Does contractor bear design liability for shop drawings?

The duty to design usually rests with the architect or engineer. However, many contracts require contractors to prepare shop drawings. Who then is liable for design faults- the architect/engineer or the contractor who prepared the shop drawings?

In H. Fairweather & Co v London Borough of Wandsworth, a nominated subcontractor was appointed to carry out installation of an underground heat distribution system. The NSC was also required to prepare detailed drawings for installation purposes.

Concerned about liability, the contractor wrote to the architect to disclaim all liability for design work carried out by the NSC. The architect confirmed that the contractor need not be responsible for the design of the system.

The arbitrator found that the shop drawings prepared by the NSC were not design drawings, relying inter alia on the architect’s confirmation. However, it may well have been a different outcome if there was no such confirmation by the architect.

It is important therefore, when shop drawings are required, to specify clearly the purpose of the shop drawings and whether these shop drawings include elements of design capable of attracting design liability for the contractor. The more terms, expectations and responsibilities are clarified, the less potential construction disputes will arise subsequently.

Kheng Hoe Advocates is a construction law firm based in Kuala Lumpur. We represent clients in CIPAA, arbitration, litigation and mediation. For queries, e-mail khenghoe@khenghoe.com. 

The pesky task of co-ordinating design

An architect/engineer appointed to design a building is expected to be responsible for all design works. However, not all design works are carried out by the architect/engineer.

Instead, there would be various parties involved who would undertake different aspects of the design work. Commonly, there would be mechanical and electrical works to be designed, in addition to various other specialist disciplines.

The architect designing the building is expected to ensure that all the other design works are properly co-ordinated, otherwise it may lead to substantial loss and expense at a later stage when it is discovered that the designs conflict with each other.

However, what if a contractor is engaged on a design and build basis? Unlike an architect (who is expected to take responsibility for the overall design), a contractor engaged on a design and build basis may not be expected to co-ordinate his designs with that of other disciplines.

All the more so when in most design and build contracts, the contractor’s design is subject to approval by the architect.

An architect wishing to disclaim liability for design co-ordination would need to ensure that the letter of acceptance issued to the contractor expressly requires the contractor to undertake design co-ordination. In fact, some experts would take the view that even a general clause would be insufficient, but instead there must be a descriptive clause to indicate which trades are to be involved, and that all loss and expense flowing from a failure of proper co-ordination would be borne by the contractor concerned.

Given the risks involved, it may serve architects well to encourage employers to adopt Building Information Modeling to have a better 3-D perspective of the project, thereby rendering design coordination a whole lot easier.

Kheng Hoe Advocates represent clients from the construction industry in CIPAA, arbitration and litigation. For any query, e-mail khenghoe@khenghoe.com. 

The effect of entering into construction contract based on “estimate” costs

What is the meaning of the word “estimate” in a construction contract?

Say a contractor quoted to carry out works and indicated that he estimated his costs to be a certain sum. Would that mean that the costs are merely approximate, imprecise and can be adjusted at a later date? Or would the fact that the employer accepted the contractor’s quotation transform this estimated costs to be a fixed sum contract? What if the eventual costs vary substantially from the initial estimate?

In Crowshaw v Pritchard and Renwick, the judge held that a contractor’s estimate which was furnished after considering the drawings and specifications to in fact be a fixed price.

However, in Sykes v Packham, the judge held that when the contractor submitted an estimate of costs, he is in fact entitled to be paid a reasonable price for the works undertaken. However, the judge on his own accord made certain deductions to the estimated costs.

Clearly a simple word like “estimate” may end up with a less than simple solution when conflict arises. Such being the case, the term “estimate” should not be used in construction contracts if possible, or if used, it ought to be specifically and expressly defined.

Such is the nature of construction disputes, that one short word like “estimate” may lead to a substantial financial impact if not defined properly.

Kheng Hoe Advocates handles construction disputes throughout Malaysia. For any queries, e-mail khenghoe@khenghoe.com.

Is an employer liable for withholding information at tender stage?

Tenders are oftentimes carried out under a short time frame. Additionally, it may not be feasible for tenderers to undertake all the necessary tests required in order to furnish a properly-considered tender bid.

If an employer possessed important information, for example, with regard to soil conditions, would it be required to disclose this information to the tenderer to assist the tenderer in its bid?

The FIDIC form of contract contains such a requirement, in which case it becomes a matter of contractual obligation. However, there may not be similar requirements of disclosure in other standard forms of building contract commonly used in Malaysia.

The failure of the employer to disclose the information may then lead to a construction dispute subsequently when it is discovered that the tenderer’s bid was not feasible by reason of harder-than envisaged soil conditions.

There is no definitive case in Malaysia at this point in time as to whether an employer who withholds such information would be liable.

As for other jurisdictions, the approach has varied between recognising a duty of care on the part of the employer (Australian case of Dillingham Construction Pty Ltd v Downs), imposing a positive obligation on the employer to disclose due to the contractor being in a vulnerable position (Canadian case of Quebec (Commission Hydroelectrique) v Banque de Montreal), and relying on statutory obligation (UK case of Howard Marine and Dredging v Ogden, decided using the UK Misrepresentation Act).

In short, a contractor may do well to in fact make a positive enquiry with the employer as to whether any important and critical technical data is available before submitting its bid. By making such a positive enquiry, the likelihood of the employer being held liable for withholding information either in contract (by reason of breach of implied term) or in tort (by reason of misrepresentation) may significantly increase.

Kheng Hoe Advocates is a law firm based in Kuala Lumpur, Malaysia. We handle construction disputes throughout Malaysia, both in Court and in arbitration. For queries, e-mail khenghoe@khenghoe.com.