Fitness for Purpose and Reasonable Skill and Care- whats the

difference in construction disputes?

In handling construction disputes and arbitrations, one of the common defences raised is that the
works rendered or goods supplied were not fit for purpose. Another common defence is that the
works were not carried out with reasonable skill and care. These would commonly be said to be
implied terms in the contract.
The standard of reasonable skill and care in construction disputes may well be different from the
ordinary standard in negligence cases. Whilst negligence cases commonly refer to the reasonable
man test, the standard in construction disputes may well be higher, because an architect, engineer or
specialist contractor may be subject to the standard of ordinary skilled man exercising and professing
to have that special skill instead (per Bolam v Friern Hospital Management Committee).
The end result of the works must be a product that is fit for purpose. Thus, an engineer calculating
the required strength of columns must calculate in such a way that his recommended strength would
be sufficient in accordance with acceptable standards. In the same way, a specialist contractor would
be expected to deliver works that are fit for purpose, consistent with his claim of specialty.
The issue is whether the employer relied upon the skill of the supplier to design or supply the end
result that would be fit for purpose (Independent Broadcasting Authority v EMI Electronics Ltd). If
a building owner made known to the contractors the purpose for which the building was required, then
it is expected that the contractors would deliver a product fit for purpose (Greaves Contractors Ltd
v Baynham Meikle & Partners).
However, there can be no liability for fitness for purpose if the supplier is not aware of the purpose
for which the goods were supplied, or if the goods were used in a way that deviated from normal use
(Slater v Finning).
Similarly, a party would not be held liable for fitness for purpose if they were only involved in a part of
the works and the fitness of their part is affected by other works carried out by third parties (PSC
Freyssinet Ltd v Bryne Brothers (Formwork) Ltd).
Fitness for purpose seems to be a more onerous burden than reasonable skill and care. So long as
the supplier exercises the skill and care of ordinarily skilled men of the same trade, complying with the
relevant standards, then he would have discharged his duty to exercise reasonable skill and care.
But in doing so, his end-product must still be fit for purpose if the employer has relied on his skills to
achieve the end-result.

Fitness for Purpose v Reasonable Skill & Care

Fitness for purpose means agreeing to deliver a product that meets a specific
requirement. It originates from sale of goods legislation.
This type of obligation is fine when you are selling a product. If it doesnt function
in the way it is supposed to, the supplier has to replace it and recompense the
purchaser for any damages.
However, selling and buying professional services is a less finite product. It
requires the expertise and judgment of the professional provider, and the
outcome may be less certain due to issues outside the professionals control
such as site conditions, changing client requirements, and the supply of
materials by others.
This is why the standard that professional consultants owe to their client is a
duty to exercise reasonable skill and care and not the more onerous fitness for
purpose standard. It is also why professional indemnity insurance excludes cover
for fitness for purpose.
The situation is different for contractors and developers, who often have to
accept contractual obligations to deliver a finished product which is fit for
purpose. Quite often a developers or contractors additional fitness for purpose
risk is contained by limitations on their liability, in specific replacement and
damages terms in their contract.
Care should be taken to avoid fitness for purpose obligations in your contract
terms and also your scope of service. When referring to client requirements,
technical briefs, project briefs, functional requirements, or outcomes of the
project (etc) never guarantee, promise or ensure to achieve a specific outcome.
Be aware that contractor and developer clients will usually seek to pass their
fitness for purpose obligations on to you, and for the reasons explained above,
this is not appropriate and not in their interest after all they could force a
consultant into a position where he had no professional indemnity insurance for a
resulting claim.

REASONABLE SKILL AND CARE VS FITNESS

FOR PURPOSE - WHAT IS THE DIFFERENCE?
27 June 2014

One of the most important terms in any designer's appointment is the standard to which it must carry out its
services.
In the absence of any express clause, the law implies that a professional consultant must carry out its
services using the reasonable skill and care of a competent professional designer. This is commonly
'amplified' by an express term to make the standard specific to the size and complexity of the project in
question.
In either case, to demonstrate a breach, an employer would need to show that the designer was negligent.
Contrast that with fitness for purpose. This is the standard implied on design and build contractors in the
absence of an express term to the contrary. Here the contractor effectively guarantees the design will meet
the employer's requirements. If the requirements are not achieved, even without negligence, the contractor
will be in breach.
Unsurprisingly, designers are reluctant to agree fitness for purpose obligations and their professional
indemnity cover rarely extends beyond reasonable skill and care. The difference between the standards and
the risk to designers was highlighted in the recent case of MT Hjgaard (MTH) v E.On. [1]

THE CASE
E.On engaged MTH for the design, fabrication and installation of the foundations for 60 wind turbine
generators in the Solway Firth.
The contract contained, in separate parts of the documentation, two material clauses regarding design
liability. The first provided that MTH carry out the design using reasonable skill and care. The second was
an obligation on MTH to ensure a design life of 20 years.
The works were found to be defective. MTH however, was not negligent - they had followed an international
standard referred to in the contract which was subsequently found to contain an error. The question for the
court was whether, having exercised reasonable skill and care, MTH would still be liable because the design
life did not last 20 years.
The court held that MTH was liable. Irrespective of the obligation to exercise reasonable skill and care, the
design life clause was clear. The court reasoned that absolute obligations and obligations to exercise
reasonable skill and care were not necessarily incompatible and in this instance they could co-exist.
Steven Carey, Partner in our Construction, Engineering & Projects team, commented:
"The lesson here for designers is to take care when negotiating terms. Fitness for purpose obligations are
not always obvious and designers must ensure they are identified. An obligation to exercise reasonable skill
and care will not necessarily displace an express absolute obligation."
[1] MT Hjgaard A/s v E.On Climate and Renewables & Others [2014] EWHC 1088 (TCC)

Understanding your design duty reasonable skill and care vs.

fitness for purpose mutually incompatible or comfortably
coexistent?
The clearly defined roles and responsibilities of the parties involved in a traditional construction project, where design is
carried out by professional consultants and construction by contractors, have become increasingly blurred. Under
modern procurement routes contractors assume a dual role as they are responsible for all or part of the design. They
are increasingly expected to give undertakings as to design or suitability and to complete the work in accordance with
certain standards or specifications. All of this can have serious implications in terms of liability and professional
indemnity insurance cover and so it is a key issue for contractors to identify and understand the level of their
responsibility at the outset. This involves considering both the terms of the contract and the design obligations which
are implied by law. In this article, Sarah Buckingham examines these difficult issues and reviews recent case law,
including the case of MT Hojgaard a/s v E.ON Climate Renewables UK Robin Rigg East Ltd 1 (the Robin Rigg case).

Reasonable skill and care

The law provides that in the absence of any written terms and conditions to the contrary, a professional designer will
have a duty to act with reasonable skill and care. This duty comes from the Supply of Goods and Services Act
1982, 2 which requires the supplier of a service to provide the service with reasonable skill and care, and the common
law test for negligence which provides that a professional person is not negligent if he carries out his work to the same
standard that another reasonably competent member of his profession would have met. What has become known as
theBolam Test 3 established that where special skill and competence are involved, the test for negligence is not that
of the man on the Clapham omnibus, as he does not possess this special skill. Neither is it necessary for the
professional consultant to possess the highest skill. It is sufficient if he exercises the ordinary skill of an ordinary
competent man exercising that particular art. 4 Therefore, if a consultant can show that he acted in accordance with
the usual practice and professional standards current at the time the design was carried out he will escape liability.
These statutory and common law duties are usually combined into a single clause requiring the consultant to use the
level of reasonable skill and care to be expected of an experienced member of his profession. For example,
In performing the Services the Consultant shall exercise all the reasonable skill, care and diligence to be
expected of an appropriately qualified and competent consultant experienced in carrying out equivalent
services for developments of a similar size, scope, complexity, value and purpose to the Development.
Due to the reliance on skill and judgement, a designers duty does not necessarily require him to achieve a particular
result as long as he has exercised the requisite level of care. By way of analogy, doctors cannot guarantee to always
cure their patients. 5

Fitness for purpose

By contrast, a fitness for purpose obligation imposes a higher duty, as it is an absolute obligation to achieve a specified
result, a breach of which does not require proof of negligence. This duty stems from the Sale of Goods Act

1979 6 which imposes implied terms on any seller acting in the course of business that the goods supplied will be of
satisfactory quality and, where the purchaser makes known any particular purpose, are reasonably fit for their intended
purpose.
In a construction context, this means that a contractor is effectively guaranteeing that the components and the finished
building will be fit for their intended purpose.
Why does it matter?
A reason why the distinction between these two levels of responsibility is so contentious is because most professional
indemnity (PI) policies will cover the holder only in the event of a claim arising out of the holders professional
negligence (i.e. a failure to exercise reasonable skill and care). This leaves the designer uninsured against a contractual
claim for breach of a fitness for purpose obligation. Where a defect arises and no allegations of negligence are made
(when the employer doesnt need to prove negligence, why would he allege it?), the policy is unlikely to respond to the
claim and insurers may refuse to pay costs associated with the defence of the claim. Further, not only do PI policies
generally expressly exclude a fitness for purpose risk (since it is difficult to quantify this risk in respect of both probability
of occurrence and magnitude of loss), some may even be completely invalidated if a consultant has agreed to any
fitness for purpose obligations within an appointment. Whilst the consultant may therefore suffer uninsured losses,
employers need to be careful too as this may seriously limit their potential for financial recovery.
Where the lines become blurred and hackles rise
The dual role of a design and build contractor has presented quite a challenge in determining the level of his
responsibility and it could be said that he is under conflicting obligations in respect of the two distinct functions of design
and construction. Case law has developed over the years supporting the view that, in the absence of an express
contractual rebuttal, a design and build contractor must ensure that the works are completed so that they are fit for their
intended purpose. This was confirmed in IBA v EMI and BICC 7 where the Court of Appeal Judges stated,

We see no good reason for not importing an obligation as to reasonable fitness for purpose into these
contracts or for importing a different obligation in relation to design from the obligation which plainly exists
in relation to materials. 8

It may seem unfair that a consultant and a contractor who carry out effectively the same design function are subject to
different levels of responsibility in relation to that design simply because the contractor also constructs the building.
However, the main rationale for this thinking is that design and build contractors are more akin to sellers of goods
(producing a finished product) rather than professional advisers (just providing a service). It means, though, that an
employer only needs to prove that the design was not fit for the intended purpose upon which he was relying,
irrespective of extraneous factors or whether the contractor exercised reasonable skill and care.
Although some doubt was thrown on the above default position by a judgment relating to the failure of a specialist fire
suppression system in a popcorn factory 9 which appeared to draw a distinction between standard kit (classed as
goods) and bespoke product (classed as a service) it is not easy to reconcile this decision with the rationale of the

previous cases. As this is a developing area of law, it remains sensible for contractors to continue to assume that they
will be subject to an implied fitness for purpose obligation when carrying out design work.
Avoiding fitness for purpose
In light of the potential absence of insurance coverage, it is reassuring that many design and build contracts (for
example, the JCT and ICE contracts) contain express provisions which absolve the contractor from a fitness for purpose
obligation. They limit the contractors liability for design to the standard required of an architect or other appropriate
professional designer, thereby imposing a reasonable skill and care obligation with the intention of overriding any
implied or common law fitness for purpose obligation. The position under the NEC3 contract is different. Whilst the
contract appears to be silent on the matter, the requirement that the contractor provide the works in accordance with the
Works Information, will probably amount to a fitness for purpose obligation. That said, you can expressly impose a
reasonable skill and care duty by selecting secondary option clause X15. However, if the contractor fails to do this, a
fitness for purpose obligation may be implied. Despite the diluting effects of the above, contracts will often include
wording that seeks to either subtly enhance the most basic level of responsibility (of reasonable skill and care) or even
to achieve a fitness for purpose obligation by the back door.
Raising the standard by increments
The standard JCT clause, for example, is often amended by employers to raise the standard of skill and care to that of a
competent consultant with experience of projects of a similar size and scope. Some amend it further to make the
standard of skill and care that of a competent design and build contractor. On the face of it, the latter wording appears
circular, but it could well re-introduce a fitness for purpose obligation with the obvious consequences for PI cover.
Full-blown fitness for purpose in disguise
In light of the above, the very words fitness for purpose will understandably trigger alarm bells in the ears of many
contractors. However, without using this highly identifiable and word-searchable phrase, absolute obligations may still
be imposed. A common way to achieve this is to slip in a requirement for the contractor to warrant that the completed
works shall comply with the employers requirements and/or any performance specification. This type of wording
commonly follows immediately after a reasonable skill and care obligation, which may lull the unsuspecting contractor
into a false sense of security.
For example, we recently came across an amended clause to a standard JCT Without Quantities 2011 which required
the contractor to warrant that the design of the CDP would be carried out using the skill, care and diligence to be
expected of a properly qualified and competent architect or engineer. This was immediately followed by a clause
warranting that the CDP, when completed, shall be suitable for the purpose stated in the Contract Documents and will,
when complete, comply with any performance specification or requirement included or referred to in the Contract
Documents. Regardless of a reasonable skill and care obligation, the effect of the mandatory wording is to add
something different an obligation of strict liability. 10

This type of amended wording has obvious advantages from an employers point of view, as it has the same power and
effect of a fitness for purpose clause but without having to shout about it.
Playing trump
In the recent Robin Rigg case, MTH was contracted to design, construct and install the foundations for sixty offshore
wind turbines. Clause 8.1 of the contract provided that these functions shall be completed with: the due care and
diligence expected of appropriately qualified designers, engineers and constructors; in accordance with Good Industry
Practice; so that each item of plant and the Works as a whole shall be fit for its purpose as determined in accordance
with the Specification using Good Industry Practice; and when completed comply with and be wholly in accordance
with this Agreement and any performance specifications or requirements of the Employer as set out in this
Agreement. The employers requirements referred to a minimum site-specific design life of 20 years and required
that The design of the foundations shall ensure a lifetime of 20 years in every aspect without planned replacement.
Despite exercising reasonable skill and care and following best industry practice, the foundations were found to be
defective. However, unfortunately, the industry-wide, and universally accepted, independent, international standard
applicable to the design of such foundations turned out to be incorrect. E.ON alleged that MTH was in breach of
overriding fitness for purpose obligations and MTH responded by saying that any fitness for purpose obligation was
qualified by its duty to comply with the standard. The point of disagreement between the parties was whether the terms
of the contract imposed a strict obligation to achieve a service life of 20 years or merely an obligation to design the
foundations on the basis of a 20-year design life in accordance with the standard.
In his judgment, Mr Justice Edwards-Stuart referred to two Canadian cases 11 as authority for the proposition that the
existence of an express warranty of fitness for purpose by the contractor can trump the obligation to comply with the
specification even though that specification may contain an error. He went on to assert that, It is not uncommon for
construction and engineering contracts to contain obligations both to exercise reasonable skill and care and to
achieve a particular result and that the two obligations are not mutually incompatible and therefore can coexist side
by side. He held that MTH did assume full design responsibility and warranted a service life of 20 years upon which
E.ON was entitled to rely, notwithstanding that MTH was required to design in accordance with the standard. Since the
foundations failed within two to three years, MTH was in breach of that strict obligation. MTH was given leave to appeal.
Other points to look out for
Even if an appointment expressly provides for a performance obligation of reasonable skill and care or is silent on this
matter, a consultant should be aware of not entering into a collateral warranty with a fitness for purpose obligation as he
will automatically be increasing his potential liabilities with similar repercussions for his PI cover. These issues also need
to be considered in the now fairly common situation where the employers design team is novated to the contractor.
Questions should be raised not only in relation to the extent of the contractors responsibility for that design but also as
to the potential for there to be differing standards of design responsibility. If the contractor has a fitness for purpose
obligation and, as is likely, the professional designers are merely required to exercise reasonable skill and care, this
potentially creates a mismatch and means that the design liabilities do not flow consistently down the contractual
chain.

Care also still needs to be taken even where a contractor thinks he has no design responsibility at all. For example, it is
not uncommon for a contractor, assuming he is authorised to do so, to delegate particularly complex design work to a
specialist or he may be instructed by the employer to enter into a subcontract with a nominated subcontractor who will
do some design work on behalf of the employer. The contractor will be under a duty to use reasonable skill and care in
selecting the third party and his duty will generally be held to have been satisfied providing he does this. However,
where the third partys work is defective, and a reasonably competent designer ought to have noticed the defect, the
designer will be under a duty to warn the employer.
The infamous case of Walter Lilly v Mackay 12 highlighted the importance, for employers, not only of the presence, but
also of the effectiveness, of any terms relating to design liability. Here, it was a requirement of the contract that the
employer must notify the contractor of any work that was to be the subject of contractor design. Such notification was
not given and a dispute arose concerning defective work. The Judge found for the contractor, emphasising the need for
a clear CDP notification for it to be effective.
Conclusion
What can we learn from recent case law? It is of fundamental importance for both parties to consider the issues relating
to risk and responsibility when negotiating any construction contract, but particularly where design and build are
combined. Absolute obligations for fitness for purpose relating to design (regardless of whether that obligation includes
such express wording) should still be approached with caution and diluted where possible, as a reasonable skill and
care clause may not offer much protection against an absolute obligation to achieve a certain standard of work.
For contractors, the risk of performance to a higher standard must first be identified and, if necessary, counterbalanced
by seeking to limit their overall liability under the contract or else by pricing it into the deal but always with the
awareness of the consequences for PI cover. Employers must balance their desire to ensure that the completed works
fulfil their requirements against the danger of imposing uninsurable obligations.