So That – So What?!: Design Liabilities within Terms of Contract

Graham Johnson
Under common law, when a professional undertakes a design function, there is an implied obligation that they must use “reasonable skill and care”. However, when a contractor undertakes the design and construct of a building, the common law obligation is that it shall be “reasonably fit for purpose”.

These are two different obligations and the distinction is important. Fitness for purpose is the higher obligation; a guarantee to achieve a specified result. If the specified result is not achieved, the obligation has not been met and the party is in breach of contract.

Reasonable skill and care is a lesser obligation. It requires the designer to carry their work with due care and skill, adhering to good industry practice, to the same standard as that of a reasonably proficient practitioner of the same profession. A professional would be found negligent if they did not achieve that standard. They would be expected to refer to contemporaneous standards and guides in undertaking their activities.

However, the above obligations can be replaced by the terms of a contract. The most immediate example is the JCT Design and Build Contract, which reduces a contractor’s design liability from fitness for purpose to that “of an architect or other appropriate designer”, which is reasonable skill and care.

But, what is the position if a designer followed a design standard, which contained a technical error? This was examined in the recent case of MT Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg Ltd[1]. MT Højgaard were appointed as the contractor for the design and construction of sixty wind turbines to the Robin Rigg windfarm in the Solway Firth. The contract contained a number of relevant clauses:

(Contractors Obligations)

The contractor shall…design, manufacture…and complete the works:

     (i) with the due care and diligence expected of appropriately qualified and experienced designers, engineers…

     (iv) in a professional manner…in accordance with…good industry practice…

So far, so good; this being reflective of a reasonable skill and care obligation. But, the contract went on to state:

     (viii) So that the Works, when completed, comply with the requirements of the Agreement…

     (x) So that each item of Plant and the Works as a whole shall be fit for its purpose as determined in accordance with the Specification using Good Industry Practice…

The above clauses now being suggestive of a fitness for purpose obligation.

The technical specification stated:

“The Works element shall be designed for a minimum…design life of twenty years without major retrofits or refurbishments…”

The technical specification required the design to be carried out in accordance with international standard DNV-OS-J101 for the design of offshore wind turbines.

Shortly after completion, the foundations were found to be defective, with the problem stemming from a technical error within the J101 standard. The repair bill being some €26.25m.

The parties went to court (three times), to see who was responsible for picking up the bill.

At the first hearing, the Technology and Construction Court found that MT Højgaard had exercised reasonable skill and care by following the requirements of J101, however the contract contained a warranty (a guarantee) that the foundations would have a service life of twenty years.

MT Højgaard appealed. The Court of Appeal found that the contract did not contain a warranty, and that the words “fit for its purpose” were tempered by “as determined in accordance with the Specification using Good Industry Practice”. In this regard, a designer following a recognised technical guide, (J101), was “good industry practice” and reflective of a reasonable skill and care obligation.

E.ON then appealed. The lords of the Supreme Court reversed the judgement. They held that the twenty-year life was either a warranty or an agreement to design the foundations in a certain way. The requirement to follow J101 was the minimum standard, but the obligation to achieve the twenty-year life was the overriding obligation. This meant that MT Højgaard had to ensure the twenty-year life.

The argument that the twenty-year life requirement was included in the technical specification, and not in the body of the contract, was rejected. When read together, the documents were sufficiently clear.

Reflection

This was a complicated case concerning design liability accepted by contracting parties. In the contract, there were clauses reflective of the reasonable skill and care obligation. However, the words “so that” in effect ousted this obligation, and replaced it with one of fitness for purpose; a much higher obligation.

The fact that the J101 standard contained a technical error, and that MT Højgaard had exercised reasonable skill and care in following J101, was insufficient to oust the strict obligation to achieve the twenty-year life.

Designers need to exercise care in reviewing the terms of contracts. Words such as “so that”, or other words that would imply or import a strict fitness for purpose obligation, should be treated with care and avoided wherever possible. The courts have determined that following recognised design standards is insufficient where strict performance is required.

 

[1] [2017] UKSC 59

 

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