4 Obligations of the contractor

4.1 The contractor’s paramount obligation is to ‘complete the design for the Works and carry out and complete the construction of the Works’. This obligation, which is stated in Article 1, and amplified in clause 2.1, is discussed in detail below. In addition, the contractor has important obligations in relation to progress and programming, discussed in Chapter 5, with regard to provision of information and compliance with instructions, discussed in Chapter 6, and with regard to insurance matters, discussed in Chapter 9. The contractor’s obligations under DB16, which are as one would expect more extensive than under SBC16, are summarised in Table 4.1.

Table 4.1 K ey obligations of the contractor

4.2 Should Supplemental Provision 5 be incorporated, the contractor would, in addition to these primary obligations, be under an express duty of collaboration. The provision states:

This places a duty on the contractor to collaborate not only with the employer, but also with other team members, which would include the employer’s appointed consultants. Other supplemental provisions introduce further obligations, including to notify the employer promptly of any matter that may give rise to a dispute. Such obligations may affect the interpretation of the nature and extent of the contractor’s duties under other clauses.

The design obligation

4.3 The contractor is required to complete the design in accordance with the employer’s requirements and under clause 2.1 this obligation also extends to compliance with any change to the requirements instructed by the employer. Clause 2.11 makes it clear that the contractor is not responsible for the contents of the employer’s requirements, or for verifying the adequacy of any design contained within them. This clause is included to prevent such an obligation being implied, as it was in the case of Co-operative Insurance Society v Henry Boot. Although it is not entirely clear, it is unlikely to prevent the implication of a ‘duty to warn’ regarding any other aspects of the consultant team’s design; for example, where the design is varied through an instruction (for an instance of this see the earlier case of Plant Construction v Clive Adams). A certain degree of vigilance should be expected from the contractor, particularly where there is an express duty of collaboration as described above.

4.4 As discussed above, the third recital states that ‘the Employer has examined the Contractor’s Proposals and, subject to the Conditions, is satisfied that they appear to meet the Employer’s Requirements’, which implies that, insofar as the design has been finalised at the time of acceptance of tender, the employer has accepted the solution. However, there are convincing arguments that, despite this recital, the contractor remains obliged to meet all the employer’s requirements, regardless of anything set out in the initial contractor’s proposals (see paragraph 3.42), and therefore should continue to monitor the developing design and adjust the solution as soon as any discrepancy with the employer’s requirements is discovered.

4.5 It is important to note that under clause 2.17.1 the contractor’s liability is stated to be equivalent to that of ‘an architect or other appropriate professional designer’. In effect, this statement reduces the strict obligation that would normally have been implied to a requirement to use due skill and care (see paragraph 1.31). It would be clearer if the form simply stated this as, strictly speaking, an architect’s liability will depend on the terms of engagement used in each case, but the phrase is intended to mean the liability that would normally be implied by law. In practical terms, the employer will not be able to claim against the contractor for every defect or problem inherent in the design, but only when the employer can show that the design was not prepared with the skill and care to be expected of a competent architect undertaking such work.

4.6 The employer’s requirements may state that any selection of materials should be fit for the purposes set out in the employer’s requirements, but this should not be confused with what is commonly referred to as a ‘fitness for purpose’ obligation, as by clause 2.17.1 the contractor’s liability is limited to the use of reasonable skill and care in making that selection.

4.7 Clause 2.17.2 states that, where the contract involves work in connection with a dwelling, ‘the clause 2.17.1 reference to the Contractor’s liability includes liability under the Defective Premises Act 1972’. The effect is that the contractor is liable to the employer for design in relation to a dwelling to the same extent that an architect would be liable. The duty is expressed as ‘to see that the work which he takes on is done in a workmanlike or, as the case may be, professional manner, with proper materials and so that as regards that work the dwelling will be fit for habitation when completed’ (section 1(1)). In case law, the duty has not generally been taken to be a strict or absolute warranty of fitness (Alexander and another v Mercouris), although other authorities suggest that it is a strict duty. It should be noted that, although the contractor’s liability is limited to the amount stated in the contract particulars, the limitation does not apply to work in connection with a dwelling (cl 2.17.3).

4.8 The employer has an option to limit the contractor’s liability for the consequential losses arising from its failure to meet the design obligations, in addition to any liability for liquidated damages. This limitation is, in fact, less extensive than it might seem, as it protects the contractor only from claims of special types of damage, and not from the losses that would normally be foreseeable as a direct result of a breach of the contractor’s design obligations. Nevertheless, if the employer does agree to this limitation, this should be reflected in a reduced tender price. The limitation of contractor’s liability is set up under the contract particulars in clause 2.17.3. If no sum is inserted into the contract particulars, the contractor’s liability in respect of these matters will be unlimited.

4.9 If the employer wishes to impose a higher level of liability, this would require amendments to the form, which should be set out in the employer’s requirements. The employer would be unwise to make any such amendments without taking legal advice. It is interesting to note that both the RIBA and NEC3 forms contain optional ‘fitness for purpose’ liability clauses, which could serve as a useful starting point were such amendments required.

4.10 The contractor is required to hold PI insurance to cover its liability under clause 6.15.1 of the type and in an amount not less than stated in the contract particulars. Advice should be taken on the type and extent of insurance required, which would normally be in the form of a PI policy. Insurance to cover any stricter liability is not usually required, and although it would be possible to obtain, such insurance might be expensive.

Standards and quality

4.11 Under clause 2.1, where the employer’s requirements specify particular materials, goods or workmanship, the contractor must provide these items in accordance with the requirements, and this obligation is amplified in clause 2.2. The contractor will be relieved of any obligation to provide materials, goods or workmanship fit for the intended use, and its obligation will be limited to supplying those items specified. It would be implied, of course, that the items should be of merchantable quality. If they are not described in the requirements, the contractor must provide materials and goods in accordance with the proposals, or with ‘other Contractor’s Design Documents’, i.e. documents prepared or used by the contractor in connection with the works.

4.12 If the contractor wishes to substitute any materials or goods for those specified, it must obtain the permission of the employer in writing, which may not be unreasonably delayed or withheld (cl 2.2.1 and 1.10). The contract does not set out what should happen when the employer has given such consent. If the material is of the same standard and value, then the employer would have no reason for concern, but if the substitution were of less value, the employer would reasonably wish to see a reduction in the amount to be paid. If the material was originally specified in the employer’s requirements, the employer could issue an instruction requiring a change, which would be valued in the normal way. If, however, the material was specified in the proposals or further specifications submitted to the employer, then it is not clear how this adjustment might be handled under the contract. The employer could again issue a change instruction, specifying the material proposed as a new employer’s requirement, but this is a somewhat artificial method of incorporating what is, in effect, a change to the contractor’s proposals. An option would be to agree a reduction, which should be recorded in writing and signed by both parties.

4.13 As in SBC16, the obligation to provide materials in accordance with the contract is qualified by the phrase ‘so far as procurable’. This means that failure to supply materials would not be a breach of contract by the contractor were the item genuinely unavailable. However, ‘procurable’ would be interpreted on the assumption that reasonable steps had been taken to order the item in advance, and would not excuse a contractor who had merely forgotten to place an order. How far in advance such orders should be placed will depend on the particular circumstances and, if the parties cannot reach agreement, the matter could be referred to adjudication.

4.14 The contract does not state what should happen if a material is not procurable. It is suggested that, as part of its overall design obligation, the onus would be on the contractor to put forward a suggestion for the employer’s approval. Any necessary adjustment to the contract sum would be dealt with as discussed under paragraph 4.12 above.

4.15 If the employer’s requirements state that any items should be ‘to approval’, this means that the contractor only fulfils its obligations in respect of quality if the employer is satisfied. It is very important to note, however, that the final statement (or employer’s final statement) is conclusive evidence that, where the employer’s requirements or any change have expressly stated that the quality is to be to the approval of the employer, then the employer is so satisfied (cl 1.8.1.1). This would have the effect of preventing the employer from bringing a claim regarding those items of work. It would therefore be advisable for the employer to avoid using phrases such as ‘to approval’ or ‘to the employer’s satisfaction’ in the requirements or in any change instruction. The dangers of including them were underlined in the case of London Borough of Barking & Dagenham v Terrapin Construction Ltd.

4.16 However, if the phrase ‘or otherwise approved’ is used in a specification or bill of quantities, this means neither that the employer must be prepared to consider alternatives put forward by the contractor, nor that the employer must give any reasons for rejecting alternatives (Leedsford v City of Bradford). It merely gives the employer the right to do so. It should be noted that under clause 2.2.3 the employer may require the contractor to provide samples. This is discussed under paragraph 6.11.

Obligations in respect of quality of sub-contracted work

4.17 Where work is sub-contracted, the contract is clear that the contractor will still have ultimate responsibility for the standard of workmanship, materials and goods provided by the sub-contractor (cl 3.3.1). This obligation extends to any sub-let design work, and is the same whether or not the sub-contractor was named in the employer’s requirements.

Compliance with statute

4.18 The contractor is under a statutory duty to comply with all legislation relevant to the carrying out of the works, for example in respect of goods and services, building and construction regulations and health and safety. The duty is absolute and it is not possible to contract out of any of the resulting obligations.

4.19 DB16 includes a contractual duty in addition to the statutory duty, which gives additional protection to the employer, in that failure to comply with statute becomes a breach of contract. Under clause 2.1.1 the contractor is obliged to comply with all statutory requirements except where the employer’s requirements specifically state that the employer’s requirements (or relevant parts) comply (cl 2.1.2). In emergencies, the contractor may carry out work in order to achieve compliance with statutory requirements without the prior consent of the employer, but must notify the employer forthwith (cl 2.16).

4.20 Clause 2.1.1 requires the contractor to complete the works in compliance with statutory requirements and ‘for that purpose shall complete the design for the Works … and shall give all notices required by the Statutory Requirements’. This obligation therefore extends to obtaining statutory permissions as relevant, unless the employer’s requirements state that they comply, and would include obtaining planning permission. It also includes complying with Building Regulations, and the contractor should make sufficient allowance in its tender to cover all permissions, testing, commissioning and certification required. All consents and permissions must be passed to the employer (cl 2.1.3).

4.21 The duty of statutory compliance applies even when aspects of the employer’s requirements do not in fact comply with a statutory requirement. The contractor is relieved of this duty only when the requirements make a positive assertion of compliance.

4.22 The contractor must pay any fees or charges and is reimbursed for these only where the tender documents included a provisional sum for this item (cl 2.18). Clause 2.18 also requires the contractor to indemnify the employer against any liability in respect of such fees and charges. Should the contractor fail to pay any fee, the employer would be able to claim any losses resulting from such failure from the contractor, including, for example, any fines or legal fees incurred by the employer.

4.23 If either the contractor or the employer finds any divergence between the employer’s requirements or the contractor’s proposals or other contractor’s design documents and statutory requirements, then one must give immediate written notice to the other (cl 2.15.1). The contractor must then submit a proposal for dealing with the problem and, with the employer’s consent, give effect to the amendment entirely at its own cost. The employer is required to make a note of the amendment on the contract documents. It is not clear why the JCT has included this requirement, as it does not apply to any other type of discrepancy or divergence. It is suggested that if the employer dislikes the contractor’s proposal for dealing with the divergence, it must issue an instruction effecting an appropriate change to the requirements. The only cases where the contractor could claim additional costs would be where the statutory requirement did not exist at the base date, where it became necessary to conform with conditions attached to an approval obtained after the base date, or where the employer’s requirements asserted that the item in question complied (cl 2.15.2). In all these cases the adjustment is to be treated as if it were a change in the employer’s requirements.

4.24 The contractor is under no express obligation to search for any divergence, but if it fails to find a divergence and the resulting works do not comply, then the contractor will be in breach of clause 2.1.2 notwithstanding that the error lay in the employer’s requirements.

4.25 Under clause 2.15.1, it is clear that the contractor remains generally responsible for any non-compliance of the requirements or the proposals with statutory requirements which exist at the base date. Nevertheless, although this obligation is extensive, it should be noted that delays to progress of the works, which the contractor has taken all reasonable steps to avoid, that are due to failure to obtain approval from statutory authorities in good time are grounds for an extension of time (cl 2.26.13). Additionally, delays relating to planning permission are also grounds for claiming direct loss and/or expense (cl 4.21.4). Under clause 8.11.1.6, such delays may be grounds for termination where they lead to a suspension of the works.

4.26 Under clause 2.15.2.1, if there is any change in statutory requirements after the base date which results in a change to the contractor’s proposals, this is treated as if it were a change, which means that it would fall to be valued under clause 5.1, and may give rise to a claim for an extension of time under clause 2.26.1, or for loss and/or expense under clause 4.21.1, and may be grounds for termination under clause 8.11.1.2. Similarly, under clause 2.15.2.2, if the contractor’s proposals are affected by ‘the terms of any permission or approval made by a decision of the relevant authority after the Base Date’ this should also be treated as a change. This could include decisions relating to an approval obtained after the base date, for example planning permission obtained by the contractor, or where an approval had previously been obtained by the employer but contained reserved matters on which an authority later made a decision. The clause 2.15.2.2 obligation is subject to the proviso that the employer’s requirements have not precluded such adjustments from being treated as a change. In other words, the employer can elect that decisions of authorities are a matter for the contractor to absorb in its original price. Requiring the contractor to take such a risk is, however, likely to result in an increase in the tender figure.

4.27 If an amendment becomes necessary because it is found that a part of the employer’s requirements which specifically states that it complies with statutory requirements does not, in fact, comply, then in such a case the employer must issue an instruction under clause 3.9 effecting a change (cl 2.15.2.3).

Health and safety legislation

4.28 The contract allows for the contractor to take on the roles of principal designer and principal contractor under the CDM Regulations 2015; in fact, under Articles 5 and 6 the contractor will be responsible for those roles unless another name is inserted. The Regulations define the principal designer as ‘a designer with control over the pre-construction phase’ (regulation 5.1(a)). It is unlikely that the contractor would be in a position to take on this role unless a separate appointment is made at a very early stage in the project, before the DB16 contract is entered into. However, the contractor will, under the terms of DB16, be responsible for the developing design after the contract is formed, and therefore it would be sensible for the contractor to act as principal designer from this point on. It would be possible for the employer to replace the original principal designer with the contractor once the tender negotiations are concluded, provided, of course, that the contractor is sufficiently competent and has the resources to take on this role (which it ought to be if offering design services). If appointed as principal designer, the contractor is required under clause 3.16.2 to comply with all the relevant duties under the CDM Regulations.

4.29 Where the contractor is not the principal designer, clause 3.16.1 places a contractual obligation on the employer to ensure that the principal designer carries out his or her duties under the CDM Regulations. There are equivalent provisions where the contractor is not the principal contractor. This is a wider obligation than the ‘reasonable satisfaction with competence’ obligation imposed by the Regulations. Breach of this clause gives the contractor the right to terminate the contract under clause 8.9.1.3. It is more likely, in practice, that the contractor will claim for an extension of time or direct loss and/or expense for breach of clause 3.16, as this is a relevant event under clause 2.26.6 and a relevant matter under clause 4.21.5. An example might be where a principal designer delays in commenting on a contractor’s proposed amendment to the construction phase plan, and progress is thereby delayed.

4.30 Clause 3.16.3 places a duty on the contractor, if acting as the principal contractor, to comply with all the relevant duties set out in the CDM Regulations 2015. Breach of this duty gives grounds for termination under clause 8.4.1.5. The warning notice has still to be given, and JCT Practice Note 27 suggested that the provision should be used only for situations where the Health and Safety Executive is likely to close the site. Any breach is covered, however, provided termination is not unreasonable or vexatious, and the employer should consider any breach that might lead to action being taken against the employer as a serious one. If work needs to be postponed or other instructions given, due to a breach by the contractor, then there should be no entitlement to an extension of time or a claim for direct loss and/or expense.

4.31 The contractor should take the cost of compliance with the CDM Regulations (e.g. the cost of developing the construction phase plan) into account at the tender stage. No claims may be made for compliance with the Regulations (e.g. adjusting the construction phase plan to suit the contractor’s or sub-contractor’s working methods) and no extension of time will be given (cl 3.16.4). If alterations are needed as a result of an instruction requiring a change, then the costs are included in valuing the change and the alterations may be taken into account in assessing an application for an extension of time.

4.32 The CDM Regulations are not the only statutory health and safety obligations which may apply to the project, and the contractor must comply with all applicable health and safety laws. Supplemental Provision 6, furthermore, states that ‘the Parties will endeavour to establish and maintain a culture and working environment in which health and safety is of paramount concern’, which suggests that a ‘best practice’ rather than a minimum compliance approach is required. The provision sets out several specific requirements: for example, the contractor undertakes to comply with all approved codes of practice, to ensure that personnel receive induction training and have access to advice and to ensure that there is full and proper health and safety consultation with all such personnel in accordance with the Health and Safety (Consultation with Employees) Regulations 1996.