It is not unusual for a design and build construction contract to contain a requirement to exercise reasonable skill and care in design alongside an absolute obligation to achieve a particular result. In the absence of clear drafting, a tension may arise between the two obligations.
This is demonstrated by the recent Court of Appeal decision in MT Højgaard v E.On. We have previously written about the TCC’s decision in the case, where the Court found that an absolute obligation effectively ‘trumped’ the requirement to exercise reasonable skill and care. However, this decision has now been reversed by the Court of Appeal.
Whilst the Court of Appeal’s approach to solving this tension will provide some comfort to designers, the decision serves as a timely reminder about the need for clearly drafted agreements.
E.ON engaged MTH to design, fabricate and install the foundations for 60 offshore wind turbines. The contract contained, in separate parts of the contract documentation, two material clauses regarding design liability. The first required MTH to carry out the design using reasonable skill and care. The second appeared to be an absolute obligation to ensure that the foundations had a design life of twenty years.
Defects were discovered but MTH was not negligent. It had followed an international standard referred to in the contract (J101) which contained an error that MTH could not reasonably have known about. The question for the Court was whether, having exercised reasonable skill and care, MTH would still be liable because the foundations had not lasted 20 years.
The Court of Appeal acknowledged that a construction contract could require the contractor to (i) comply with particular specifications and standards and (ii) achieve a particular result. This would impose a double standard on the contractor.
However, the Court found that this was not such a contract. The contract did not state with sufficient clarify that the absolute obligation must take precedence. In reaching this conclusion, the Court was persuaded by the fact that the absolute obligation was inconsistent with the remainder of the contract. It therefore held that the correct interpretation was that MTH must comply with J101 but there was no guarantee of a 20 year service life.
This decision will undoubtedly be welcomed by designers. However, the case very much turned on the specific wording of the contract. With some more nuanced drafting, the court may have taken a different view, as it did re-iterate that the inclusion of a reasonable skill and care clause does not necessarily prevent a designer having to perform to an absolute standard.
Contractors and professional consultants should continue to take great care when agreeing to absolute obligations, as they can lead to a finding of liability without any degree of “fault” or negligence being proved against the designer.