John
Russell
Construction
Contracts & Training Consultant
(Established 1984)
Cheshire CW4 7DP
Tel : 07770 986444
Email : swsubbie@globalnet.co.uk
Website: www.jrconsultant.co.uk
BEWARE THOSE “DESIGN” RESPONSIBILITIES
The last few years have seen an
increasing tendency for the client’s “design team” to off-load responsibility
down the contractual chain. Perhaps this has been influenced by the increasing
cost of professional indemnity insurance. Some or all of this responsibility
usually falls upon the specialist sub-contractor. With the added responsibility
of “design” comes a whole range of contractual and commercial risks. However,
these design risks can be minimised by cultivating commercial awareness from
the very outset. Some of the key
problem areas are summarised below.
Clarity of tender offer
Many
problems arise from lack of clarity within the original enquiry and tender
documents. It is essential that the
sub-contractor’s tender is quite clear as to exactly what the client is going
to get for his money. Is it “full design” or “design development” ? If “design development” then is the
demarcation line clear? If the
sub-contractor is unable to comply fully with the enquiry requirements, then is
the tender suitably qualified ? If “provisional sums” are included, then
are these clear and specific?
Duty to warn
The specialist sub-contractor has,
arguably, an implied “duty to warn” at tender stage, regarding
elements of “impossibility”. It is not enough
to take the stance of “Well, that’s
what you said you wanted”. Such
“warnings” should be given at the outset.
The text books tell us this is
equally true even when there is no formal design responsibility.
Fitness for purpose
This is a very onerous obligation,
which should be watched for in enquiry documents, and attempts made to exclude
from the eventual sub-contract agreement.
Clearly, the risk factor is much higher than the more acceptable
criteria of “all due skill and care”.
It has been ruled in the courts that if a contractor undertakes a
“design and build” obligation, then “fitness for purpose” applies. For this reason, the standard forms of
contract usually express the design
onus as “all due skill and care”.
However, the position is not always clear, and even less so under
non-standard (bespoke) forms. Few, if
any, insurance firms will knowingly accept a “fitness for purpose” risk, and so
the careless sub-contractor could well find himself carrying an uninsurable
obligation.
Client’s warranties
Beware the typical “design warranty”
which places the sub-contractor at risk, usually for twelve years, to actions
from the end client and a whole succession of funders, purchasers and future
tenants. Even when there is no formal
design responsibility or warranty, the sub-contractor could well be sued in
tort by a party to whom he owes a “duty of care” under law.
Approval periods
If not stated in the enquiry
documents, then does the sub-contractor’s tender specify a “turn round” period for
approval of drawings and other submissions ?
At the very least, this needs to be firmed up as soon as possible after
receipt of order.
Drawing register
A
drawing register should be set and maintained up from the outset, recording the
issue and receipt of all drawings, from whatever source, and detailing
reference numbers, titles, dates of issue, status and approval.
Preferential engineering
Many
difficulties and disputes arise from “preferential engineering”. This term may
be used to describe the process where, by a subtle process of queries,
suggestions and conditional approvals,
the client intrudes into the sub-contractor’s design and selection process,
sometimes intentionally but often
without realising it. “Preferential engineering” can cause serious delay and can introduce what are in actual fact “variations”
without their being recognised as such.
The sub-contractor must be watchful of this, and ready to nip it,
politely but firmly, in the bud.
Confirmation of all communications,
approvals, instructions etc
It is absolutely essential that all
communications, approvals, instructions etc be confirmed in writing at the
time. Unconfirmed communications give
rise to subsequent differences of recollection as to what was said, or even to total
amnesia. It is almost always the sub-
contractor who suffers in these cases.
Technical queries
All queries and requests for
information should be communicated, and/or confirmed, in writing. A register should be kept, showing date of
issue, reference, content, and dates of response and eventual resolution. It is vital to use a coded reference system
which makes it possible to trace the individual links through from initiation
to final resolution.
“Little tin gods”
“Little
tin gods” is a term which aptly describes personnel in the client’s team,
and/or other parties on the periphery, on whose “say so” important decisions
are taken and/or variations introduced, but who have no proper contractual
authority. Typical examples would be : client’s co-ordinators, consulting
engineers, works managers, facilities managers etc. If in doubt, the sub-contractor should ask for written
clarification at the outset, as to whether or not a particular party has the
requisite authority. Later on is too
late !
Conclusion
In
essence, it is true to say that any ambiguity or discrepancy, however
unfairly, nearly always gets sorted
out at the sub-contractor’s expense. So the street-wise sub-contractor must eliminate those “grey areas”
of design responsibility from the start !
John Russell
Based on Jack
Russell’s “Contract Law” column in
“Electrical Times” published 1 October
06.
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