Understanding contractual terms case study no.2

The following example relates to a claim against a consulting engineer in connection with this clause and which resulted from the failure of a specialist contractor’s foundation design.

The consultant was retained by a developer as civil and structural engineer for a new residential housing scheme. His appointment was based on the ACE agreement containing the clause noted previously.

“In dealing with ambiguous contractual terms, the courts must now do more than simply read and interpret the words on the page. They need to look at what meaning the document would convey... to a reasonable man.”

The ground conditions on site were particularly poor, effectively comprising a layer of fill on top of peat and peaty clay on top of limestone, and the engineer duly produced a design for the development with piled foundations for all buildings on the site.

It was suggested that the roadways and hardstanding areas could be constructed on a geo-grid. Later in the project, the decision was made to replace the piled foundation design of the buildings with an extension of the geo-grid under the roadways and this is what was subsequently constructed on site using the designs produced by a specialist sub-contractor. 

The foundation design failed leading to significant settlement of the constructed development and a substantial claim by the employer against the contractor, the foundation specialist and the consulting engineer. The case proceeded to Court where the Judge had to consider to what extent the consulting engineer and the contractor and specialist sub-contractor were each liable for the failed design. 

The consulting engineer’s defence hinged on whether he had done enough to warn his client of the potential risks posed by the foundation solution and if he had obtained the client’s consent to the assignment of the foundation design to the specialist contractor as required by the ACE agreement.

The consulting engineer maintained that the client had been advised early in the project that a specialist designer would be needed for the geo-grid design and that the client’s consent to this had been obtained. If this could have been proved in Court, it would have been enough to release the consulting engineer from liability under the terms of the relevant clause of the ACE agreement. 

However, the Court could find no evidence confirming that the use of a specialist had been recommended by the engineer or that the client’s consent to this had been obtained. The result was that the consulting engineer was held liable for 35% of the total loss. 


The outcome

This outcome seems harsh; particularly given that there was no doubt that the client knew the geo-grid was being designed by a specialist.

However, the Judge made it absolutely clear that the terms of the relevant clause had to be followed to the letter in order for the consulting engineer to obtain the release of liability set out in the final sentence.

In the Judge’s words this was necessary “to ensure that the client is fully informed as to the need for delegation of responsibility for design”.

In not following the procedure set out in the clause, the client was entitled to assume that the consulting engineer retained the ability to evaluate the specialist sub-contractor’s design and it is this that proved to be the consulting engineer’s undoing.

To contact Griffiths & Armour about this story, please email contractualrisk@griffithsandarmour.com.