Back to Basics #18 - Who Takes the Risk? Adequacy of Design in the Employer's Requirements under JCT D&B 2016
A perennial question that arises under design and build contracts is: “What happens if the design, incorporated into the contract, prepared by the Employer is wrong / inadequate?”
Prior to JCT issuing revised contracts in 2016 the Contractor took the risk for inadequacy in the Employer's Design if it was incorporated into the contract. This was made absolutely clear in Co-operative Insurance Society Ltd v Henry Boot Scotland Ltd & Others (2002).
The judge in this case stated that “Completing the design ... included examining the designs at the point that it was taken over assessing the assumptions on which it was based and forming a view as to whether they were appropriate.”.
The JCT obviously felt that this was unfair and in 2016 introduced a revision to its Standard Terms to rebalance the risk allocation in such circumstances.
Clause 2.11 in JCT D&B 2016 states “the Contractor shall not be responsible for the contents of the Employer’s Requirements or for verifying the adequacy of any design contained within them.”
JCT D&B 2016 clarifies what happens in the Employer's Requirements in Clause 2.12.1 “If an inadequacy is found in any design in the Employer’s Requirements and the Contractor under Clause 2.11 is not responsible for verifying its adequacy, then, if or to the extent that the inadequacy is not dealt with in the Contractor’s Proposals, the Employer’s Requirements shall be corrected, altered or modified accordingly.” Clause 2.12.2 states “...any correction, alteration or modification under Clause 2.12.1 shall be treated as a Change”.
The Standard JCT Subcontract contains similarly worded conditions.
So, if the Employer provides design in the Employer's Requirements and this information is inadequate, or simply wrong, then if the Contractor misses this, and does not correct them in the Contractor's Proposals the necessary correction, alteration or modification is to be treated as a change (a variation).
BUT be aware:
Clause 2.11 is often amended by Employer's and the word “not” is removed which reverses JCT’s amendment and results in the position being as that stated in Co-operative Insurance Society Ltd v Henry Boot Scotland Ltd & Others (2002) AND also note that without wording similar to Clause 2.11 in a bespoke contract, the Contractor IS usually responsible for any inadequacy in the Employer's Requirements / Design by the Employer.
Ramskill Martin's Team of Specialist Consultants can assist you interpret your obligations, with regards to design or any other matter, in a clear and precise manner to ensure you fully understand the Terms and Conditions which you are about to enter in to. This advice and assistance can be by way of a detailed Contract Review presented in a “traffic light” risk profile Contract Review or by way of advice on individual clauses.
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