In E.ON Climate & Renewables UK Robin Rigg East Limited v MT Højgaard A/S [2017] UKSC 59, the Supreme Court for the United Kingdom held that it is the contractor who carries the risk, if the contractor agrees to work to a design that renders the item incapable of meeting the criteria to which he has agreed.  This is a decision of significance to all commercial contracts.

The respondent, MT Højgaard (MTH), installed and built two wind farms for the applicant companies, E.ON.  The foundation structures of both wind farms failed shortly after the project's completion.  MTH denied liability for this failure because:

  • The failure was due to MTH designing the wind farms in accordance with an international standard, J101, that contained a material error
  • The relevant contract:
    • required MTH to comply with J101
    • did not require the windfarms to have a lifetime of 20 years.  If this was a requirement, it was inconsistent with the requirement to comply with J101.

Overturning the decision of the Court of Appeal, and restoring the order made at first instance, Lord Neuberger (with whom the rest of the Supreme Court agreed) held that:

  • An obligation to design the windfarms so that they would have a lifetime of 20 years was not inconsistent with the obligation to comply with J101
  • While each case turns on its own facts, the courts in similar cases have generally given full effect to requirements that an item be produced to comply with prescribed criteria (eg a lifetime of 20 years).  It is the contractor who can be expected to take the risk of agreeing to work to a design that would render the item incapable of meeting the prescribed criteria
  • In this case, compliance with J101 was clearly a minimum standard, and MTH had a duty to identify the need to improve on the design
  • The contracts did require the windfarms to have a lifetime of 20 years, although that requirement was only contained in the tender documents.  The terms of the contract clearly gave the relevant part of the tender documents contractual effect.

See the Court's decision here.