3
Obligations of the contractor
3.1 The contractor’s paramount obligation is to ‘carry out and complete the Works’. This is stated in Article 1 and reinforced in clauses 2.1 and 3.6, the latter being a clear statement that the contractor is held wholly responsible for achieving this, irrespective of whether the contract administrator or clerk of works visits or is present on the site.
3.2 Should Supplemental Provision 1 (Schedule 8) be incorporated, the contractor would, in addition to these primary obligations, be under an express duty of collaboration. The provision states:
3.3 This places a duty on the contractor to collaborate not only with the employer, but also with other team members, which would include the employer’s appointed consultants. Other supplemental provisions introduce further obligations, including to notify the employer promptly of any matter that may give rise to a dispute. Such obligations may affect the interpretation of the nature and extent of the contractor’s duties under other clauses.
The works
3.4 The works that the contractor undertakes to carry out will be as briefly described in the first recital of SBC16, and as shown or described in the contract documents. It is therefore important to check that the entry in the first recital clearly identifies the nature and scope of the proposed work, and that descriptions of the works given elsewhere are clear and adequate. Under the ninth recital the employer may stipulate that the works include the design and construction of an identified part or parts of the project, termed ‘the Contractor’s Designed Portion’. The term ‘Works’ is consequently defined under clause 1.1 as ‘including, where applicable, the CDP Works’.
3.5 Note also that, as defined in clause 1.1, the works will also include any changes subsequently brought about by a contract administrator’s instruction, which might also introduce additional drawings or other information. These might not be ‘Contract Documents’, but they nevertheless have an important status and the contractor is obliged to carry out any additional work which they show.
Contractor’s design obligation
3.6 The contractor’s design obligation is set out under clause 2.2, which states ‘Where the Works include a Contractor’s Designed Portion, the contractor shall … in accordance with the Contract Documents, complete the design for the Contractor’s Designed Portion’.
3.7 The part or parts to be designed by the contractor are to be identified in the ninth recital, which could if necessary refer to a separate schedule listing the parts. The design requirements will have been set out in the employer’s requirements and sent out with the tender documents (tenth recital). The contractor will have submitted a proposal containing a design solution with its tender (the contractor’s proposals, eleventh recital) although, depending on the information requested, this may not be fully detailed. Some of the design may therefore remain to be finalised after the contract is entered into.
3.8 Clause 2.13.2 makes it clear that the contractor is not responsible for the contents of the employer’s requirements, or for verifying the adequacy of any design contained within them. This clause is included to prevent such an obligation being implied, as it was in the case of Co-operative Insurance Society v Henry Boot. Although it is not entirely clear, it is unlikely to prevent the implication of a ‘duty to warn’ regarding any other aspects of the consultant team’s design, for example where the design is varied through an instruction (for an example of this see the earlier case of Plant Construction v Clive Adams).
The Co-operative Insurance Society (the Society) engaged the contractor Henry Boot on an amended version of JCT80 incorporating the Designed Portion Supplement, where the relevant terms are virtually identical to those of WCD98. During construction, problems arose where soil and water flooded into a basement excavation. An engineer had originally been employed by the Society to prepare a concept design for the structure, and Henry Boot had developed the design and prepared working drawings. The Society brought claims against Henry Boot and the engineers. Henry Boot argued that their liability was limited to the preparation of the working drawings. The judge, however, took the view that completing the design of the contiguous bored pile walls included examining the design at the point that it was taken over, assessing the assumptions on which it was based and forming a view as to whether they were appropriate.Co-operative Insurance Society v Henry Boot Scotland and others (2002) 84 Con LR 164
Ford Motor Company engaged Plant on a JCT WCD contract to design and construct two pits for engine mount rigs at Ford’s research and engineering centre in Essex. Part of the work included underpinning an existing column, and in the course of the work temporary support was required to the column and the floor above. JMH was sub-contracted to carry out this concrete work. Ford’s own engineer gave instructions regarding the temporary supports, which comprised four Acrow props. JMH and Plant’s engineers, Clive Adams Associates, felt the props to be inadequate and discussed this on site. The support was installed as instructed and failed, so that a large part of a concrete floor slab collapsed. Plant settled with Ford, and brought a claim against JMH and Clive Adams (who settled). The court found that the duties of the sub-contractor included warning of any aspect of the design that it knew to be unsafe. It reserved its opinion on whether the duty would extend to unsafe aspects it ought to have known about, or design errors that were not unsafe.Plant Construction v Clive Adams Associates and JMH Construction Services [2000] BLR 137 (CA)
3.9 As discussed above, the twelfth recital states ‘the Employer has examined the Contractor’s Proposals and, subject to the Conditions, is satisfied that they appear to meet the Employer’s Requirements’, which implies that in so far as the design has been finalised at the time of acceptance of tender, then the employer has accepted the solution. It might be possible to argue that the employer could not be held to have accepted defects in the design which a reasonable inspection would not have revealed. An example might be the design of a roof truss, where without a detailed double-checking of calculations it would not be possible to ascertain whether the truss would be structurally sound. The contractor would therefore remain responsible for achieving this whatever the contractor’s proposals showed. Nevertheless, the recital is problematic from the point of view of the employer and is sometimes deleted. (For a list of watchpoints, see Table 3.1.)
Table 3.1 Watchpoints: contractor’s design
Extent of design liability
3.10 The contractor is only required to design the parts of the project identified in the ninth recital. It is therefore essential that those parts are described clearly and accurately. Leaving this to be agreed or resolved later will undoubtedly lead to problems (see Walter Lilly & Co. v Giles Mackay & DMW Ltd). Defining the extent of the contractor’s designed portion (CDP) can be quite difficult in practice, especially as it could be several parts or elements, and could also be a system (e.g. services) that is integral to many parts of the building. The contract is clear that the administrator remains responsible not only for any integration, and this could extend to the physical junctions between the CDP and other parts, but also for the combined performance of several systems, or systems with elements. If any of these interfaces (physical or performance) is intended to be the contractor’s responsibility to resolve, then the interface would have to be placed firmly within the CDP.
This was a project for three luxury houses, which began on site with very little finalised design information. The reason for the rushed start was that planning permission had been obtained in 1999 and was subject to a condition that work had to start within five years (i.e. by 15 June 2004). Apart from the preliminary cost items, all the actual building work was covered by provisional sums. The recitals indicated that the employer’s requirements for the CDP were to be ‘as notified by the Employer to the Contractor in writing’ and the specification stated that ‘the following works may be designed by the Contractor’, with a list of around 21 possible CDP items. In addition, the specification stated that ‘certain Sub-contractors as defined in the Contract will be required to provide design, coordination, fabrication, installation […] drawings, design calculations, fixing details, specifications and other information as appropriate during the course of the Contract’, giving a list of 18 possible types of work, but not indicating any particular firms. Ultimately, the practical completion certificate was not issued until August 2008, around two years after the original completion date, and even then several key items were omitted from the contract, to be completed later. A major dispute arose over the extent of delays and liability for liquidated damages. Crucial to determining liability was the question of who was responsible for the design of the most defective items, and hence for the consequential delays. Ultimately, the court decided that the contractor was not liable for the design of the doors, nor of any other of the crucial defective elements. The fact that a firm had been involved in developing the design, and the contractor had in some cases entered into sub-contracts where the firm undertook to develop the design, had no bearing on whether the main contractor was liable. If it was intended that Walter Lilly was to take on such responsibility, this should have been made clear in the original contract documents, or through subsequent instructions issued in conformity with the contractual terms.Walter Lilly & Co. v Giles Mackay & DMW Ltd [2012] EWHC 649 (TCC)
3.11 Contract administrators sometimes attempt to place a design obligation on the contractor through clauses in the bills or by a reference in other documents, or through the inclusion of a performance specification in a description of the works, other than the contractor’s designed portion. It would be unwise to try to assign a design role in this way as the outcome cannot be predicted with certainty. The wording of clause 2.3.3 gives some support to the argument that the contractor would be responsible for providing something ‘appropriate to the Works’ (see paragraph 3.21 below) and there have been cases where a court has found that ad hoc methods have placed a design obligation on the contractor. However, these did not involve a form which made provision for a ‘Contractor’s Designed Portion’. In National Museums and Galleries on Merseyside v AEW Architects and Designers Ltd it was made clear that the contractor’s design obligation was limited to the CDP.
This project, let on SBC05, was for a new museum, constructed between 2007 and 2011. A key design element was a series of ‘half amphitheatre’ pre-cast concrete steps and seats at the north and south ends of the museum. Unfortunately, architects AEW made several errors in co-ordinating the detailed design of the project, including the valley junction between the concrete steps and seats. The steel substructure to these had been redesigned by the engineers (Buro Happold) in August 2007, and AEW failed to appreciate the implications this had for the geometry of the interface between the steps and seats, or to specify the dimensional tolerances between the pre-cast units, or an adequate coverage for the reinforcement to the units, even after they were alerted to the problems in 2008 by a query from the contractor. As a result, it was not possible to use the steps at the time the museum was opened to the public in 2011. The problems resulted in a claim by the museum against the architects, who tried to argue that this detail was the contractor’s responsibility. However, the judge would not accept this argument, stating (at para. 82):
National Museums and Galleries on Merseyside v AEW Architects and Designers Ltd [2013] EWHC 2403 (TCC)
Level of design liability
3.12 Standard forms of contract and appointment will often set out specific provisions regarding design liability, but these have to be understood in the legal context in which they operate. A key point is whether any design liability incurred is a ‘fitness for purpose’ or ‘reasonable skill and care’ level of liability.
3.13 The Sale of Goods Act 1979 implies terms into all contracts for the sale of goods that the goods sold will be of satisfactory quality. The Consumer Rights Act 2015 stipulates that this requirement cannot be excluded in any contract with a consumer, and under the Unfair Contract Terms Act 1977 it can only be excluded in other contracts in so far as it would be reasonable to do so. If parties have included terms which purport to exclude this liability, the terms will be void. Similarly, if the use to which the goods are to be put is made clear to the seller, the seller must supply goods suitable for that use unless it is clear that the buyer is not relying on the seller’s skill and judgement. So if, for example, a DIY enthusiast asks a builder’s merchant for paint suitable for use on a bathroom ceiling, the merchant must supply suitable paint, regardless of what is written in the contract of sale. If, however, the buyer specifies the exact type of paint, the seller would no longer be liable as the buyer is not relying on the seller’s advice.
3.14 Contracts for construction work are usually for ‘work and materials’ (as opposed to supply-only or install-only) and as such fall under the Supply of Goods and Services Act 1982. This implies similar terms to those described above in relation to any goods supplied under such a contract. Therefore, a contractor would normally be liable for providing materials fit for their intended purposes. If, however, an employer or consultant specifies particular materials, the contractor would be relieved of this liability.
3.15 The obligation to supply goods or materials fit for their intended purpose would extend to a product or structure which a contractor had agreed to design and construct (Viking Grain Storage Ltd v T H White). In all cases the liability of the contractor will be strict; in other words, the contractor will be liable if the goods, element or structure is not fit for its intended use, irrespective of whether the contractor has exercised a reasonable level of skill and care in carrying out the design. This is a more onerous level of liability than that assumed by someone undertaking design services only, where they would normally be required to demonstrate that they had exercised the skill and care of a competent member of their profession. To put it the other way around, if an employer can prove that a building designed and constructed by a contractor is defective, then this will normally be sufficient to prove that there has been a breach of contract, whereas in the case of a design professional, the employer would also have to prove that the professional had been negligent.
Viking Grain entered into a contract with White to design and erect a grain drying and storage installation to handle 10,000 tonnes of grain. After it was complete, Viking commenced proceedings against the contractor claiming that, because of defects, the grain store was unfit for its intended use. The contractor, in its defence, claimed that there was no implied warranty in the contract that the finished product would be fit for purpose, and that the contractor’s obligation was limited to the use of reasonable skill and care in carrying out the design. The judge decided that Viking had been relying on the contractor and, because of this reliance, there was an implied warranty that, not only the materials supplied, but also the whole installation should be fit for the required purpose. There could be no differentiation between reliance placed on the quality of the materials and on the design.Viking Grain Storage Ltd v T H White Installations Ltd (1985) 33 BLR 103
3.16 Under clause 2.19.1 of SBC16, the contractor’s liability for the contractor’s designed portion is equivalent to that of ‘an architect or other appropriate professional designer who holds himself out as competent to take on work for such design’. In effect, this means that in order to prove a breach the employer would need to prove that the contractor had been negligent. If, for example, the contractor is required to design a heating system to heat the rooms to a certain temperature, and when installed the system fails to do so, this fact alone would not be enough to prove that there had been a breach of contract. The employer would need to prove that the contractor had failed to use the skill and care expected of a professional person.
3.17 It should be noted that where the contractor is carrying out work in connection with a dwelling, including design work, this would be subject to the Defective Premises Act 1972. This obligation is acknowledged in clause 2.19.2. The Act states that ‘A person taking on work for or in connection with the provision of a dwelling … owes a duty … to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for habitation when completed’ (section 1(1)). In case law the duty has not generally been taken to be a strict or absolute warranty of fitness (Alexander v Mercouris), although other authorities suggest that it is a strict duty. In addition, it should be noted that although the contractor’s liability is limited to the amount stated in the contract particulars, the limitation does not apply to work in connection with a dwelling (cl 2.19.3).
This case considered when the duty arose, not its scope, but some observations are helpful, for example Lord Justice Buckley stated (at page 1274):
Alexander v Mercouris [1979] 1 WLR 1270
Materials, goods and workmanship
3.18 Work must be carried out in a proper and workmanlike manner and in accordance with the construction phase plan (cl 2.1). Any failure in these respects is regarded as serious, and the contract administrator has the power to intervene by issuing an instruction if necessary (cl 3.19).
3.19 Clause 2.3.1 states that all materials and goods shall be of the standard described in the contract bills (or in the specification in the Without Quantities version). The obligation is qualified by the phrase ‘so far as procurable’. It would be an implied duty that the contractor should notify the contract administrator before substituting any materials or goods, even where those specified are unobtainable. The substitution would result in a variation that should be covered by a contract administrator’s instruction. With respect to the contractor’s designed portion, the standard of materials and goods should be that in the employer’s requirements or, if none is given, then that shown in the contractor’s proposals or other contractor’s design documents. Unlike DB16, there are no clauses in SBC16 referring to an obligation to provide samples (see DB16 cl 2.2.3). If samples are required, then additional provisions would need to be included in the contract.
3.20 Standards of workmanship should be as specified in the contract bills (or specification, cl 2.3.2). In respect of the contractor’s designed portion, the standard of workmanship is that set out in the employer’s requirements or, if none is set out, is that set out in the contractor’s proposals.
3.21 Clause 2.3.3 states:
3.22 This reflects the duty that would normally be implied by law. In other words, where the description of the standard required for any goods, materials and workmanship is (deliberately or inadvertently) incomplete, the contractor is required to provide something ‘fit for purpose’ (see paragraph 3.13). This appears to be a strict obligation (see above), rather than an obligation to use reasonable skill and care.
3.23 The phrase ‘Insofar as the quality… are stated to be a matter for the Architect/Contract Administrator’s approval, such quality and standards shall be to his reasonable satisfaction’ (cl 2.3.3) does not authorise the contract administrator to alter the standard specified at will, but means that where a correct construction of the contract documents leaves a matter regarding quality to the approval of the contract administrator, the contractor only fulfils its obligations if the contract administrator is satisfied. Any expression of dissatisfaction by the contract administrator must be made within a reasonable period of the carrying out of the unsatisfactory work, and the contract administrator must state reasons for the dissatisfaction (cl 3.20). It should be noted that the final certificate is conclusive evidence that where the contract documents have expressly stated that the quality is to be to the approval of the contract administrator, then the contract administrator is so satisfied (cl 1.9.1). This would have the effect of preventing the employer bringing a claim regarding those items of work. The contract administrator should generally avoid using phrases such as ‘to approval’ or ‘to the contract administrator’s satisfaction’ in the contract documents.
3.24 If the phrase ‘or otherwise approved’ is used in a contract bill or specification this does not mean that the contract administrator must be prepared to consider alternatives put forward by the contractor, nor that the contract administrator must give any reasons for rejecting alternatives (Leedsford v City of Bradford). It merely gives the contract administrator the right to do so. A substitution would always constitute a variation whether or not this phrase is present in the specification.
In a contract for the provision of a new infant school the contract bills stated ‘Artificial Stone … The following to be obtained from the Empire Stone Company Limited, 326 Deansgate, or other approved firm’. During the course of the contract the contractor obtained quotes from other companies and sent them to the architect for approval. The architect, however, insisted that Empire Stone was used and, as Empire Stone was considerably more expensive, the contractor brought a claim for damages for breach of contract. The court dismissed the claim stating: ‘The builder agrees to supply artificial stone. The stone has to be Empire Stone unless the parties agree some other stone, and no other stone can be substituted except by mutual agreement. The builder fulfils his contract if he provides Empire Stone, whether the Bradford Corporation want it or not; and the Corporation Architect can say that he will approve of no other stone except the Empire Stone’ (Hodson LJ at page 58).Leedsford Ltd v The Lord Mayor, Alderman and Citizens of the City of Bradford (1956) 24 BLR 45 (CA)
Obligations in respect of quality of sub-contracted work
3.25 With increasing specialisation in the construction industry it is almost universal practice for much of the work on building projects to be sub-contracted to a large number of other firms. This arrangement benefits the employer by enabling it to take advantage of a wider range of specialisms than would normally be available within one contracting organisation. The employer will wish, nevertheless, to be able to hold the contractor responsible to a degree for any non-performance of the sub-contractors.
3.26 There are three methods of sub-contracting allowed for under SBC16:
- sub-letting to a domestic sub-contractor selected by the main contractor, but with the written consent of the contract administrator (cl 3.7);
- sub-letting to a domestic sub-contractor selected from a list of at least three names under the procedure set out in clause 3.8;
- sub-letting to a ‘named specialist’ sub-contractor under the procedure set out in Supplemental Provision 9.
3.27 All of these methods are discussed in detail in Chapter 5. With respect to quality, in all cases the contract makes it clear that the contractor remains entirely responsible for the performance of any sub-contractor (cl 3.7.1). This responsibility would extend to any contractor’s designed portion work that was sub-contracted (although note that the named specialist provisions are not intended to be used for contractor’s designed portion work). As discussed at paragraph 3.11, if any ad hoc method is adopted, such as attempting to ‘nominate’ a sub-contractor in the contract bills or specification, then responsibility for quality and fitness will depend on the particular facts of each case. It should be noted, however, that attempts to hold the contractor liable based on early editions of the standard form were not always successful (see for example Gloucestershire County Council v Richardson).
Under a building contract on JCT37 (1957 edition), the contractor was to supply concrete columns, which were to be ordered from suppliers nominated by the employer. A prime cost sum had been stated in the bills of quantities, which named a particular supplier. On accepting the tender, the architect nominated a different supplier, who it transpired would only contract on particular terms, which excluded all liability for defects or their damaging consequences save only an obligation to replace. The columns had defects which were undetectable when they were supplied, but which appeared after some columns had been incorporated in the building under construction. Once the defects were discovered the contractor was told to stop work on the columns, which eventually led to the contractor terminating the contract. In an action by the employer against the contractor, the employer argued that the contractor had repudiated the building contract, and that the defects in the concrete columns were a breach of its implied warranty of fitness. The court found that the contractor was not liable for the defects, commenting that it felt that to find otherwise would be unfair. Russell LJ pointed out that ‘if the employers wished to impose liability on the contractor for defects in materials supplied by nominated suppliers they could do so in plain terms, such as are contained in clause 31 of the General Conditions of Government Contracts (October 1959)’.Gloucestershire County Council v Richardson [1969] 1 AC 480 (CA)
Compliance with statute
3.28 The contractor is under a statutory duty to comply with all legislation that is relevant to the carrying out of the works, for example in respect of goods and services, building and construction regulations, and health and safety. The duty is absolute and there is no possibility of contracting out of any of the resulting obligations.
3.29 SBC16 imposes a contractual duty in addition to the statutory duty, which gives additional protection to the employer, in that failure to comply with statute becomes a breach of contract. Under clause 2.1 the contractor is required to carry out and complete the works ‘in compliance with … the Construction Phase Plan and other Statutory Requirements’. The contractor is required to pay all fees and charges, but unless these have already been included in the contract sum or are covered by a provisional sum, the amounts will be added to the contract figure (cl 2.21).
3.30 If the contractor finds any divergence between what the contract requires and statutory requirements, then the contract administrator must be given immediate written notice and, where the divergence is between the statutory requirements and the employer’s requirements, the contractor’s proposals or the contractor’s design documents, must set out its proposals for dealing with the divergence (cl 2.17.1). Provided the contractor complies with this requirement, it is not liable for any non-compliant work, other than the CDP works (cl 2.17.3). Once either the contractor or the contract administrator discovers a divergence, the contract administrator must issue an instruction within seven days to rectify the situation. This is treated as a variation (cl 2.17.2), and may therefore give rise to an extension of time and reimbursement of direct loss and/or expense (cl 2.29.1 and 4.22.1).
3.31 The contractor may need to take immediate action in an emergency, but only in so far as is reasonably necessary to comply with statutory requirements (cl 2.18). Unless it is an emergency, any alteration made by a contractor, for example at the request of a district surveyor, could be a breach of contract, unless the contract administrator decides to sanction the variation under clause 3.14.4.
3.32 Under clause 3.23 each party undertakes to the other to comply with all their obligations under the Construction (Design and Management) (CDM) Regulations 2015. The principal designer and principal contractor are named under Articles 5 and 6 (the contract assumes that the contractor will act as principal contractor, unless another firm is named). Clause 3.23.1 places a contractual obligation on the employer to ensure that the principal designer carries out his or her duties under the CDM Regulations. There are equivalent provisions where the contractor is not the principal contractor. This is a wider obligation than the ‘reasonable satisfaction with competence’ obligation imposed by the Regulations. Breach of this clause gives the contractor the right to terminate its employment under the contract under clause 8.9.1.4. It is more likely, in practice, that the contractor will claim for an extension of time or direct loss and/or expense for breach of clause 3.23, as this is a ‘Relevant Event’ under clause 2.29.7 and a ‘Relevant Matter’ under clause 4.24.5. An example might be where a principal designer delays in commenting on a contractor’s proposed amendment to the construction phase plan, and progress is thereby delayed.
3.33 Clause 3.23.2 places a duty on the contractor to comply with regulations 8 and 15 and, if acting as the principal contractor, to comply with regulations 12 to 14. Breach of this duty is grounds for termination under clause 8.4.1.5. The warning notice still has to be given, and JCT Practice Note 27 suggested that the provision should only be used for situations where the Health and Safety Executive is likely to close the site. Any breach is covered, however, provided termination is not unreasonable or vexatious, and the employer should consider any breach that might lead to action being taken against it to be a serious one. If work needs to be postponed or other instructions given due to a breach by the contractor, then there should be no entitlement to an extension of time or a claim for direct loss and/or expense.
3.34 The contractor should take the cost of compliance with the CDM Regulations (e.g. the cost of developing the construction phase plan) into account at the tender stage. No claims may be made for compliance with the Regulations (e.g. adjusting the construction phase plan to suit the contractor’s or sub-contractor’s working methods) and no extension of time will be given (cl 3.23.3). If alterations are needed as a result of a variation instruction, then the costs are included in valuing the variations and the alterations may be taken into account in assessing an application for an extension of time.
3.35 The CDM Regulations are not the only statutory health and safety obligations which may apply to the project, and the contractor must comply with all applicable health and safety laws. Furthermore, Supplemental Provision 2 (Schedule 8) states that ‘the Parties will endeavour to establish and maintain a culture and working environment in which health and safety is of paramount concern’, which suggests that a ‘best practice’ rather than a minimum compliance approach is required. The provision sets out several specific requirements; for example, the contractor undertakes to comply with all approved codes of practice, to ensure that personnel receive induction training and have access to advice and to ensure that there is full and proper health and safety consultation with all such personnel in accordance with the Health and Safety (Consultation with Employees) Regulations 1996.
Other obligations
3.36 In addition to the major obligations outlined above, the contractor also has other obligations arising out of the contract. The most significant of these are in relation to progress and programming, discussed in the following chapter, and in regard to insurance matters, discussed in Chapter 8. The contractor’s obligations and powers are summarised in Tables 3.2 and 3.3.
Table 3.2 Key duties of the contractor
Table 3.3 Key powers of the contractor
