does the architect have to the contractor? i.e What things could the contractor possibly “chase” the architect over? I’ve found a lot of information regarding the contractor’s liability towards the employer for the design but nothing about the architect (and all other subconsultants) towards the contractor.
It is important that a novated professional appointment, such as an architect’s appointment, remains consistent with the fact that the novation has occurred. For example, that it doesn’t require continuing advice to the original client, which may create a conflict of interest with the new client (the contractor). As we say in our Practice note, Novation of construction documents:
That is, the scope of services and the terms of the appointment are fundamental after novation, just as they were before novation. So, if the professional appointment and scope of services require an architect to deliver designs or information, using reasonable skill and care, to a particular timeframe, that contractual obligation will continue after novation.
I have a design which has been accepted by the client. During works an adjacent buried asset (outside of the original scope & worksite) was found to be unsafe and the client notified. Works have ceased on site whilst investigation works and re-design take place. He states that this was a foreseeable risk under a design and build contract and says that design and repair should have been included in the original price. He did not issue any pre-construction information about this adjacent asset.
If it was a foreseeable risk surely the client (acting as PD) should have informed us. If its not a foreseeable risk then surely its a variation to contract.
Also he states that any delay to programme is not his fault and is looking to apply penalties Is this reasonable?
Hi All,
I have a quick question, on JCT design and built project in terms of samples how much should be put in front of the client and their consultants? This is something that has been brought up on current project we are involved in as a main contractor.
Your help would be appreciated.
We have an architect providing design information to RIBA stage 3 and obtaining planning permission – they are not appointed for detailed design, RIBA stage 4. We have been informed that the project will be carried out as a design and build contract.
Does this mean that the Contractor is responsible for the architectural detailed design, RIBA Stage 4 and will be taking design liability. Therefore should the contractor also have professional indemnity insurance were something to go wrong in the future ?