Chapter 2
The laws of contract and tort

This chapter:

  • describes the practical differences between the two main types of civil obligation – contract and tort
  • examines how these obligations arise
  • discusses how an architect can recognise what the extent of their liability may be
  • considers what standard of performance is required of an architect
  • considers how long an architect may remain legally liable for their actions.

2.1 The civil legal obligations of an architect

This book is primarily concerned with the civil obligations that the law imposes on architects, and which govern architects’ relationships with their clients, fellow professionals, funders, end users of projects and members of the public. It should be borne in mind that an architect may also be subject to the criminal law in the event that their actions (or omissions) cause a harm for which the criminal law imposes a sanction. For example, if an architect designs a building so poorly that it collapses, the architect may be sued by the client for the losses the client incurs as a result, but if someone was inside the building when it collapsed and that person lost their life, the architect may also be prosecuted for manslaughter and subject to a fine or imprisonment.

2.1.1 Laws of contract and tort

The law of contract and the law of tort are the main bodies of rules in English law relating to civil, as opposed to criminal, obligations. The basis on which the law imposes an obligation in contract is conceptually different from the basis on which the law of tort imposes an obligation, and it is simpler to analyse these two areas of law separately. However, depending on the facts of the case, English law provides that the two sets of obligations may overlap significantly. This overlap is likely to be particularly relevant in relation to professional negligence. Negligence is the most common form of tort, although there are many other types, including breach of statutory duty, for example trespass and nuisance. Negligence is a key area of interest for architects, especially because different limitation periods will apply in relation to legal actions in contract and those in tort, as discussed below. An architect’s professional appointment is likely to require them to exercise reasonable skill and care in producing their design; if the architect fails to meet that standard, they will be in breach of contract. But if the architect fails to use reasonable skill and care in their design work, they will also have acted negligently.

Both contract law and tort law set down standards of behaviour with which parties must comply. Behaviour is regulated by the provision of legal remedies for the victim of a civil wrong; the award of damages for breach of contract is an example of such a remedy.

The law of contract concerns self-imposed obligations, created by an agreement between the parties which the law recognises as binding on them. In contrast, the law of tort concerns obligations that are imposed by the law on one party because of the existence of a duty of care not to harm another party, whether or not the parties have agreed that the duty of care exists and even if there is no pre-existing link between the parties at all.

2.2 The law of contract

2.2.1 What makes a contract?

A contract is an agreement recognised by law as binding on the parties to it. The parties are said to be ‘privy’ to the contract, and the terms of the agreement are binding on them alone and not on third parties; the contract cannot generally be enforced by or against someone who is not a party to it. This doctrine of ‘privity of contract’ is subject to some qualifications – for example, the effects of the Contracts (Rights of Third Parties) Act 1999, as discussed in Chapter 6 – but remains a key difference between the way contract law and tort law operate.

The history of contract law is predominantly judge-made and, as explored in Chapter 1, the modern law in this area has, to a degree, developed to create confidence within, and been informed by the practice of, the business community. It is only relatively recently that Parliament has taken a more active role in helping to shape the principles of contract law. How do the judges decide whether or not a contract exists?

There is no prescribed form for a contract. A contract may be made between two parties, or more parties may be involved. It may be written or purely oral. In practice, it can be difficult to prove before a court what was orally agreed in the event of a dispute, because it will typically be the word of one party against that of the other; but the old Samuel Goldwyn maxim that ‘an oral contract is only as good as the paper it’s written on’ does not necessarily hold true, particularly with the English courts taking an increasingly investigative role when looking into the circumstances around a potential contract. However, certain elements must be present in the agreement to make it into a legally binding and enforceable contract.

In reality the behaviour of parties during the negotiation of a contract tends to be complex; as a result the courts have developed certain ‘control mechanisms’. These are used to break down the complex interplay between the parties into simpler concepts, in order to allow the court to do justice in individual cases when the existence or meaning of a contract is in dispute:

  • There must have been agreement between the parties.
  • The parties must have intended that their agreement should be legally binding.
  • Some consideration must have passed from the party receiving the benefit of the contract, in exchange for receiving that benefit (except for contracts made ‘under seal’).

These control mechanisms were refined in the golden age of English contract law, the 19th century, and are still used by the courts to legitimise decisions today.

2.2.2 Was there consideration and an intention to create legal relations?

The doctrine of consideration started as pure common sense; a court sought to understand why a party may have wanted to enter into a binding contract to provide particular goods or services. What bargain was made between the parties? If there was a sensible, understandable reason why the promise to provide goods or services was made, then it would be enforced. Over time a body of case law developed as to which reasons were good, enforceable reasons and which were not. Obviously the exchange of money was and remains a valid reason, so for example a collateral warranty will typically include a variation on the phrase:

For there to be an actionable contract binding the parties, there must also be evidence that the parties intended to create legal relations. The court in the case of Tesco Stores Limited v Costain Construction Limited and Others (at paragraph 152) said:

The courts adopt an objective approach for purely practical reasons. The orderly conduct of business affairs depends on people being taken to mean what they say, rather than being able to avoid the consequences of what they say in reliance on unexpressed reservations. If objectively a party conducts itself in its speech, writing or behaviour in such a way as to indicate that it intends to take on by agreement legally binding obligations, then the law will enforce on them the objective consequences of their conduct. In so doing, the law is not seeking to disregard what their actual intentions were, but only to limit the scope of the enquiry to the objective signs of their actual intentions; this was another conclusion reached by the court in the Tesco judgment referred to above.

2.2.3 Was there an offer? Was it accepted?

Artificial it may be – as mentioned above, the interaction between contracting parties is very often so much more complex – but the notions of ‘offer’ and ‘acceptance’ are of the highest importance in determining whether there is a concluded contract.

When analysing the offer and the acceptance a court is looking at whether the parties should be taken objectively to have been in agreement. As with the doctrine of intention to create legal relations, the court is not concerned with the actual subjective positions of the contracting parties, to the extent that those are different from the impression given objectively. The lesson for any party, including an architect, engaging in commercial negotiations is clear – make sure that the written evidence documenting the relationship, including the written contract or appointment, properly reflects the relationship you intended to create.

For the courts, both the offer and acceptance have to be clear and unequivocal. A party cannot accept an offer by saying or doing nothing – that is not enough evidence for a court to judge objectively – and nor is it possible to accept an offer that is different from the one made. For example, if you offer to provide design services for £50,000 and the client says they accept your terms provided you reduce your fee to £40,000, there is no agreement – only a counter-offer.

To add another layer of complexity, in the event of a dispute a court must not only decide objectively whether there has been an offer and an acceptance, it must also decide precisely what has been offered and what has been accepted. How does a court decide what the substance of the agreement is?

2.2.4 How does a court interpret a contract?

What are the principles on which a court acts when trying to interpret the meaning of a contract? The general rule is that the court is limited to interpreting the expressed intention of the parties through the words actually used in the contract. If you wish to be able to rely on a particular provision, or a particular point you raised during negotiations, you must ensure it is incorporated into the final agreed contract or appointment.

For the courts ‘what matters most … is not that the words themselves should initially seem clear … but that, at the end of the interpretative process their meaning should be clear’ (Persimmon Homes Ltd v Ove Arup & Partners Ltd [2015] EWHC 3573 (TCC). The interpretative process is aimed at ascertaining the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties at the time of the contract.

The court may look at the surrounding ‘factual matrix’ to give colour to the words of the contract and shed light on the objective aim of the parties in making the contract, but the court cannot try to interpret the clear words of the contract as if the court were the parties acting in that factual matrix. The factual matrix that a court can take into account is basically everything apart from the things that were said by the parties during the pre-contract negotiations – so it would include, for example, evidence of the business requirements of the parties at the time of the contract, which may show why the parties would have wanted to enter into a contract on particular terms.

The court will use all the background factual information which would affect the way in which an objective, reasonable person would understand the language of the contract; but it cannot, in interpreting a contract, ordinarily use evidence of the actual stated positions of the parties in pre-contract negotiations. This is known as the ‘exclusionary rule’ and was reaffirmed by the Supreme Court (in its former guise as the House of Lords) in the case of Chartbrook Ltd v Persimmon Homes Ltd, one of its final judgments before transforming into the Supreme Court. What the parties actually say pre-contract, and their subjective statements of intent for the contract, are not taken into account because they cannot help the court to assess the language of the contract objectively.

A court has the power to imply terms into a contract

If it is apparent to a court that, having reviewed the background factual matrix, something went wrong with the language of the contract, then the court will in such circumstances be prepared to rewrite the contract to properly reflect the terms of the offer and acceptance which the court has objectively identified. The Chartbrook case was tightly focused on the commercial effect of the contract as drafted. However much ‘red ink’ was required to make the words of the contract make commercial sense, in the context of what the parties were objectively trying to achieve as discerned from the factual background, the court was willing to make those changes – but only once the court concluded from the circumstances of the contract that the parties intended to include the additional words, but for whatever reason did not.

You should not rely on a court to make your contracts or appointments make sense – it is far better to draft the contract in the first place so that it properly reflects the deal you have made.

As discussed in Chapter 1, additional contract terms may also be implied by statute, such as those providing the right to refer disputes to adjudication under the 1996 and 2009 Construction Acts. If the parties intend that statutory implied terms are not to apply in their contract, those terms must usually be expressly deleted; however, a number of statutory provisions cannot be contracted out of, such as those in the Construction Acts.

There are limits on what the parties may agree: exclusion clauses

In certain circumstances, Parliament is also active in protecting contracting parties from themselves, or from the adverse effects of agreeing onerous contractual provisions due to the unequal bargaining positions of the parties. Statutory provisions, enforced by the courts, do not allow certain terms to be agreed between the parties to a contract in certain circumstances. A party in a dominant bargaining position may wish to include terms in the contract which exclude or limit their liability in the event of them being in breach of contract. An architect may be affected by such concerns if their client is seeking to impose onerous terms on them, or it may be the architect who has the dominant position and is seeking to limit or exclude their liability to the client, particularly to a consumer (as opposed to a commercial) client.

The two important pieces of legislation in this area are the Unfair Contract Terms Act 1977 (UCTA 1977) and the Consumer Rights Act 2015 (CRA 2015). CRA 2015 applies exclusively to relationships between commercial providers of goods and services and their consumer clients. As will be seen later in the context of the RIBA Standard Professional Services Contract 2018 (RIBA Standard PSC), clauses which are potentially unfair and which have not been individually negotiated or fully explained to a consumer client will fall foul of CRA 2015, and the architect will not be able to rely on them.

UCTA 1977 applies only to liability arising in the course of a business and in relation to liability arising towards other businesses. The provisions of UCTA prevent parties from contractually excluding liability for death or personal injury resulting from negligence; UCTA goes on to provide that liability in negligence for other loss and damage may be restricted or excluded only if the clause in question satisfies the test of ‘reasonableness’ in all the circumstances, as set out in the Act. Exclusions or limitations of liability for breach of contract must also satisfy the test of reasonableness, if the contract involves one party contracting as a consumer, or if the contract is made on one party’s standard written terms of business. Again, this could affect an architect contracting on the basis of a standard form of appointment. For example, the 2009 case of Langstane Housing Association v Riverside Construction Aberdeen Ltd and Others concerned arguments by a client that a net contribution clause (a limitation of the consultant’s liability which reverses the common law position and makes it harder for the client to recover their losses) was not fair and reasonable for the purposes of UCTA 1977. The court decided that in the circumstances a net contribution clause was fair and reasonable, but the credibility of this decision is undermined by the fact that the court also said that it did not consider a net contribution clause to be a restriction of liability to which UCTA 1977 would apply. It is safest to assume that the law in this area is not settled and net contribution clauses and other limitations on liability may still be vulnerable to UCTA-based arguments raised by clients in certain circumstances.

In the 2012 case of Ampleforth Abbey Trust v Turner & Townsend [2012] EWHC 2137 (TCC), the court had to decide whether the consultant was able to rely on a contractual cap on liability in order to defend itself against a claim. Turner & Townsend (T&T) had negotiated a liability cap in its appointment of the lesser of £1 million or the total of the fees paid – a sum of £111,321. However the appointment also provided that T&T must maintain professional indemnity insurance (PII) cover in the sum of £10 million. The court concluded that the contractual limit on liability was unfair because the client would be prevented from accessing the benefit of the PII cover that the consultant was contractually obliged to maintain. If allowed to rely on the overall cap, T&T’s liability would have been limited to just 1% of its PII insurance cover and the court could not support such a huge disparity.

2.2.5 Letters of appointment, letters of intent and other ‘informal’ contracts

An architect may come across a letter of intent on a project if they are asked to administer a building contract based on one. An architect may also be appointed on an informal basis, such as a letter of appointment – which amounts to a letter of intent. In this section any such informal contract or appointment based on a letter or an exchange of letters or emails will be described as a ‘letter of intent’; using the term ‘informal contract’ would just create confusion because not every such agreement is going to amount to a legally enforceable contract.

When a new job is secured it is always tempting, especially in a difficult financial climate, to dive into the project and neglect the appointment paperwork. You might proceed on the basis of an exchange of emails, an oral instruction in a meeting or a letter of intent. But is it really so vital to begin work before concluding the building contract or your own professional appointment? In the majority of cases where letters of intent are used, the perceived benefit of an early start is outweighed in the long term by the risks of proceeding without properly settled contract and appointment terms. In the context of a building contract, if the contractor is working on the basis of an open-ended letter of intent, and being paid, the incentive to agree a formal building contract diminishes with each passing week.

The phrase ‘letter of intent’ is not a term of art and does not have a fixed meaning. It covers a broad range of agreements between parties, with varying degrees of ‘formality’, covering a spectrum from ‘definitely not a contract’ at one end to ‘definitely a binding contract’ at the other end, and all points of ‘maybe’ in between. Its meaning and effects depend on all the circumstances of each particular case. Letters of intent are not a special case; a court will use the same principles to decide whether a letter of intent is a binding contract (and if so, what the binding obligations require the parties to do) as it would use for any document.

The primary disadvantage of letters of intent is their unpredictability; it is often very difficult to tell in advance what interpretation a court would give to such a document, in terms of the extent of the legal relationship (if any) it creates. It is rare for there to be such fundamental doubts about a formally agreed contract or professional appointment. Poorly thought-out drafting – ambiguous wording or incomplete treatment of important issues – within a letter of intent will inevitably make it more likely that a dispute will arise about the nature and extent of the rights and obligations of the parties.

Many attempts have been made, mostly by lawyers, to identify different categories of letters of intent, but these definitions are not necessarily helpful. Every letter of intent is different, and an over-emphasis on categorisation can mask the single important issue for the parties involved: what is the legal effect of the document in question?

Interpretation of letters of intent by the courts, in theory

There is no presumption that, because the works or services required by the letter of intent have been completed or substantially completed, the letter of intent must be a binding contract between the parties. Each case will depend on all the facts, and on the drafting of the document in question. In the leading Supreme Court case of RTS Flexible Systems Limited v Molkerei Alois Müller Gmbh & Company KG (UK Production), Lord Clarke stated:

The most common form of letter of intent describes generally the initial works or services that the employer wants carried out, and sets out a maximum sum that will be paid in return for those works or services. A form of underlying contract or appointment will typically be referred to as something the parties intend to execute in due course, and payment and other terms from the ‘formal’ contract form may be specifically cross-referred to in the letter of intent. Such a letter of intent will also usually contain requirements for timing of the works or services.

The essential point is that the employer typically wants their letter of intent to be legally binding to some extent; there is no purpose to the exercise if the contractor or service provider is not obliged to do anything other than complete those works or services it chooses to carry out within a reasonable time. As a result, letters of intent tend to be uneasy hybrids, mini-contracts pretending to be informal agreements – too simple to cover all the important points properly, but too complex to be free of ambiguity – and often drafted with insufficient legal input, to save time and money. The majority of decided cases in this area have been concerned with this type of agreement: a mini-contract created without the care that would be taken for a ‘formal’ contract or appointment.

Interpretation of letters of intent in practice

In the RTS Flexible Systems case, the Supreme Court had to consider the principles governing the legal status of letters of intent. Müller, a food manufacturer, wished to update its packaging equipment. It entered into discussions with RTS, which over several years led to a number of quotations being received from RTS.

RTS was awarded the job on the basis of a quotation which referred to its own standard terms and conditions. Müller then issued a letter of intent setting a four-week period for the execution of a formal contract and also referring to Müller’s standard terms, one of which (clause 48) stated: ‘The Contract … shall not become effective until each party has executed a counterpart and exchanged it with the other.’ The four-week period was repeatedly extended. After the expiry of the last period of extension, a dispute arose in relation to alleged defects in the works. Müller claimed it had no further obligation in respect of the work that had been carried out because the execution of a formal contract had still not taken place.

The case eventually reached the Supreme Court. Did the parties make a contract after the expiry of the letter of intent, and if so, on what terms? The Supreme Court set out some basic principles, with Lord Clarke quoting with approval, as a summary of the current position, the guidance originally expressed by the Court of Appeal in the 1987 case of Pagnan SpA v Feed Products Ltd. The key principles from the Pagnan case are as follows:

  • The existence and terms of any contract between the parties depends on an objective reading of the correspondence, discussions and conduct between the parties as a whole.
  • Even if the parties have agreed all the terms of the proposed contract, there may still be no contract if, viewed objectively, the parties did not intend a contract to exist or intended that the contract should not become binding until some further condition had been fulfilled.
  • Conversely, the parties may be seen, objectively, to have intended the contract to be binding even though there are further terms still to be agreed or some further formality to be fulfilled.
  • It is for the parties to decide whether they wish to be bound and, if so, by what terms, however objectively ‘important’ or ‘unimportant’ those terms are.

On the facts, the Supreme Court found it unrealistic to suppose that the parties did not intend to create legal relations. Both parties accepted that there was an agreed price, and if the price was to be accepted as a term binding on the parties the case could not be one of no contract, at least on conventional principles. It was surely not possible that RTS would have agreed to proceed with detailed work and to complete the whole job on a non-contractual basis, subject to no terms at all. Such an approach would not make ‘commercial sense’. The Supreme Court decided the basis for the contract was effectively the Müller standard terms and, on the facts, the Court was happy to infer an unequivocal agreement had also been reached between the parties to waive the problematic clause 48.

How had the contractual position been allowed to become so confused? Counsel for one of the parties before the original hearing said that ‘neither party wanted the negotiations to get in the way of the project’. This is understandable and at the same time extremely risky behaviour.

Any consultant or contractor should insist on the importance of settling the terms of a formal contract or appointment, rather than letting sleeping dogs lie out of a misplaced sense of being seen as ‘being awkward’.

Agreeing formal terms of appointment provides a benefit for both the client and the service provider. Anything else leaves the interpretation of the relationship between the parties to the court. Using management time to settle formal terms of appointment should never be seen as a distraction from ‘getting on with the job’; on the contrary, settling the terms of appointment is an essential part of the job. As Lord Clarke said in the very first paragraph of his judgment in the RTS case:

Is it ever safe to use a letter of intent?

The use of letters of intent remains widespread throughout the industry. But should they have a place? Is a letter of intent better than nothing? The answer is that a letter of intent can serve a purpose, if the parties find themselves genuinely unable to agree formal terms before the works or services start; but only if serious thought has been given to the terms of the letter so that it achieves legally what the parties want it to achieve. Like any agreement governing the relationship between commercial parties, a letter of intent can take time and considerable skill to get right. Parties who see a letter of intent as a temporary quick fix, which can be achieved with minimal thought or legal input, will often suffer the consequences.

For very small projects an architect may be appointed on the basis of a letter contract, and the RIBA publishes A guide to letter contracts for very small projects, surveys and reports, which includes model letters and guidance notes. In some very exceptional cases, perhaps for a feasibility study where the final project definition remains to be determined, it may be necessary to proceed initially on the basis of an exchange of letters. Generally, though, the RIBA’s position is that proceeding with an appointment on the basis of a letter of intent is to be avoided if at all possible.

When considering the terms of a letter of intent, ask: what do I want out of it? If it is not intended to create legally binding relations, this can be achieved by keeping the document very simple. It will not be conclusive, but will make explicit that the parties do not intend through the letter to create a legally binding contract. All else that needs be set out is the scope of the client’s request for services, which may be accepted by the consultant. The client is indicating that if the consultant chooses to go ahead with the work, and does carry out and complete the services, the client will pay what the services are reasonably worth. All other obligations that may be expected from a contract – an actual obligation to provide the work, timing for performance of that work – have no place in such an arrangement.

If the intention is to create legally binding relations, the parties need to invest management time and incur legal costs to properly set out the nature of the relationship and the extent to which they intend to be bound – just as they should for any contract. For example, if you do not wish to be potentially bound by the terms of a particular standard form contract or appointment, do not cross-refer to it. Refer instead, if necessary, to the specific terms with which you choose to govern your relationship. The logical conclusion to be drawn is that the time and expertise required to be invested in making a letter of intent fit for the purpose of legally binding the parties could almost always be better spent in settling formal contract or appointment terms.

If the agreement of a formal contract or appointment seems impossible prior to commencement of the works or services, then a letter of intent which properly sets out the scope of the work and the payment terms is preferable to an oral instruction or an exchange of emails. But think about why the agreement of a formal contract seems impossible.

  • Is it simply a question of timing?
  • Is there a deep-rooted point of disagreement that no amount of time spent negotiating will cure?

In the former case, proceed with caution, but in the latter case, consider whether you should be proceeding at all. Consider whether it is possible to have a non-binding letter of intent; this may concentrate minds on agreeing something more formal, but are the parties willing to proceed without contractual protection in the meantime? This may simply be unrealistic on a high-value or time-critical project. Sometimes a legally binding letter of intent seems like the only viable ‘middle ground between nothing and a formal contract or appointment. But viewing a binding letter of intent as a quick fix, to be taken somehow more lightly than a formal contract, is a mistake.

The parties should be no less thorough in their approach to settling a letter of intent than they would be when dealing with a full-blown contract. The letter of intent could be limited in scope, or time, or value, but if it is intended to be legally binding the terms should be no less certain than would be the terms of a formal contract.

If the letter of intent is intended to be legally binding, but important terms remain to be agreed or are ambiguous, then both parties are proceeding at risk, because there is no certainty as to how a court would interpret the relationship between the parties. In these circumstances, it is vital that the parties continue to negotiate and do not rely on the letter of intent to see them through to the end of the project. It is only safe to rely on a letter of intent through to completion if the letter sets out the parties’ intentions for their respective rights and obligations as clearly as the formal contract would have done.

2.3 The law of tort

2.3.1 What is a tort?

The word ‘tort’ derives from archaic English for an injury, literally something twisted. It now means a civil legal wrong, as distinct from a criminal legal wrong. A party may commit a ‘tort’, as other parties may commit a ‘crime’. Some tortious behaviour may also be criminal.

In tort cases, the party that claims to have suffered a loss, and brings a claim, is called the ‘claimant’. The party alleged to have inflicted the damage is the ‘defendant’. The role of the law of tort is to compensate victims of tortious behaviour for their resulting losses. The objectives of criminal law, in contrast, focus on punishment and deterrence.

Tort is concerned with the allocation of legal liability for losses which will inevitably occur in any mature society. The damage may take many forms, including personal injury, physical damage to property, economic loss, damage to a party’s image or reputation, and interference with rights in intellectual property. The law of tort does not provide a remedy in every case where a person suffers damage. Over the long development of the law, courts and governments have taken decisions about which interests need to be protected by the law, so we have a body of decided cases and statute law that requires people to do or refrain from doing certain things, but not others, and allows redress for an infringement of another person’s rights created by those cases or statutes.

There are a number of different types of tort

In addition to negligence, the almost all-encompassing tort described below, there are several other types of civil (as opposed to criminal) wrong where the courts recognise that the infringement of a legal right gives rise to a claim for damages or an injunction. Among those other torts, an architect may for example encounter nuisance, trespass or breach of statutory duty.

The land-related torts of trespass (for example, building on or over a neighbour’s land) and nuisance (for example creating noise, fumes or vibrations during construction work that interfere with a neighbour’s use of their land) should be in the contemplation of an architect when advising a client at the outset of a project. It is the architect’s duty to their client, as a responsible professional, to bring to the client’s attention the possibility that land law may be an issue that affects the development being considered. An architect should always obtain confirmation from their client or the client’s legal advisors that there are no restrictions or neighbour’s rights (restrictive covenants or easements) that may change the way the project is designed or the methodology for carrying out the works.

The courts have in recent years been less willing than before to grant injunctions to prevent or halt developments in cases of trespass or nuisance, choosing instead to assess the loss to the claimant in financial terms. However, it should be borne in mind by any architect that if a client is successfully sued for trespass or nuisance as a result of some default on the part of the architect – such as failing to obtain accurate information relating to the site boundary and designing a building partly on a neighbour’s land – then the client is likely to try to recover its losses by claiming against the architect in negligence.

2.3.2 What is negligence?

Of the many different categories of tort recognised by law, the most important by far is the tort of negligence.

Practically, for an architect, a claim in tort will usually mean a claim for negligence.

A negligent act, or omission (a failure to do something), is one which breaches a legal duty to take care and causes damage to a claimant. So for there to be negligence, there must be:

  • a legal duty of care on the part of the defendant not to cause damage to the claimant
  • a breach of that duty, and
  • damage suffered by the claimant as a consequence of the defendant’s breach of duty.

The separation of these elements is sometimes not realistic when a court reviews the facts of a case, but nevertheless the courts have developed tests to decide whether each of these elements is present in any particular set of circumstances. Arguably, these are simply three ways of assessing the underlying issue of ‘foreseeability’. Could the defendant have foreseen that the specific claimant could be affected by their conduct? Could the defendant have foreseen that their conduct would cause harm? Could the defendant have foreseen that their breach of duty would cause the damage suffered? One complicating factor is that, although the principles of tort law have general application, and the duties concerned are duties owed to people generally, the courts decide cases on individual sets of facts. There are therefore two key questions for the court:

  • Does the defendant owe a duty of care to this claimant not to cause this type of damage?
  • Has the defendant breached their duty to this claimant?

Foreseeability in practice – the case of Acrecrest Ltd v Hattrell & Partners

The architect in this case had been engaged by a developer to design a block of flats. The architect’s specifications required the foundations to be built to a depth of 3 feet 6 inches; during a subsequent examination of the foundation trenches, a local authority building inspector found tree roots in part of the site and instructed that the foundations in that area should be dug to a depth of 5 feet. The architect complied, but the foundation design was still not in accordance with the Building Regulations then current, which required foundations to be specified and constructed to a depth sufficient to safeguard the building against damage by swelling or sinking of the subsoil.

The offending trees and tree roots were removed from site before construction began. Unfortunately, when the block of flats was complete, cracks began to appear in the structure; the removal of the trees had resulted in swelling of the subsoil, which caused the foundations to ‘heave’. This in turn caused the cracks in the structure. The foundations had not been specified or constructed to a sufficient depth to counteract the heave; if the foundations had been specified to a uniform depth of 5 feet over the entire site, the problem could have been prevented.

The court held that the architect’s foundation design should have been based on adequate knowledge of the subsoil conditions and the Building Regulations. The heaving and cracking were foreseeable consequences of failing to specify foundations to a sufficient uniform depth. The architect was liable to the client for the full extent of the damage caused by heave, because it was foreseeable that damage of that type would be caused. It did not matter that it was not foreseeable that the damage would be quite as extensive as it turned out to be.

2.3.3 When does a party owe a duty of care?

The concept of the duty of care is used by courts to define when a party should be considered to be obliged to take care not to harm the interests of another party through their negligent behaviour. An act or omission may be negligent, and may even cause damage, but the law does not decide that the negligent party should be held legally responsible in every case.

The duty of care is the key control mechanism used by the courts to maintain the scope of negligent liability within the limits that they think wider society, and the court system, can bear. The courts have regularly exercised their considerable discretion, finding the existence of a duty in some cases, and the absence of a duty in other cases, based on policy considerations such as what would be considered ‘fair’ in all the circumstances, or to what extent a duty can be allowed to exist without swamping the courts with claims. So how do the courts decide when a duty of care is owed?

The neighbour principle

The modern law of negligence began less than 100 years ago with the case of a Mrs Donoghue, who suffered illness after drinking a bottle of ginger beer that had been bought for her by a friend. She was prevented by the doctrine of privity from making a claim in contract – she had not purchased the drink herself. Even so, the House of Lords in the case of Donoghue v Stevenson found that the manufacturer did owe her a duty of care to make sure that the contents of the bottle would not cause her physical harm.

The court started from the biblical passage requiring believers to ‘love thy neighbour’ and derived from this the legal principle that people ‘must not injure’ their neighbour. The ‘neighbour principle’ means that a person must take reasonable care to avoid acts or omissions which a reasonable person could foresee would be likely to cause harm to their neighbours. For these purposes ‘neighbours’ was defined to include those people so closely affected by the acts or omissions that a reasonable person could have foreseen them suffering harm.

There was a period of significant expansion in the law of negligence during the years 1978 to 1990, beginning with the House of Lords case Anns v London Borough of Merton, when the courts showed a willingness to consider the neighbour principle as generally applicable unless there was a good reason of public policy for it to be excluded. Since then the tests for duty of care have become more restrictive, as set out overleaf, but it is worth knowing the historical context in this fluid area of law, to understand the potential unpredictability of the courts.

Development of the current, more restrictive tests for a duty of care

The courts do not now recognise a general principle of liability in negligence. In Caparo Industries v Dickman, the court identified a three-stage test to decide the presence of a duty of care:

  1. Was it reasonably foreseeable that the defendant’s conduct would cause damage to the claimant?
  2. Was there a sufficient relationship of ‘proximity’ between the claimant and the defendant, so that the defendant should have had the claimant in mind when carrying out its actions?
  3. Overall, was the situation one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope on one party for the benefit of the other?

This remains good law but has been refined further by subsequent House of Lords cases.

In 1995, the House of Lords in the Henderson v Merrett Syndicates case focused on ‘assumption of responsibility’ by the party committing the tort as the basis for the claimant to recover damages. This approach has been adopted in many important cases, sometimes in tandem with the Caparo three-stage test, though sometimes the court has considered assumption of responsibility to be a sufficient test on its own. In 2008 the House of Lords took a chisel to their sculpture once again in the Transfield Shipping case, and this time emphasised the need for a court to decide whether the defendant ought fairly and reasonably to be seen as having accepted responsibility to the claimant to guard against the type of loss which occurred. That is where we currently are.

In the case of Lejonvarn v Burgess [2017] EWCA 254 the Court of Appeal followed the decision of the trial judge in finding that the defendant architect/project manager owed a duty of care to the claimants on the basis that she had assumed a responsibility to them. The case also serves as a warning against giving informal professional advice to friends. Mrs Lejonvarn had agreed to become involved in a neighbour’s garden project, initially on an unpaid basis. The project went badly and it was alleged that the defendant’s performance as project manager had caused the claimants to suffer significant losses. The court held that, even in the absence of a formal contract, Mrs Lejonvarn owed the claimants a duty of care, based on her statements and actions and importantly based on her knowledge that her neighbours were relying on her exercising reasonable skill and care in relation to the services she provided. She had assumed a responsibility to them.

The concept of a duty of care is discussed further below in the context of economic loss, which was the focus of many of the cases mentioned in this section.

2.3.4 What amounts to a breach of duty?

Architecture is a profession, and the legal duty of any professiona architect in carrying out their work is to exercise the reasonable skill and care that would be expected of the ordinarily skilled architect. This is an objective test and the particular special skills or inadequacies of the individual architect compared with other members of their profession are not generally taken into account. The largest international practice and the smallest one-person band are subject to the same test for breach of duty, in tort.

Most professionals will aspire to perfection, but they do not ordinarily have to achieve perfection. It is possible for an architect to make a mistake without being negligent. Some errors are not substantial enough to amount to negligence; others may be substantial, but if the architect can show that a responsible body of members of their profession would have done the same thing, they will not ordinarily be said to have acted negligently.

For example, if an architect has designed a building with an access ramp for wheelchair access from the street up to the doorway, the architect will be negligent if on their elevation drawings they mis-state the existing site levels so that the ramp gradient when built is outside the tolerances allowed by Part M of the Building Regulations. However, if the site levels shown on the architect’s elevations are incorrect but the access ramp when built on the basis of the drawings remains within the allowable tolerances, this is just an error, not a negligent error, and the architect has been fortunate.

Whether an architect’s actions amount to a breach of duty is judged on the basis of the state of knowledge within the profession at the time the architect acted. There is no place for hindsight in this judgment, and no scope for an architect to be retrospectively punished for acting in a way that was accepted at the time but subsequently came to be seen as negligent.

Ultimately, though, it is not always possible or desirable to keep separate the questions of breach of duty and the existence of a duty in the first place, and the question of whether the damage caused was too remote a possibility to foresee. Reasonable foreseeability is at the heart of all this; if a reasonable person can foresee that damage is likely to result from their actions, this both creates the duty and sets the parameters for what will amount to a breach of that duty.

2.3.5 What do we mean by 'damage'?

For there to be negligence, the claimant must establish that the defendant’s breach of duty caused actual damage. Generally, damage must mean physical damage to people or property in order for there to be a viable claim in tort.

To prove causation, the claimant must not only show that there is a factual material connection between the defendant’s actions and the damage, but must also show ‘causation in law’ by establishing that the damage which occurred was a reasonably foreseeable consequence of the defendant’s actions.

Once again, foreseeability is the key ingredient. Where there is a duty of care not to cause a particular type of damage, but that type of damage occurs and the damage was factually caused by the actions of the defendant, this is not proof of negligence without the missing ingredient. There must be proof that the damage was a reasonably foreseeable consequence of the defendant’s actions.

2.3.6 Can an architect be liable in negligence for pure economic losses?

The existence of a duty of care in cases of physical damage, to people or property, is generally not problematic. It is difficult to argue against a duty to take care to avoid physical harm being caused to other people or their property.

The real battleground, for the past 30 years if not longer, has been in the field of pure economic loss:

  • pure economic loss resulting from negligent conduct is generally not recoverable
  • pure economic loss resulting from negligent mis-statements, in contrast, has long been considered recoverable in appropriate circumstances.

Pure economic loss means loss suffered by a claimant which is not an immediate consequence of physical damage caused by the actions of the defendant. The word ‘pure’ is used to distinguish such losses, generally not recoverable, from economic losses which are a consequence of physical damage and can be recovered in tort. This can sometimes be a hard distinction to make, but the case of Spartan Steel and Alloys Ltd v Martin & Co (Contractors) shows how the courts define which losses are ‘truly consequential’ on the material damage.

The production of metal in the claimant’s factory was brought to a standstill when the defendant, a contractor, negligently damaged an electricity cable and cut off the claimant’s power supply. The price for the metal went down during the period the electricity was cut off. The claimant lost profit on the melt that had been in production at the time; they also claimed for the loss of profit on four other melts that would have taken place had the electricity not been cut off. The majority decision of the Court of Appeal was that the lost profit on the metal in production at the time of the power cut was recoverable, but the lost profit on the other four melts was pure economic loss, not recoverable because it could not be shown to be an immediate consequence of the physical damage the contractor had caused.

Pure economic loss is an area of the highest importance for architects, because of the potentially huge increase in the scope of the architect’s liability if they assume responsibility for pure economic losses. So it is unfortunate that some of the fine legal distinctions in the decided cases can be so difficult to understand. Was the lost profit on the melt that was in progress really any different from the loss of profit on the hypothetical ‘lost’ melts? After all, the delay in production as a whole did flow from the physical damage to the electricity cable. Part of the problem is that the courts are not trying to say there is a logical distinction. Instead, the courts are expressing a reluctance to recognise a duty of care to guard against pure economic loss, on policy grounds. Partly the courts are wary that they would be overwhelmed with claims for economic losses if their approach ever again became less restrictive, and partly the courts consider it unfair to hold a defendant liable for all of the consequences of their actions, however remote and unforeseeable those consequences might be. There have to be cut-off points somewhere, and pure economic loss is one of them. But caution is still required – even pure economic loss can be recovered in certain circumstances.

The starting point for the current restrictive approach was the case of Murphy v Brentwood, which decided that the infliction of a purely economic loss on a party does not universally need to be justified, in contrast to the approach to be taken in cases of physical injury to people or property:

This doctrine does leave the door slightly ajar; if there is some additional factor, some special circumstance, that justifies the imposition of a duty to avoid causing pure economic loss, a successful claim can be made. Looked at in this way, the Murphy case does not provide the comprehensive protection against claims for pure economic loss that some construction professionals had hoped it did.

In the years since Murphy, while the overall trend has been restrictive the courts have also explored a potential line of authority in support of economic loss claims, discussed below, based on the concept of an ‘assumption of responsibility’ on the part of consultants and contractors to carry out their services using reasonable skill and care not to cause pure economic loss.

2.3.7 In what circumstances does an assumption of responsibility arise?

Since the post-Murphy clampdown, the following has happened. The courts have taken the rule made in a 1964 case, Hedley Byrne v Heller & Partners, which said that pure economic loss could be recovered in tort in certain circumstances if it resulted from a negligent mis-statement, and expanded it to allow such claims, in restricted circumstances only, even if the loss is caused by negligent conduct.

The Hedley Byrne case involved a negligent financial reference; the claimant, in reliance on the negligent advice they received, suffered a financial loss following the insolvency of a client. The House of Lords decided that the defendant must be liable for pure economic losses resulting from negligent mis-statements if there was a special relationship between the parties based on a voluntary assumption of responsibility, and if the claimant had reasonably relied on the defendant’s statement.

The House of Lords, again in the case of Henderson v Merrett Syndicates Ltd, took the logical step of saying that if a person assumes responsibility to another in respect of certain services, there is no reason why they should not be liable to that other person in damages in respect of any pure economic loss that flows from the negligent performance of those services. There was no reason for the principle to relate only to liability for statements but not actions; any professional task or service, by word or deed, is now covered by the principle.

A contractual relationship may establish an assumption of responsibility

It will be obvious that the most common way of assuming responsibility to another in a business context is through a contract. So the law is now that an architect or any other construction professional, including a contractor without design responsibility, may be potentially liable in tort for pure economic losses to a party if there is a contract between the parties requiring the professional to exercise reasonable skill and care. The current position is summed up neatly in the case of Robinson v PE Jones (Contractors) Limited. Importantly, the Robinson case also makes clear that the terms of the contract can be drafted so as to prevent a concurrent duty of care in tort from arising at all; just such a term was included in Mr Robinson’s contract and as a result he was unsuccessful in his claim. Both points of principle were later upheld by the Court of Appeal.

Mr Robinson had signed a contract with the house builder PE Jones in 1992; when a significant defect in the chimney flue of the completed property emerged over 12 years later, an action for breach of contract was not possible because the relevant contractual limitation period had expired. Only a claim in tort would do – for latent defects, the long-stop limitation period is 15 years. Mr Robinson had suffered pure economic loss only – his house was worth less because of the building defects. Was there enough to establish a duty of care in tort?

The Court held that there was. If there is a contractual relationship obliging the professional to exercise reasonable skill and care in the performance of the services, this may be enough (note, not necessarily will be enough) to establish an ‘assumption of responsibility’; therefore there may be a duty of care in tort to avoid pure economic losses which is concurrent with the duty of care under the contract. This concurrent duty in tort may arise from a contractual relationship in circumstances where:

  • one party has a special ‘skill’, broadly understood to include special knowledge
  • that party agrees to perform services (not limited to the provision of information and advice, or to the performance of professional services), in circumstances where there is an express or implied obligation to exercise reasonable care and skill while providing those services
  • considered objectively, those circumstances disclose both an assumption of responsibility by that party to the other for the performance of those services and reliance by the other party, and
  • the contractual relationship is not inconsistent with the existence of that duty in tort.

As expressed by the High Court in Robinson, there is effectively a presumption (in relation to professional consultants) that there has been an assumption of responsibility in cases where there is a contract between the parties requiring reasonable skill and care. In the absence of circumstances pointing to a different conclusion, all the necessary ingredients to establish a tortious duty of care are present. The Court of Appeal was more measured in its decision and focused on the entirety of the relationship between the parties, of which the contract was just one element, as being indicative of whether or not there was an assumption of responsibility. But the principle is beyond doubt:

2.3.8 Pure economic loss and the Defective Premises Act 1972

Parliament has made provision by statute through the Defective Premises Act 1972 (the DPA) for the recovery of pure economic loss. The DPA imposes a number of specified obligations in relation to those involved in the construction of dwelling houses. In fact the Robinson case, and others which can be interpreted as equating an assumption of responsibility in tort with a contractual relationship, do not go as far as the DPA. The DPA provides that any person taking on work for the provision of a dwelling owes a duty not only to the original owner (the Robinson situation), but also to every person acquiring an interest in the dwelling – any subsequent owners.

This duty requires that the work is carried out in a professional manner such that the dwelling will be fit for habitation when completed. The DPA applies to all building professionals, including architects. The duty cannot be excluded by contract.

The remedy for breach of the DPA is damages, and pure economic loss (the diminution in value of the property itself caused by negligence) is recoverable. The potentially onerous nature of the DPA obligations was highlighted in the case of Bole v Huntsbuild, which concerned cracking to a building structure caused by heave due to inadequate foundation depth – facts very similar to the Acrecrest case discussed in 2.3.2. The Court of Appeal strongly upheld the consumer protection spirit of the DPA, both in the strictness with which it defined ‘suitability for purpose’ and ‘fitness for habitation’, and in the apparent generosity with which it established the correct measure of damages.

It is possible that an increasing number of claims for pure economic loss could be brought against architects under the DPA, particularly bearing in mind the current restrictive approach to pure economic loss favoured by the courts. However, the limitation period for actions under the DPA is just 6 years from completion of the work concerned, which may limit the scope for a significant increase in claims. For subsequent owners with no prospect of a contractual claim or assumption of responsibility based claim, though, the DPA is a potentially useful tool of which architects should be aware.

2.3.9 Summary of practical effects for architects

When is a duty of care owed? When may an architect be liable for pure economic loss?

The numerous attempts to define and refine the scope of the tort of negligence, and in particular the duty of care, seem individually to be sensible, useful, applicable tests for lawyers and judges. But for an overview, it is instructive to go back to the Caparo case, where the House of Lords denied that any such practical application was possible, commenting that:

and that proximity, fairness and assumption of responsibility are:

What does all the legal theory mean, practically, for architects? Liability for negligence is an intensely practical issue for architects; every statement made, every drawing produced, every certificate issued, in a professional capacity, is an expression of the architect’s skill and potentially creates a duty of care for parties relying on the quality of the architect’s performance, whether or not they have a contract with the architect.

The numerous tests for establishing a duty of care are arguably just so many ways of saying the same thing. Is an assumption of responsibility really any different from saying that the parties have a relationship of proximity? The overall lesson for an architect is that the closer the relationship with another party, the more likely it is that a duty of care in tort will be found to exist and, if the relationship is contractual, the scope of the duty of care may be wide enough to include a duty to avoid causing pure economic losses.

Some key principles are apparent:

  • An architect will be liable in negligence for loss which is the direct result of physical damage to people or property, if duty, breach and causation are established.
  • An architect is likely to owe their client the same duty in negligence in relation to pure economic loss as they owe under any contract the parties have made (concurrent liability), unless there are any circumstances which would lead the court to a different conclusion.
  • The architect and the client can by the terms of their contract prevent such a concurrent duty of care in negligence from arising.
  • An architect may be liable in negligence for pure economic loss caused to non-client third parties by negligent mis-statements under the principle in Hedley Byrne, if there has been an assumption of responsibility coupled with reliance.
  • An architect’s liability in negligence for pure economic loss caused to non-client third parties by negligent conduct is restricted, but not eliminated, and the courts have left open the possibility of there being an assumption of responsibility for pure economic loss caused in this way – a contractual relationship is not necessarily the only way for there to be an assumption of responsibility.
  • An architect may be liable under the 1972 DPA for pure economic loss caused to non-client third parties by negligence.

2.4 Limitation periods

2.4.1 Why are limitation periods important?

With the passage of time, it becomes increasingly difficult for the courts to do justice between the parties to a civil claim. The memories of witnesses may become more unreliable and important documents may be mislaid.

As a matter of public policy, the law imposes limitation periods within which an action in tort or for a breach of contract must be commenced. ‘Commencing’ an action means issuing a claim form to begin the litigation process before the courts. The limitation periods are imposed by statute, primarily the Limitation Act 1980 as amended by the Latent Damage Act 1986.

With any new claim, but particularly for claims relating to latent defects (discussed in section 2.4.3) or projects that were completed some years ago, it is important that an architect seeks specialist legal advice so as not to miss out on the possibility of a limitation defence. If the limitation period has expired, the defendant will generally have an absolute defence to any action which the claimant tries to instigate. The claim is described as being ‘statute-barred’.

The limitation periods for actions based on contract and tort are different, with time beginning to run from different starting points:

  • in a negligence claim, time will usually run from the date when the negligent act or omission caused damage to occur
  • in a contract claim, the limitation period runs from the date when the contract was breached.

The time limits also differ according to the type of contract and, in tort, according to the cause of action.

Because of these differences, the question of whether a claimant has the option of pursuing a claim in either contract or tort can become extremely important. If the limitation period for an action under the contract has expired, the claimant may have no option but to explore the possibility of making a claim in tort on the same facts.

By way of example, the 2010 case Robinson v PE Jones (Contractors) Limited, discussed above in section 2.3.7 in the context of economic loss, required the court to consider whether a builder could in principle owe a duty in contract and at the same time owe a duty to their client in tort not to cause the client to suffer economic loss. The motivation for the client in trying to make a claim in tort was that their ability to bring a claim in contract had expired. Mr Robinson entered into a contract with Jones to purchase a property in 1992; serious defects to the chimney flues were only discovered in 2004, and Mr Robinson issued proceedings in 2006, 14 years after the last work was done at the property by Jones. Even if it had been executed as a deed, the limitation period for an action in contract had long since lapsed; Mr Robinson sought the benefit of the extended limitation period for an action in tort for latent defects resulting from negligence.

The Robinson case also highlights one further important limitation issue; limitation periods may be varied or even excluded by agreement.

A client with a strong negotiating position may try to effectively extend the contractual limitation period in an architect’s appointment, for example by insisting on time running from the issue of the certificate of making good defects. But the architect’s involvement in the project may have ended long before that – or indeed, making good of defects may never happen, potentially leaving the limitation period open-ended.

Architects should always resist any attempt to extend the limitation periods for actions under their appointments. The Limitation Act periods were decided on for a reason; after an extended period of time, it becomes harder to guarantee a sufficiently high quality of justice. An architect coming under pressure to agree an extended limitation period should remind their client of this practical reason for the statutory rules, and also remind the client that an extension of the statutory duration of liability may not be covered by the architect’s professional indemnity insurance (PII). PII policies typically provide that performance warranties in contracts are only covered to the extent that they would have existed anyway, without the specific wording of the contract in question. An extension beyond the statutory periods discussed in section 2.4.2 would not, therefore, usually be covered.

In contrast, a contractor or consultant whose work on a project incorporates products using cutting-edge technology may try to drastically reduce the limitation period for actions under their contract because of the risk that the working life of innovative technology can be difficult to gauge.

In Robinson, the court rejected the building owner’s claim in tort, even though it found that in principle a builder could owe a concurrent duty in contract and in tort, because the terms of the contract agreed between the parties were not consistent with the concurrent duty. The builder had gone to the trouble of negotiating a provision in the original contract that excluded any duty to the employer in respect of ‘any defect, error or omission in the execution of the work’ save for the 10-year period covered by the National House Building Council’s (NHBC’s) standard agreement, ‘on which alone his rights and remedies are founded’. Unfortunately for Mr Robinson, the 10-year period of the NHBC agreement had expired, and it cut across any other longer limitation period for actions that may otherwise have been available to him.

2.4.2 The limitation period in contract

In a claim based on a ‘simple’ contract, one executed under hand or otherwise not as a deed, the limitation period is 6 years, running from the date when the contract was breached. The period is extended to 12 years if the contract was executed as a deed.

The date of breach of the contract may, especially for an architect or other design professional, occur before any physical damage becomes apparent. If there has been a negligent design of a building element, it may be possible to show that physical damage will ultimately be caused to the building. The breach of contract occurs when the negligent design is produced, and so the client will be entitled to claim for the diminution in value of the property before the physical manifestation of the damage. This has positive and negative implications for an architect. If a negligent design is spotted early, the architect can be sued for breach there and then. But if the problem is not identified until the physical manifestation of damage, it may be that the contractual limitation period has expired, and the client will be left at best with a claim in tort – always a slightly more problematic prospect evidentially for a claimant, because the first thing the claimant would have to do is establish that the architect owed them a duty of care at all.

The limitation rules relating to indemnity provisions

One issue which may have significant practical implications for an architect is the limitation period for liability under indemnity clauses. Bespoke forms of professional appointment and collateral warranty drafted by clients will often feature indemnity provisions. For example, the consultant may be obliged to indemnify the client in relation to third party claims for breach of intellectual property rights, claims relating to death or personal injury, or claims arising from a breach of confidentiality provisions. Some may even go so far as to seek a general indemnity in relation to any losses arising from the performance of the architect’s services. Architects should always resist the incorporation of indemnities. One important reason for doing so is that the limitation period associated with claims under an indemnity runs only from the date when the indemnified liability or loss is actually suffered. This could be significantly after the expiry of the ordinary period for contractual claims, which starts to run from the date of the breach of contract that caused the loss. Claims based on indemnity clauses are also unlikely to be covered by most PII policy wordings.

2.4.3 The limitation period in negligence

According to the Limitation Act 1980, an action founded on tort must be brought within 6 years of the date when the cause of action ‘accrued’ (Figure 4). No further explanation is given, but the common law rule is that the cause of action in negligence accrues when damage is caused. If the damage is physical damage, the courts will generally say that the cause of action accrues when the physical damage first becomes manifest. However, there is some conflicting authority for the proposition that in the case of a defective building, the cause of action in negligence accrues at the time when the value of the property in the market falls as a consequence of the relevant defects. The issue can be of great importance, particularly in relation to defects which have remained undiscovered for a long period of time; clarification from the courts is overdue.

Of particular relevance to building cases is the potential for ‘latent damage’; damage which was not reasonably discoverable before the expiry of the basic 6-year limitation period. It is possible to bring a claim outside the 6-year limitation period in such circumstances thanks to section 14A of the Limitation Act 1980, which was included following amendment by the Latent Damage Act in 1986. In such circumstances, the limitation period will be 3 years from the date when the claimant had ‘the knowledge required for bringing an action for damages in respect of the relevant damage’, or 3 years from the date they could reasonably have been expected to know that they could bring such a claim. In either case, claims are subject to a long-stop limitation period of 15 years from the date of the defendant’s original negligent act or omission.

Figure 4 Limitation periods for claims

Figure 4 Limitation periods for claims

The latent defects limitation period highlights two important practical issues for architects. It is vital that proper provision is made for the retention of documents relating to any project for 15 years after completion (16 years to be on the safe side) because, even though it may be unlikely that a claim will be made at such distance from the date of the project, it will be impossible to properly defend yourself against a claim if you do not have the relevant written records relating to the project. For the same reason, it is also vital that PII is maintained in relation to projects for the same period.

2.5 Working overseas

2.5.1 The same rules will not apply

The potential benefits of expanding your practice to include work on projects outside the UK come with certain risks attached. Different legal considerations apply in relation to work in foreign jurisdictions. You should always seek legal advice before entering into an appointment to provide services overseas, and this advice should include advice from a local lawyer based in the relevant jurisdiction.

2.5.2 Particular problems in relation to foreign work

Foreign laws may be more onerous

The local laws relating to your duty of care and the interpretation of your professional appointment may be different from those you would expect in the UK, but some local laws are particularly onerous. For example, when carrying out work under an appointment governed by the laws of the United Arab Emirates, architects should be wary of the provisions of the local code that impose strict liability – that is, obligations that require more than the exercise of reasonable skill and care. Emirati law provides that both contractors and consultants (if and to the extent that the design was prepared with the intention that the contractor would carry out the works under the designer’s supervision) may have to compensate their employer for the collapse of a building, or a defect which threatens its stability.

This liability may apply even if the contractor or consultants are not at fault and, for example, the fault is found to be with the land being built on. This strict liability provision is known as ‘decennial liability’, because contractors and consultants are subject to such liability for a period of 10 years after handover of the building. The Emirati code is not unique, and decennial liability is a feature of the laws of many jurisdictions in the Middle East and elsewhere. Take local legal advice; it is also vital to clarify with your insurers whether accepting terms of appointment governed by foreign laws may create a coverage issue under your PII policy.

Your PII cover may not apply to the overseas job you have secured

Check with your broker – does your policy provide cover for projects worldwide? There is also the question of the extent to which local laws will create policy coverage issues. Decennial liability is an example; under such ‘strict liability’ provisions it is not necessary to prove negligence or breach of a professional duty of care in order for a claim to be made. But most PII policies cover only negligent acts and omissions and breaches of contract, so may not respond to a claim where there is no accusation of negligence. Check with your broker and insurer to see whether specific endorsements to your policy may be required to cover you adequately for work on overseas projects.

You will need to comply with local standards/building regulations

As well as the laws governing your own appointment, and the contractual relationships with the rest of the project team, you should bear in mind that the project will need to be designed and constructed in compliance with the local equivalents of our procurement laws, planning law, health and safety legislation and Building Regulations. Do you have this local knowledge? If not, it is vital that you work with a local architect who does have this knowledge and expertise.

You may be required to enter into an association with a local architect

Some clients in foreign jurisdictions will require you to work in association with a local architect in any case. One reason for this is that it is common sense – the client wants to ensure that the local building laws are complied with, but knows there is a risk that, however knowledgeable a foreign architect may be, their knowledge of the local law and practice may never be as intimate as that of a local architect. Another reason is that many foreign governments want to ensure work for local consultants. You should be wary of working with a local architect whose work you have no experience of. You must ensure that your appointment terms make very clear that, to the extent that the local architect is responsible for ensuring compliance with local building laws, this responsibility is that of the local architect and you cannot be held liable for any errors or omissions in their work. It is vital that you see and approve the local architect’s appointment and the schedule of the services they will be providing.

Finding a satisfactory dispute resolution mechanism may be problematic

Arbitration may be the safest course in the event of a dispute because it can be much harder to enforce a judgment of a UK court in a foreign jurisdiction than it is to enforce an arbitrator’s award. The architect may not be given a choice, though. If the client selects a local court of arbitration, what can the architect do to attempt to ensure fairness? Insisting on a three-person arbitration panel is always sensible; agreeing to abide by the judgment of a single arbitrator is a leap of faith if the architect has no prior experience of that individual’s competence or fairness.

Getting paid can be more problematic

Getting paid can be problematic with any client with whom you have not worked extensively. Different clients have different approaches to the timing of payments and the withholding of sums you think are due; some clients are just less scrupulous than others. When working in a foreign jurisdiction the risk is increased because of the potentially less effective dispute resolution options; for example, there is no right to launch a quick Construction Act adjudication in Emirati law if you think a fee payment has been unfairly withheld.

The possibility of not being paid in full is a commercial risk. The options available to you to reduce that risk depend largely on the strength of your bargaining position before you enter into your professional appointment. The safest option is to get money upfront, but clients are often unwilling to take such a leap of faith. You could consider requesting that an ‘escrow account’ is set up – a bank account into which the client must deposit sums in advance to pay forthcoming fee invoices, and which is administered by an independent third party. Alternatively, you could request that the client provides a payment guarantee bond; depending on the precise wording, you would be entitled to ‘call’ on the bond if the client fails to pay a sum properly due to you under your appointment. Finally, if your foreign client has a UK holding company, you may request that the UK parent provides a parent company guarantee.

Chapter summary
  • An architect in carrying out their services will be subject to agreed contractual obligations, but will also be subject to laws of general application – the law of tort, and criminal law.
  • Not every agreement is a legal contract, and an architect should know what is required for the formation of a contract.
  • An architect needs to know when they may owe a duty of care in tort.
  • Architects do not have to be perfect – the law imposes a standard of care that has to be achieved in particular circumstances.
    • the law imposes limitations on the types of losses that may be recovered in the event of a claim.
    • the law imposes time limits on liability – an architect is not liable forever.
..................Content has been hidden....................

You can't read the all page of ebook, please click here login for view all page.