Design Liability under English Law

The devastation of a series of earthquakes that struck Turkiye and Syria in early February left the construction industry at large in the centre of public and governmental scrutiny. Indeed, construction professionals play a critical role in the design and construction of elements of modern living. Though the depth and details of that role is outside the purview of this article, considering the robust global presence of Turkish construction companies, a brief discussion of the current status of design liability under two of the most preferred methods of procurement under English law seems timely.

Traditional Procurement Model: Employer-builder relationship

The more traditional method of procurement sees the owner of the project taking responsibility for its design either through the assistance of its internal and/or external design professionals. Once the design is complete, the owner then sets out to find a suitable contractor to carry out the works as planned by its architects and engineers. In turn, the contractor enters into separate agreements with various sub-contractors to complete the project.

Under this method of procurement, the owner retains the design liability to the extent the main contract between the owner and the main contractor does not allocate such liability to any third party including the main contractor. However, if the owner retains external design professionals to undertake such works, the terms of engagement between them will govern how any design liability will be allocated, as it is highly unlikely that an owner would bring claims against its in-house architects and engineers for design defects. Therefore, owners must try and manage their risks either by way of seeking insurance or through contractual means as in the event of a design defect, they would be the main party in dispute.

Design & Build Procurement Model

Since the 1990s, this method of procurement has become a common and competitive delivery method for larger projects in the U.K.[1] and is used more often than the traditional procurement method on large construction projects. In this type of procurement, the owner enters into a contractual relationship with the main contractor of its choosing and expects the contractor to design the structure in line with the design elements the owner has selected as part of its tender process.  The contractor's contractual autonomy to design and build the project means that it must retain either internal or external architects and engineers to design the structure and retain sub-contractors to carry out the works. Where the owner has already carried out or procured design work prior to engaging the contractor, the contract usually provides that the contractor is responsible for all design, which means the contractor will be responsible for any design that was carried out before it even became involved and was carried out by other professionals.

The owner's participation in either stage (design or build) of the project is nominal that generally sees the contractor absorbing the design liability unless otherwise stated in the main contract. Such liability is often not displaced or reallocated away from the contractor even though the owner maintains certain approval obligations.[2] The owner's participation in the design process also does not absolve such responsibility.[3] Therefore, contractors in design and build contractual schemes must carefully understand their rights and obligations under various agreements to ensure that they take the necessary measures to protect themselves against potential liability.

Difference in Potential Design Liability between the Two Models

For example, in the event of a design defect including total failure, the allocation of costs for any remedial work under each procurement method would be as follows:

• Employer-builder: Owner's responsibility unless otherwise agreed.  Whether the owner can bring claims against any third parties would then depend on the status of the terms of the professional engagement between the owner and the professionals.
• Design and Build: Contractor's responsibility for all design before and after the contract was entered into, unless otherwise agreed.
  

Design Liability in Contract

The terms of the contractual agreement between various parties in construction projects play a crucial role in the determination of design liability. A contractor operating under the standard of "reasonable skill and care" is only expected to undertake the works competently[4] and is  usually judged against how a contractor of a similar size working on a similar project would perform. Whereas under the standard of "fitness for purpose" a contractor would be under a stricter obligation beyond the ordinary competent practitioner standard. A fitness for purpose obligation is onerous, as it requires the contractor to meet any performance standards set out in the contract, no matter how expensive or difficult to achieve[5].

For example, in a design and build contract, if the contract between the owner and the contractor requires the contractor to exercise such care as a reasonably competent contractor would, in the event of a design defect, the owner carries the risk of having to prove that the contractor's performance fell under that standard.  However, if the same contract required the contractor to undertake the works that will be fit for the purpose stated in the agreement, the contractor's failure to deliver an end product in short of those standards will be its own responsibility absolving the owner of potential liability. This is because if a contractor agrees to both work to a specific design and to achieve a specified result, the contractor will be in breach if the design does not achieve that result.

Conclusion

Generally, owners who would like to retain control over the design element often prefer the traditional procurement method absorbing any potential liability at the end. On the contrary, owners who wish to do away with design responsibility and the ensuing liability, often pick the design and build procurement method outsourcing all the relevant works, which would be more expensive than the traditional procurement method. However, there have been instances where poorly drafted contracts confused various standards and awkwardly allocated risk and liability to unintended parties leaving them at perilous conditions when disputes arose. Therefore, owners and contractors who choose to enter into bespoke or heavily revised standard agreements should tread carefully to ensure that the documents fully reflect their understanding of their rights and obligations thereunder.

[1] DifferenceBetween Office Design & Build and Traditional Procurement (oktra.co.uk)

[2] Hampshire CC v. Stanley Hugh Leach (1990) 8 Const LJ 174 at 179.

[3] London Underground Ltd. v. Kenchington Ford PLC (1998) 63 Con LR 1 at 6-7.

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

[5] MT Højgaard A/S v E.On Climate & Renewables UK Robin Rigg East Limited and another [2017] UKSC 59

Tagged with: Fieldfisher LLP, Mehmet Baysan, Sarah Shafiq, Construction