Limitation of design liability for contractors

Abstract

This paper is based on research into the different levels of design liability which contractors might be expected to carry. There is a perception within the construction industry that there are two distinct levels of liability: `reasonable skill and care' and `fitness for purpose'. The paper shows that this is an oversimplification, partly caused by the lack of legal definition of the term `fitness for purpose'. The paper provides an introduction to the legal background of design liability and considers some of the problems raised by the difficulty of obtaining insurance cover for `fitness for purpose' liability. Some commonly used forms of contract are then compared in relation to their treatment of design liability and legal analysis, and case law is addressed to demonstrate problems associated with attempts to limit liability to `reasonable skill and care'. The paper then presents the concept of a spectrum of liability rather than two distinct levels and considers the extent to which the novel approach adopted in the relatively new Engineering and Construction Contract is consistent with the concept of a spectrum of liability. The main aim of the paper, whose authors are not legal practitioners, is to provide enlightenment for project managers and other construction industry professionals in an area where difficulties of understanding are caused by the interaction of legal elements with contractual provisions. A further aim is to stimulate the industry to move towards the adoption of liability clauses in forms of contract which are robust in the prevailing legal and insurance contexts.