The Scottish Court of Session has recently considered the extent to which a duty to warn can arise under the discrepancies clause in an SBCC Design and Build 2011 contract. This clause requires the Contractor to notify the Employer of inadequacies, discrepancies and divergences in the Employer’s Requirements and other design documentation. The contract in question also contained commonly made amendments making the Contractor responsible for the adequacy of the Employer’s Requirements. The court’s decision will be of interest to both Employers and Contractors as showing the types of issues which can arise in relation to duties to warn under the Design and Build form in particular.
Duties to warn
Generally, there is a duty on parties to a construction contract to warn of dangers or defects in the works or proposed working methods. There are two primary sources for this duty:
- Contractual obligations: construction contracts will usually import an obligation to carry out work or discharge responsibilities with reasonable skill and care. This obligation will require a contractor or sub-contractor in certain circumstances to warn of dangers to life, limb or property posed by the carrying out of the works.
- Common law duties arising in tort/delict may also impose a duty to warn against dangers to life, limb or property.
The extent to which a contractor or sub-contractor will have a duty to warn about non-dangerous design defects is much less clear. The extension of the implied contractual duty of reasonable skill and care to such defects was left for future consideration by the leading English Court of Appeal authority in this area (Plant Construction v Clive Adams Associates).
In addition to the general duties noted above, the express terms of a construction contract may also impose a duty to warn. This most commonly occurs where the contract requires a contractor to notify the employer of any discrepancies or inadequacies in designs or specifications for the works. For example, the JCT / SBCC Design and Build 2011 contract requires the Contractor (at clause 2.13) to notify the Employer of any inadequacy, discrepancy or divergence in or between the Employer’s Requirements (the “ERs”), the Contractor’s Proposals and other design documents.
The Contractor has no positive obligation to check for such matters, however, as it is only required to notify the Employer of matters which it “becomes aware of” and has no obligation to verify the adequacy of the ERs (per clause 2.11).
Oil States Industries (UK) Limited v Lagan Building Contractors Limited
This case involved Lagan’s failure to comply with instructions to remedy a number of defects that became apparent during the works. Oil States later terminated Lagan’s employment for failure to progress with those instructions and remedy the defects in a regular and diligent manner.
One of the defects related to an external concrete slab, in respect of which Oil States alleged design errors including that it had a pan finish rather than a broomed finish.
The contract between the parties was an amended SBCC Design & Build 2011 contract (similar to the JCT 2011 DB form). However, the parties had amended the standard form clause 2.11 noted above so that it read:
“The Contractor shall be responsible for the contents of the Employer’s Requirements and for verifying the adequacy of all design contained within them. The Contractor hereby accepts full responsibility in all respects for the whole of the design of the Works”.
Clause 2.13 remained largely as per the original drafting, save that Lagan was obliged to notify Oil States of any “mistake, omission or errors” in the ERs as well as any “inadequacy”.
Lagan sought to defend the claim on a number of grounds, including a challenge to the validity of the instructions given by Oil States and its liability for the defects alleged by Oil States. In relation to the concrete slab, Lagan had previously contended that in applying a pan finish it had simply complied with the ERs. Oil States’ primary position was that the pan finish was a design defect for which Lagan was responsible under clause 2.11 despite the fact that such a finish was specified in the ERs. However, Oil States also advanced an alternative case that Lagan had a duty to warn against the unsuitability of a pan finish. Oil States relied in this respect on Clauses 2.11 and 2.13 rather than the implied duty arising from the Plant Construction case.
The matter came before Court of Session for a debate over whether Oil States case as to the instructions and duties to warn should proceed to trial (i.e. the equivalent of a Summary Judgment application in England).
The court found the large majority of Oil States’ case to be suitable for inquiry. In relation to a duty to warn, the court agreed with Oil States that such a duty in relation to the concrete slab could arise from clauses 2.11 and 2.13 regardless of any danger posed by the slab. The fact that a pan finish could pose a slip hazard in the winter also supported a duty to warn arising under the implied duty from Plant Construction.
Conclusions and implications
This case raises an important issue as to the effect of the standard SBCC / JCT clause as regards the notification of inadequacies, discrepancies and divergences in the ERs or other design documentation. The extent to which this clause gives rise to an express duty to warn under the Design and Build contract, and its equivalent under the Standard Building Contract, remains untested.
The amendments made to the Design and Build form by the parties in this case are relatively common. By accepting responsibility for the adequacy of the ERs, the need for an Employer to rely on a duty to warn should be minimised. However, as this case shows, arguments may still arise as to the extent to which the Contractor is entitled to rely on the ERs. There may be circumstances where the ERs do not contain any objective defect in design, but where the Contractor is still obliged to warn the Employer of potential inadequacies or omissions.
The court’s decision in the present case was made at an interlocutory stage and only provides limited guidance. Clarity on these issues will need to await developments in this case or others in the future.