Fitness for purpose obligations are always hotly debated, but fitness for purpose obligations in construction contracts can arise unbeknownst to the parties to the contract meaning parties may find that they have signed up to more than they bargained for. Some recent decisions from the UK suggest particular care needs to be taken, particularly when entering into design and build contracts.
The extent of fitness for purpose obligations in construction contracts are often a point of contention. If no express words are included, this obligation can be implied, and even where there are express terms, the extent of the obligation can be much wider than you might think. Two recent cases have thrown in to stark relief the potentially expensive distinction between the concept of fitness for purpose and the exercise of reasonable skill and care, and have caused some alarm amongst contractors. Employers need also to be aware of the issue, as it benefits no-one for the contractor to be taking on more than they can handle! Both cases were in connection with projects based in Scotland, the first relating to the Robin Rigg off-shore windfarm and the second relating to the Glendoe Hydroelectric Scheme.
MT HOJGAARD A/S V E.ON CLIMATE & RENEWABLES UK
In 2006, MT Hojgaard (the contractor) agreed to design and install 60 wind turbine foundations at the Robin Rigg off-shore windfarm for EON, under a design and build contract. The technical requirements provided that the contractor was to prepare their design in accordance with a document known as J101 (being an international standard for the design of offshore wind turbines). The J101 document set out various equations applicable to such design. However, one of these equations contained a fatal miscalculation. Acting in accordance with the J101 standard, the contractor designed the foundations utilising the flawed equation and as a result, the axial load capacity of the turbine was significantly overestimated, eventually causing the top section of the turbine to slip down the connection point. This movement in the connection point was discovered in 2009, following which the error in the equation contained in the J101 standard was identified. All of the foundations required extensive remedial work, costing 26.25 million!!
The dispute concerned which party was liable for the turbine failure. The Technical Requirements, with which the contractor was to design and construct the works, provided that...