As Karen Gidwani explains, fitness for use is a term often used in everyday language in relation to a service or product that does not work as intended or desired. However, in the case of construction contracts, the concept of fitness for use has its own jurisprudence and analysis, and the effects of including a fitness for use clause in a construction contract can be draconian. Since some standard forms of contract (in particular FIDIC) contain such clauses, it is important that the parties are aware of the existence of such a clause and its possible effects. Explicit conditions of opportunity are often found in design and construction contracts in which the employer seeks to mitigate its risk in relation to complex or high-quality technical projects where the end result is decisive in terms of performance, such as port construction or offshore wind projects. Build UK`s recommendation to avoid warranties/obligations of merchantability is prudent advice. Insurers` appetite, especially for PII, has declined significantly, and insurers still active in the construction sector are generally trying to limit their risks in a number of areas, including enforcing coverage restrictions. In 2006, E.ON commissioned MTH to design, manufacture and install 62 monopile foundations at the Robin Rigg offshore wind farm in the Moray Firth. The foundation design was a monopile design consisting of a monopile foundation (“MP”) on which a transition piece (“TP”) was laid, with the two structures connected by a pressed connection (“the pressed connection”). The contract contained a clause stipulating that all the works “are fit for purpose, which have been determined in accordance with the specifications using good industrial practice”. A practical solution is to ensure that a document delivery hierarchy is clearly discussed and documented in the contract.
In this way, the parties have the opportunity to examine how the different contractual documents interact and which documents should have priority in case of discrepancies or conflicts. An additional measure may be that the Contract clearly states in its main terms that, notwithstanding any other provision of the Contract, the Contractor is required to perform its Work with reasonable skill and care or, where appropriate, to ensure that the Work is fit for its particular purpose at the time of construction. Most often, the answer is to look at the specifications or other requirements provided by the buyer. For example, a manufacturer may receive from the purchaser a number of tolerances that the product must meet. These requirements, as well as any additional requirements or specifications provided throughout the process, are generally considered to describe the “purpose” for which the goods are used. In some cases, the specifications may be so detailed and complete that they effectively gobble up any separate purpose for which the buyer intended the goods. If a buyer provides the manufacturer with detailed technical drawings and tolerances so that the seller can build effectively for printing, most courts will find that the buyer no longer relies on the seller when selecting the goods and, therefore, the implied warranty of fitness for a particular purpose under UCC 2-315 does not apply. Although an express warranty of fitness for a particular purpose does not presuppose that the buyer relied on the seller to select the product, it is generally found that a set of specifications in sufficient detail described the buyer`s objectives that compliance with the specifications would generally be equivalent to the conclusion, that the goods were fit for the buyer`s use. “After completion, the works must be suitable for the purposes defined in the contract.” When determining the obligation, it is essential that the employer defines the purpose of the work or services to be provided. In the FIDIC 1999 forms of the Yellow Book and the Silver Book, this is done using the following language: Meaning It is well known that the effect of an obligation of suitability for use is to impose an obligation of result. If a warranty is given that certain work or designs are fit for purpose, the contractor or designer (or planning and construction contractor) is bound by this obligation, regardless of the reason why the work or design is not fit for purpose.
In other words, matters beyond the control of the contractor or design do not relieve the contractor or designer of this obligation (in the absence of contractual conditions to the contrary). In reality, this goes beyond the contractor`s or planner`s obligation to exercise reasonable skill and care in performing the work and instead creates an absolute obligation to produce a result. This is an onerous obligation that is not insurable. I recently read an interesting article about the “usability” of construction contracts and it made me wonder if the insults for these words were really justified. I have been involved in negotiations where professional contractors or consultants have insisted on removing any requirement that the finished building be “fit for purpose.” A guarantee of suitability for a particular purpose generally arises in two ways. First, like the implied warranty of merchantability mentioned in previous articles on this blog, a warranty of fitness for a particular purpose is implied by law under the Uniform Commercial Code (UCC) when certain conditions are met. In particular, CDU 2-315 provides as follows: Therefore, in contracts for the sale or purchase of goods, manufacturers should be aware of the warranties (express or implied) that the goods may be fit for a particular purpose. As with all warranties, buyers and sellers must determine whether the warranties are appropriate for the transaction or whether they should be excluded or excluded from the contract.
Given the number of documents that could constitute an EPC contract for a complex engineering project and, in addition, the documents that could be incorporated by reference into such a contract, this type of clause is very broad and can lead to difficulties in interpreting exactly what the purpose of the work might be. Although contractors are generally advised not to include such a clause in their contracts, it is not always true that such a clause has the effect that the owner might think it should have. Even the words “fit for purpose” will naturally ring alarm bells for many consultants and construction contractors. However, without this highly identifiable formulation, absolute obligations can still be imposed. A common way to do this is to require the consultant to ensure that the work performed meets employer requirements and/or a performance specification. This type of formulation usually follows immediately after an appropriate duty of skill and diligence, which can lull the unsuspecting professional to sleep in a false sense of security. The problem may arise from the wording of the Supply of Goods and Services Act, according to which, where an employer expressly or implicitly informs a contractor of a specific purpose for which the building is to be constructed, there is an implied clause that the building is reasonably fit for that purpose. if it is a destination for which these goods are normally supplied.
The argument is: “I will not accept a duty to accommodate because it is too onerous and uninsurable. As the author of the article rightly says, if an employer wants to construct a building for a specific purpose, as stipulated in his employer`s requirements, should he not be entitled to expect that the contractor he has chosen will construct such a building on the basis that the contractor will be paid for it? The situation is different for the design consultant, who only has to apply the reasonable skill and care that such a consultant requires. An employer may want to consider whether the landlord`s duty to exercise reasonable skill and diligence is more prudent, as this may result in a lower contract price. If the contractor is expected to fulfill an appropriate obligation, not only must the purpose be clearly and explicitly stated, but it may also be desirable to indicate this in the tender documents with the contract, including a limitation of liability clause to weigh the risk.