Fitness for purpose in construction

Revision as of 10:03, 9 June 2013

The article on reasonable skill and care deals in general terms with the legal obligation of professionals, but what is the position of the contractor or sub-contractor, in particular the design and build contractor?

Clearly, if the contract expressly deals with the standard of the contractor's performance then, in the absence of ambiguity, the express terms will determine the extent of the contractor's or sub-contractor's legal obligation. However, if the contract is silent on these matters it has long been held that a contractor, or sub-contractor, who agrees to carry out construction works impliedly warrants (that is to say there is a term implied by law) that they will carry out their works with reasonable skill and care (often referred to as the obligation to carry out the works in a good and workmanlike manner). The standard of performance is the same as reasonable skill and care in negligence. The contractor or sub-contractor also warrants that the materials they supply for the purposes of works will be of a merchantable quality, that is to say good of their kind. This warranty is an absolute warranty and extends to latent defects and it will not help the contractor to show that they have exercised reasonable skill and care in the selection of those materials.

In the case of Young & Marten Limited v McManus Childs Limited, M were developers of a residential housing estate and Y were a firm of roofing sub-contractors. Y provided an estimate for the supply and laying of certain roof tiles subsequent to which M specified that Y should use a particular roof tile called 'Somerset 13'. These tiles were supplied by only one manufacturer, J. Beale & Co. The tiles supplied by Beale appeared to be sound; however, 12 months after completion of the roofs a large number of tiles began to disintegrate, a consequence of a latent defect. M was sued by the purchasers of the houses and M sought indemnity against Y. At first instance, the court rejected M's submission that there was an implied term that the Somerset 13 tiles should be reasonably fit for their purpose and should be of merchantable quality.

On appeal the Court of Appeal held:

• Unless the circumstances of a particular case suffice to exclude then there will be implied into a contract for the supply of work and materials a term that the materials used will be of merchantable quality and a further term that the materials used will be reasonably fit for the purpose for which they are used; and
• In this particular case the circumstances sufficed to exclude the term that the tiles would be reasonably fit for the purpose for which they were required; and
• In this particular case the circumstances were not sufficient to exclude the term that the tiles were merchantable. The fact that these tiles were obtainable from only one manufacturer was not a circumstance which excluded the implication but, per Lord Reid, if the tiles had been made by only one manufacturer who was willing to sell only on terms which excluded or limited the ordinary liability (under statute) and if that fact was known to the employer and to the contractor when they made the contract, then it would be unreasonable to place upon the contractor a liability for latent defects; and
• Y supplied and fixed tiles which were latently defective and thereby breached the implied term (of merchantable quality).

In Gloucestershire County Council v Richardson, the House of Lords found that the particular circumstances of the case excluded both the implied warranty of suitability and the implied warranty of merchantable quality. In that case R entered into a contract with G for the construction of an extension to a technical college. The contract was in the RIBA Form 1939 Edition, 1957 Revision. The bills of quantities provided for a prime cost sum for concrete columns to be supplied by a nominated supplier. R contracted to erect the columns. Clause 22 of the conditions of contract dealing with nominated suppliers, unlike clause 21 which dealt with nominated sub-contractors, did not entitle R to make reasonable objection to a proposed supplier, nor to object on the ground that the supplier would not indemnify them in respect of their main contractor's obligation. G's architect instructed R to accept a quotation given by C W & Co for the supply of the concrete columns. CW's standard conditions of trade restricted their liability in respect of good supply by them. The columns supplied by CW had latent defects because of faulty manufacture and after erection cracks appeared in them; the columns were unsuitable for use as structural members of the extension. The House of Lords considered that the circumstances set out above indicated an intention on the part of G and R to exclude from the main contract any implied terms that the concrete columns should be of good quality and fit for their required purpose.

The Court of Appeal in Rotherham Metropolitan Borough Council v Frank Haslam Milan & Co Ltd and M. J. Gleeson (Northern) Ltd v Taylor Woodrow Construction has given extremely useful guidance to the operation of the obligations of fitness for purpose and merchantable quality (now satisfactory quality) in the context of a construction project. The case concerned the use of steel slag as a fill material, which although suitable for some fill purposes, was not fit for the particular purpose of fill in a confined area where the fill had to be inert. Steel slag was not inert. The emphasis of the court was that the matter should be approached not from the test as to whether there should be an implication of an obligation of fitness for purpose, but whether in all the circumstances and the 'matrix’ there was or was not reliance on the contractor's or supplier's skill and judgment. The judgments identified the types of circumstances that would be relevant to the test. The case also provides a useful comparison of the obligations of fitness for purpose and merchantability.

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Related articles on Designing Buildings Wiki

• Collateral warranty.
• Contract.
• Contractor.
• Design and build.
• Defects.
• Reasonable skill and care.
• Sub-contractor.