Very much obliged

The concept of “duty to warn” has been the subject of court comment again in recent weeks (see Stephanie Canham’s piece, 9 April). In a new Scottish case, Oil State Industries vs Lagan Construction [2018] CSOH 22, the court looked at an amended JCT clause where the contractor was obliged to warn of any mistake, omission or errors in the employer’s requirements, as well as any inadequacy.

Among the issues was the contractor’s responsibility for the type of finish of an external concrete floor slab. This had been specified in the employer’s requirements as a pan finish. The employer argued this was not in accordance with normal practice as it did not provide slip and skid resistance and that the contractor had a duty to warn of the choice of finish. At preliminary application stage, the contractor challenged the legal basis of a duty to warn as the finish was within the employer’s requirements, but the court found that this ground of claim should go to trial. 

When does a duty to warn of errors or inadequacies in design arise in a construction contract? And what are the consequences of a breach of that duty?

You will seldom see the expression ‘duty to warn’ but its equivalent will be the clauses that provide for assumption of some or all of the risk of the accuracy or workability of the employer/third party design 

A duty to warn, it was held in Goldswain vs Beltec [2015] EWHC 556, is part of a duty to exercise skill and care in the execution of contractual duties. Take the contractor’s duty to exercise skill and care under a design and build contract. Part of this duty is an obligation to warn its employer, whether it is as main contractor or subcontractor, if it identifies problems with the design it is being asked to build to. In the Court of Appeal case of Plant Construction vs Clive Adams Associates, the subcontractor was held to have an implied duty to warn. An excavation subcontractor was concerned about the engineer’s temporary works design and prepared an alternative design – but was told to stick with the original, which collapsed on construction. The subcontractor was found to have an implied duty to warn as part of its obligation to exercise care and skill (although discounted significantly for contributory negligence), which it had breached although it had raised concerns.

It had not raised them “strenuously” enough. 

Similarly in Linden vs Canning the builder built to architects’ drawings that wrongly showed a wall as non-load-bearing, leading to damage. While the builder had no design responsibility, the court found it should have been obvious to it that the wall was load-bearing and it should have raised doubts and/or used temporary propping.

These cases show an implied term is not limited to contractors with design obligations. The contractor or subcontractor is expected to warn of problems with construction if it would be obvious to them given their skills and experience.

Such an implied duty does not extend to checking a design, but if it is apparent the design will not work in the course of or even before construction, its obligation is to advise its client. 

What are the consequences of a breach of such an implied duty to warn? It is a breach of contract and therefore any remedy would be in damages for breach. This does not absolve others involved in the design from responsibility, so there is likely to be sharing of responsibility or discount for the contributory negligence of others. Every situation will vary on its facts – and there may be questions of causation as to whether any damage that follows would have been avoided by the warning. 

A duty to warn is expressed in one form or another in most building contracts, avoiding the need to seek to define the extent of any implied term. You will seldom see the expression “duty to warn” but its equivalent will be those clauses that provide for assumption of some or all of the risk of the accuracy or workability of the employer/third party design by the contractor/subcontractor. For example, the JCT design and build provision referred to above obliges the contractor to notify the employer of any inadequacy, discrepancy or divergence in or between the employer’s requirements, the contractor’s proposals and any other design documents. It is specifically provided that the contractor is not responsible for the employer’s design or for verifying its design. 

In NEC 4 the early warning mechanism obliges parties to warn each other of a wide range of risks.

The FIDIC Silver Book (design and construct) transfers much more risk to the contractor, which is obliged to correct any error, omission, ambiguity, inconsistency, inadequacy or other defect in the design and the works at its own cost. It is deemed to have “scrutinised” the employer’s requirements – including any design criteria and calculations – and is responsible for the accuracy of the employer’s requirements with some specified exceptions. There is no need for the implication of any terms on duty to warn as this contract is so specific as to the obligations and the liability.

In summary, a contractor’s duty to warn of potential problems with the design is implied in most construction contracts. The extent of this duty will depend on the circumstances but will not extend to verifying another’s design. The extent of liability for a breach of that duty can be uncertain and affected by a number of factors, particularly the contribution of others.

The equivalent in express contract terms is often described as an assumption of risk for the employer’s design, obliging the contractor to notify of any problems and in some contracts be responsible for the consequences. It will prescribe which party assumes the risk and therefore the cost consequence, should the errors not be identified by it. These express terms should be scrutinised closely at tender stage.