Houston, we have a problem: Standard of Workmanship & Defects

Read more articles by: Oliver Slater, Read more articles by: Rachel Murray-Smith,

In last week’s article we looked at risk allocation in a construction contract. In this, our slightly delayed (luckily no LADs apply!) but penultimate article in our series, we turn our attention to:

  1. Standard of workmanship and design; and
  2. Defects.

Standard

We are all familiar with the requirement in construction contracts to carry out works in a “good and workmanlike manner” and to use “reasonable skill and care”. However, I am asked on a not infrequent basis by employers what these terms really mean and how they can assess whether a contractor has complied with these requirements, so….

What do they really mean?

Workmanship

“good and workmanlike manner”

The requirement for a Contractor to complete works in a “good and workmanlike manner” exists whether or not you have an express term to that effect; it is an implied term in every construction contract as a result of cases such as Duncan v. Blundell (1820) 171 ER 749; Cousins v. Paddon 150 Eng. Rep. 234 (1835); Conquer v. Boot [1928] 2 KB 336, [1928] All ER 120 and Purser and Co. (Hillingdon) Limited v. Jackson and Another, [1971] 1 QB 166.

The term is used to reflect the requirement to carry out works using the ordinary skill and competency to be reasonably expected of a particular trade or business. In simple terms it places an obligation on the contractor not to carry out the works in a manner that is inferior to other contractors. It should be noted that in respect of standard building contracts the obligation is normally an absolute one to carry out and complete the works in accordance with the contract and, absent provisions to the contrary, that the works be fit for purpose (as advised in the employer’s design and scope). We revisit the issue of fitness for purpose in more detail below.

Design

“reasonable skill and care”

This particular requirement comes into play when there is a design element. This term is also implied into contracts but by statute[1] as opposed to common law. Subject to an express contractual term to the contrary, professional designers and contractors with design responsibility must provide their ‘design services’ to the same standard as a reasonably competent member of the profession (i.e. an architect)[2]. Much in the same way as “good and workmanlike manner”, it is a requirement for the contractor to use the skill and care which would reasonably be expected of a contractor carrying out ‘services’ of the same nature but importantly it does not require the contractor to guarantee a particular result.

An assessment of a contractor’s compliance with the aforementioned requirements is predominantly a technical one which must be based on the specific facts.

The issue of the applicable standard is less straightforward in design & build (“D&B”) projects.

There are two design standards which can be applied in a D&B scenario: i) the reasonable skill and care standard and/or ii) fitness for purpose.

The courts have looked at D&B projects and drawn a parallel with the standard required under the Sale of Goods Act 1979 (as amended). This Act, as many of us know from our own retail purchases, requires that goods be fit for their intended purpose. The rationale of the courts in coming to this view is that a D&B contractor has responsibility for both the design (inputting into buildability) and also building to that design. In so doing, a D&B Contractor is effectively delivering a product (or “goods”) as opposed to simply a service to the Employer.

Fitness for purpose is a higher standard, the end product must be fit for the employer’s intended purpose. The absolute nature of the standard means it is easier for an employer to prove that a contractor has failed to comply.

Contractors (and consultants for that matter) regularly take issue with any attempt to apply the fitness for purpose standard on the basis that their insurance does not cover them for non-negligence based claims.

There has been a relatively long and tortuous line of case law regarding the existence of both design standards within a contract. Luckily for employers (and the employer in this case in particular!) the Supreme Court held in MT Højgaard A/S v E.On Climate and Renewables UK Robin Rigg East Ltd and another [2017] UKSC 59 that the fitness for purpose obligation trumped that of reasonable skill and care.

If it is not possible or appropriate on a given D&B project to apply the fitness for purpose standard then as a minimum we would recommend a bespoke version of the “reasonable skill and care” obligation which is reflective of the size and complexity of the project.

Defects

Is the work defective? The essential first step

We want to concentrate, although briefly, on the first and most important step in the process when it comes to defects and ensuring that they are rectified. The reason for doing this is that we regularly advise on matters where this first step is not carried out properly or where one or both of the parties has merely made assumptions in carrying out this first initial assessment of the existence or otherwise of a defect.

Most standard form construction contracts (the NEC suite being the exception) do not define “defect”. The courts have interpreted this term broadly and in accordance with its natural meaning.

In order to establish whether works are in fact defective it is necessary to consider and assess the following:

  • The specific facts and circumstances;
  • The technical requirement(s) contained within the contract;
  • The standard or standards applicable to the works (as discussed above);
  • Applicable contractual obligations i.e. those that impose absolute obligations. Although a Contractor may have carried out the works to the required standard they may still be liable for a defect owing to absolute obligations contained within the contract (MT Højgaard A/S v E.On Climate and Renewables UK Robin Rigg East Ltd and another [2017] UKSC 59);
  • Any limitations on liability contained within the contract.

Consideration of the above points will assist in establishing whether something constitutes a defect under the contract and, therefore, whether the contractor is liable for rectifying and/or any loss suffered by the employer.

An assessment of the above points is an essential first step in enforcing defect rectification obligations and/or pursuing a claim against a contractor for defective works.

[1] Supply of Goods and Services Act 1982 (as amended)

[2] Bolam v Friern Hospital Management Committee [1957] 2 All ER 118

Posted in Authors, Oliver Slater, Rachel Murray-Smith.