EWJ 60 April 2025 web - Journal - Page 104
Housebuilder Tip of the Month:
What Does 'Fitness for Purpose'
Mean in Construction Contracts
By Jennifer Johnson - www.dacbeachcroft.com
involve numerous annexures making it more difficult
to determine exactly what the 'purpose' is – any
subjective wording should be avoided.
Overview
In law, in the absence of written terms to the contrary,
a professional designer will have a duty to complete
its services using reasonable skill and care. A professional will generally not be considered negligent if the
services are completed using the same standard as
would be expected from a competent member of its
profession (i.e. the usual practices and professional
standards applicable to the relevant design or works).
A design and build contractor is held to a higher standard, in
terms of providing a finished product, than a design consultant who might be providing the same service. An obligation
on a contractor or developer in relation to design
(where they are appointed under a design and build
contract) could be construed as imposing a fitness for
purpose obligation if the contract does not contain express wording stating that the standard of care required from the contractor or the developer is limited
to reasonable skill and care.
A fitness for purpose obligation takes the designer,
contractor or developer (as the case may be) beyond
this common law duty to exercise reasonable skill and
care and imposes an absolute legal duty or responsibility to achieve a particular outcome, standard or result. It is essentially a promise or guarantee that the
design, components or finished product will be fit for
the intended 'purpose'.
The JCT design and build contract limits the
contractor's liability for design to that required of an
architect or other appropriate professional designer
and expressly excludes fitness for purpose in new
clause 2.17.1.2 in the 2024 edition ('…under no circumstances shall the Contractor be subject to any duty,
obligation or liability which requires that any such design shall be fit for its purpose'). By contrast, the NEC4
remains silent on fitness for purpose and the obligation to provide the works in accordance with the
Scope could amount to a fitness for purpose obligation in the absence of the Client including optional
clause X15 into the contract.
If a fitness for purpose obligation is imposed, then the
designer, contractor or developer will be held accountable regardless of the reason why the design or
works do not achieve the desired outcome. As this is
an absolute obligation to achieve the required result,
a breach of a fitness for purpose warranty will not require proof of negligence.
Drafting considerations
Where a designer, contractor or developer is carrying
out a professional activity, a strict legal responsibility
to achieve the result may apply unless it is clear from
the contract that the parties have agreed a contrary
position. Where the intended purpose for which the
works are carried out is clear the relevant party has
held itself out as being able to achieve that purpose
and the employer has relied on that result being
achieved, a warranty that the completed works will be
reasonably fit for their intended purpose will be
implied.
Why does it matter
Contractual fitness for purpose obligations are
generally uninsurable. Most professional indemnity
policies will cover claims arising out of negligence or
failure to exercise reasonable skill and care. Some policies will expressly exclude fitness for purpose risks and
an insured’s opportunity to recover under its insurance policy could be reduced if a fitness for purpose
obligation is included. Similarly, entering into a collateral warranty which contains a fitness for purpose
obligation could automatically increase liability and result in the obligations under the collateral warranty
not being covered by the PI policy.
Contract drafting on design standards and responsibility should be clear and concise. It is important to
note that the words 'fitness for purpose' do not necessarily need to be used in order to impose a fitness for
purpose obligation. Simply including an obligation to
warrant that the completed works will comply with
the requirements of the employer, or will achieve any
particular performance standards, could achieve the
same result. A fitness for purpose obligation can also
be implied from performance standards, requirements of specifications set out in the technical annexures to a contract. Complex construction projects can
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Contractors and developers should seek to resist
fitness for purpose obligations, and to the extent that
they are included in contracts, seek to limit their scope
or their overall liability in respect of such obligations.
Contractors and developers should ensure they have
a proper understanding of the required standards, be
clear as to what the intended 'purpose' is (to be expressed in an objectively measurable way) and flow
this down to their supply chain. Employers are likely
to require fitness for purpose obligations in complex
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