Design and Build Contractor's Liability

How to Assess a Contractor's Liability under a Design & Build Contract?

Fitness for Purpose

Previous case law has indicated that in the absence of any contractual indication to the contrary, a design and build contractor will be obliged to ensure that its works are reasonably fit for purpose.

The main rationale being that design and build contractors should be equated with sellers of goods, not that of professional advisers. Statute dictates that under a supply of goods contract, goods must be of satisfactory quality and reasonably fit for purpose. Whereas under a contract for the supply of services, the services need only be carried out with reasonable skill and care.

However, this can be contrasted with the case of Trebor & Cadbury v ADT.

Reasonable Skill and Care

ADT provided a fire suppression system for Cadbury's popcorn factory. A fire developed which the system failed to extinguish. The High Court found that ADT had failed to exercise reasonable skill and care in designing the system. However, the Judge found that Cadbury had contributed to its own loss and reduced the damages by 75 per cent.

Cadbury appealed. It argued that ADT's system was a supply of goods and therefore subject to the statutory requirements of satisfactory quality and fitness for purpose. Crucially, as these went further than the duty to exercise reasonable skill and care, this would preclude any defence of contributory negligence so that ADT would be 100 per cent liable.

The Court found that the system was not 'off-the-shelf' and rejected the argument that what was being provided equated to goods. The most important thing that ADT did was to decide to use a particular piece of equipment in a particular location - this was design.