Construction lawyers often get quite anxious about whether the duty of care owed under a contract for design is one of “reasonable skill and care” or “fitness for purpose”. But what is the difference and why is it such a contentious issue?

Reasonable skill and care

Where a contract is for design only, the duty of care implied into this contract is one of reasonable skill and care.

When demonstrating a reasonable skill and care obligation, all the contractor/consultant is required to show is that they exercised the standard of care to be expected of a reasonably competent professional in their field.

Fitness for purpose

The obligation to produce something which is fit for purpose is much more onerous. It is an absolute duty. To succeed in a claim the employer need only prove something does not work as intended by reference to the intent expressed in the contract.

There is no need to prove negligence. It does not matter if the contractor/designer acted reasonably in the circumstances.

When does fitness for purpose apply?

Fitness for purpose can apply because of:

1. an express term of the contract; 2. the terms of the Sale of Goods Act 1979 (as amended); or 3. a term implied as a matter of law.

Express terms

Express fitness for purpose obligations are being increasingly imposed in contracts and can be found in a number of the standard form construction contracts.

Fitness for purpose implied by The Sale of Goods Act 1979

Fitness for purpose is implied by The Sale of Goods Act 1979 (as amended). When a contractor is to supply materials in the course of building works there will be an implied warranty that the materials used will be good quality and reasonably fit for the purpose which the contractor is using them for.

Fitness for purpose implied as a matter of law

Where a contract is for both design and construction and there is no express term to the contrary, there will be a warranty implied into the contract that the end product is fit for its intended purpose. The law draws a distinction between a designer and a designer who also carries out construction.

Implied fitness for purpose obligations may apply not just against design and build contractors but also against any consultants whom they employ, if there is no express term to the contrary within the appointment.

Care needs to be taken by consultants engaged by contractors who are expressly or impliedly subject to a fitness for purpose obligation if they are not also to become subject to this obligation.

How does fitness for purpose affect insurance?

The reason why fitness for purpose obligations are so contentious is because of the effect such obligations have on designer’s professional indemnity insurance policies.

Where a defect arises and there are no allegations of negligence made, a professional indemnity insurance policy is unlikely to respond to the claim and insurers may refuse to pay costs associated with the defence of the claim.

This article first appeared in Construction News in April 2012.