A recent TCC decision has once again considered the interplay between general standards of care over specific contractual requirements such as fitness for purpose and provides a useful reminder as to the complexities which exist in including both in the same appointment.
MW High Tech Projects v Haase Environmental Consulting
MW High Tech Projects (MW) was appointed main contractor for the design and construction of a waste to energy plant in West Sussex. The contract was awarded on a fixed priced basis.
MW engaged Haase Environmental Consulting (HEC) under a letter of intent to develop a basic design for the process engineering elements of the plant. That design informed MW’s tender price. Once the main contract was signed up, MW formally appointed HEC to develop its initial design. Under that appointment HEC was obliged to (i) act with reasonable skill and care; and (ii) design in accordance with certain specified design requirements including an output specification.
HEC duly developed its design but well beyond the parameters of its basic design. This significantly increased MW’s costs (which could not be recovered under the fixed price main contract). This led to a dispute and the parties ended up in court. MW asked the court to find that in making such significant changes to its original design, HEC had breached its obligation to design in accordance with the specified design requirements. HEC on the other hand argued that it was not in breach so long as its design was not negligent i.e. it had used reasonable skill and care.
The court looked at the priority of the various contractual obligations. It found the obligation to exercise reasonable skill and care was paramount. HEC would not be required to comply with any other obligation that placed it in conflict with this overriding duty.
However where there was no such conflict, HEC was required to use reasonable skill and care to comply with any other obligations, including those to develop the initial design in accordance with the specific design requirements. The court said on the face of it HEC was in breach of contract for deviating from its previous brief and had failed to meet its design requirements.
This case provides an interesting reversal of the usual tension between general standards of care and fitness for purpose type obligations. Most commonly, designers will be criticised for not achieving a sufficiently high standard of design, whereas in the present case the complaint was one of over-design. Fitness for purpose in the present case meant sticking as close as possible to the original design requirements so as to keep costs down.
The present case makes an interesting contrast with last year’s decision in MT Højgaard v E.ON Climate And Renewables which looked at the interaction between an absolute fitness for purpose obligation in relation to design life and a requirement to exercise reasonable skill and care. Although the court found that the two were not mutually incompatible, on the facts fitness for purpose trumped reasonable skill and care. In that case the contractor constructed wind turbine foundations to a specified industry standard (so discharging its duties of reasonable skill and care) but an unknown error in the standard meant that the foundations failed to last their required design life of 20 years, breaching the contractor’s fitness for purpose obligation. The contractor was therefore liable for the costs of remedial works to the turbines.
Much will depend on the individual wording of the contract, but both decisions emphasise the primacy of overriding standards of care. Parties are well advised to review their obligations carefully and ensure that they comply with any general standards of care whilst undertaking specific obligations.