If a party has “design liability,” it indicates that it is legally responsible for the entire or a portion of the design of a construction or engineering project. Typically, on a construction project, a number of consultants, as well as the contractor and some of its subcontractors, will produce and develop the design and bear “design liability.” In this article, design liability in construction contracts, we take a look at the process involved and the options available to you.
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Duty of care
Parties having design liability may be expected to exercise differing kinds of care in connection to the design; some may be subject to an absolute obligation to guarantee that the completed design is fit for purpose, while others may be obliged to exercise only reasonable skill and care. The allocation of design responsibility varies based on the procurement option used, and the parties may also expressly adjust the standard of care needed in respect to design in the construction contract and consultant appointments.
How to minimise risk
Central to minimising risk for contractors is ensuring they have a thorough knowledge of what they are agreeing to. This requires evaluating not only the terms of the contract, but also the schedules and documents.
Contractors should avoid adopting duties that are susceptible to interpretation, such as stating that the work should be of a “high standard” or that the fittings used should be of “good quality”, as these can give rise to disputes. It is also vital to be aware of requirements related to fitness for purpose. For instance, be wary of terms that reference “appropriate skill and care” but allude to the expected level of a design-and-build contractor. In addition, requirements to satisfy certain performance standards should be scrutinised thoroughly. In any of these instances, the contractor may inadvertently include a fitness for purpose duty into the contract.
In addition to ensuring that liability is properly transferred down the contractual chain to subcontractors and design consultants, contractors must also carefully assess their insurance status. Regardless of the agreed-upon design duties and standards, both contractors and employers must ensure they have enough insurance coverage. It is not in anyone’s best interest for there to be a gap.
Design liability
There is a predisposition against contractors who design works according to common law. Importantly, the basic common law requirement will vary depending on whether you are a designer or a producer of services and materials, i.e. a design-and-build contractor.
A designer is required to exercise reasonable skill and care in the absence of express terms. This is due to the designer’s implied guarantee that he is competent enough to complete the task he has undertaken.
When a contractor offers services and materials, the law implies that he will perform his task in a good and workmanlike manner and that the ultimate result will be suitable for its intended purpose. In other words, the contractor’s duty is greater than that of the designer and is not confined to the obligation to exercise reasonable skill and care.
Statutory application of terms
Acts of Parliament may also impose design responsibilities in addition to common law obligations. These two aspects coexist, and the existence of a statutory requirement does not preclude the adoption of a higher standard under common law.
The statutory requirements in this instance derive from the Supply of Goods and Services Act (England and Wales) of 1982. In accordance with Section 13 of the Act, when a designer engaged in the course of business provides a service, that service will be performed with reasonable skill and care. When there is an express term in the contract regarding the performance of the service with reasonable skill and care, such an express term does not negate the statutory term unless it is contradictory with the statutory term. In addition, the Act does not affect any laws that impose a higher requirement.
This means that a design and build contractor operating under a contract that implicitly or explicitly imposes upon him a responsibility that his design be fit for its purpose cannot argue that the implied phrase in the Supply of Goods and Services Act reduces his stricter design duty.
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It is important for you to be well informed about the issues and possible implications of a construction contract. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
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Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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