Double Jeopardy? - check your Terms!

Builders and sub-contractors up and down the UK are having a tough time. Work is in short supply and margins are virtually non-existent. So now may be a good time to spread some potentially good news amongst colleagues and friends in the building industry.

Let’s start with a bit of background law. When builders do building work under a contract they assume the responsibilities expressly set out in that contract and implied by law. Such implied terms may include an obligation to undertake works using reasonable skill; in other words, a duty under the common law tort of negligence, not to be negligent.

 

So why is this important? Well it all comes down to the question of time. I am not talking about the time to complete the works but for how long a builder or sub-contractor remains liable for the works it has done after the work is complete.

 

A builder who undertakes works under a simple contract assumes liability for its breaches of contract for a period of 6 years. Canny Employers will require contracts to be executed under seal or as a deed, as this extends the period of contractual liability from 6 years to 12 years.

 

Liability under the tort of negligence, however, sets a long stop period of liability for which a builder might be found to have been negligent as 15 years from completion of the works.

With this background in mind, is it not surprising that an informed builder might seek to limit the period for which it remains liable for its breaches of contract and to exclude liability for any economic loss arising from its negligence after the period of contractual liability has expired?

 

These principles were examined by the court in the case of Mr J A Robinson v P E Jones (Contractors) Ltd 2010.

 

P. E. Jones Contractors (“Jones”) built a house for Mr. Robinson (“Robinson”) in 1992. The work included the construction of chimneys and flues. In 2004, Robinson called out a British Gas engineer, who undertook a spillage test to check that the gas fires were working properly. British Gas advised that the fire in the family room had a "poor flue run". Robinson engaged a surveyor to investigate and he advised that the flues had not been built in accordance with best practice or the Building Regulations in force at that time. Robinson started legal proceedings against Jones, claiming that the builder had been in breach of its duties in contract and tort. Jones denied liability and argued that Robinson's claim was out of time.

 

The court found that a builder could owe a concurrent duty of care in tort and contract in respect of economic loss. This is not such good news but is hardly surprising.

 

A contractor's special skill is building and this involves exercising skill and judgement. Builders know that their clients expect them to build with skill and care and, if they fail to exercise that skill and care, their clients are likely to suffer economic loss by having to remedy defects. That skill, and the reliance which clients put upon it, extends to encompass both design and workmanship.

 

However, in this particular case, clause 10 of the parties' contract had required the parties to enter into a National House-Building Council's Standard Form of Agreement and, whilst this gave Robinson the benefit of a more extensive contractual warranty under the Buildmark scheme than that provided for in the parties' contract, it meant that clause 10 relieved Jones of any liability for defects other than were provided for in the NHBC Agreement.

 

In summary, Jones had successfully excluded the concurrent duty of care which it would otherwise have owed Robinson in tort of negligence. There was no basis for finding that this provision was unfair in the context of the Unfair Contract Terms Act 1977.

 

Summary

 

This is an important case because the judge reviewed the law relating to concurrent duties in contract and tort with regard to economic loss and found that a builder can owe a duty of care concurrent with his duty in contract in respect of economic loss. The good news is that this Judgement confirms that builders can limit their exposure to claims by including a term in their conditions which excludes liability for economic loss arising from its negligence after the period of contractual liability has expired.

 

So to all the builders out there - now might be a good time to check your terms!
 

Peter Vinden

Peter is an experienced professional in the construction industry with particular expertise in quantity surveying and the commercial management of contracting organisations. 

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