Mikhail Eremenko - LLM - Construction - Dissertation - Final - Without Attachements

The University of Salford
School of the Built Environment

LLM Construction law and practice
Whether a warranty of fitness for purpose of design should be

implied into EPCm (Engineering, Procurement, Construction
management) contracts in English law
Mikhail Eremenko
2020
1
ABSTRACT
The area of this research is English construction contracts law, namely the EPCm contracts. EPCm is a
relatively new type of contract where a contractor undertakes to design a building and manage
construction works and procurement of materials on the employer’s behalf. The corresponding supply
and building contracts are concluded directly with the employer.
The focus of the research is to provide answer whether, despite the consultancy nature of the EPCm
contractor’s obligations, the latter’s functions are such as to warrant implication of the fitness for
purpose liability on the contractor’s side.
The research was performed with the use of case law research, literature review (both legal and
construction management books and journals) and interviewing of construction professionals.
The findings confirm that the EPCm contracts are seen as consultancy services contracts, that English
law does not usually treat consultants, including designers, as liable for fitness for purpose of their
services, unless employer’s reliance on the contractor’s skill and knowledge can be evidenced, and that
EPCm contractors’ functions do not automatically suppose such reliance.
The conclusions drawn from those findings are that the English law does not recognise implied fitness
for purpose warranty of the EPCm contractor and that functions of the EPCm contractor are not such as
to say that such an implied warranty should be found in English law.
Keywords: EPCm, fitness for purpose, EPC, reasonable care, implied terms, English law.
2
CONTENTS
1. CHAPTER 1 - INTRODUCTION 6
1.1. BACKGROUND 6
1.2. RESEARCH FOCUS 6
1.3. BOUNDARIES OF THE RESEARCH 7
1.5. OVERALL RESEARCH AIM 8
1.6. INDIVIDUAL OBJECTIVES 8
1.7. RESEARCH METHODS 9
1.8. RESEARCH STRATEGIES 9
1.8.1. BLACKLETTER RESEARCH 9
1.8.2. LITERATURE REVIEW 10
1.8.3. EMPIRICAL RESEARCH 10
1.9. VALUE OF THIS RESEARCH 10
1.10. OUTLINE OF THE RESEARCH’S CHAPTERS 10
2. CHAPTER 2 – NATURE OF EPCM CONTRACT 12
2.1. WHAT IS THE EPCM CONTRACT 12
2.2. DESIGN AND BUILD CONTRACTS 13
2.3. EPCM AS A CONSTRUCTION MANAGEMENT CONTRACT 14
2.4. EPCM AS A DESIGN CONTRACT 15
2.5. ANALYSIS 15
3. CHAPTER 3 - ENGLISH LAW RULES ON FITNESS FOR PURPOSE 16
3.1. CASE LAW 16
3
3.1.1. CONCLUSION ON CASE LAW 20
3.2. FORMS OF CONTRACTS 20
3.2.1. NEC4 20
3.2.2. JCT DESIGN AND BUILD CONTRACT 2016 21
3.2.3. FIDIC YELLOW BOOK 21
3.2.4. CONCLUSION 21
3.3. PROFESSIONAL LITERATURE AND LEGAL COMMENTARIES 21
3.3.1. THE BASICS 21
3.3.2. REASONABLE CARE 22
3.3.3. FITNESS FOR PURPOSE 22
3.3.4. DIFFERENCE BETWEEN THE TWO STANDARDS 23
3.3.5. FITNESS FOR PURPOSE IN DESIGN 24
3.4. CONCLUSION ON CASE LAW AND LITERATURE REVIEW 25
4. CHAPTER 4 - FUNCTIONS OF THE EPCM CONTRACTOR 26
4.1. GENERAL 26
4.2. REVIEW OF THE LITERATURE 26
4.2.1. CONSTRUCTION MANAGEMENT 26
4.2.2. DESIGN 27
4.3. EMPLOYER’S RELIANCE 27
4.4. CONCLUSION 28
5. CHAPTER 5 – EMPIRICAL RESEARCH 29
5.1. GENERAL 29
4
5.2. INTERVIEWING 29
5.2.1. THE SUMMARY OF THE INTERVIEWING PROCESS 30
5.2.2. FINDINGS 30
5.2.3. CONCLUSION 31
6. CHAPTER 6 – CONCLUSION 32
6.1. RESEARCH OBJECTIVES: SUMMARY OF FINDINGS AND CONCLUSIONS 32
6.2. CONCLUSION ON DISSERTATION TOPIC AND AIM 33
6.3. FURTHER RESEARCH 34
7. ANNEXES 35
5
1. CHAPTER 1 - INTRODUCTION
1.1. Background
The EPC (engineering, procurement, construction) contracts have been dominating
construction industry for years. 1 It is a convenient way of contracting, giving the employer
confidence in the contract price 2 and a tool of single point responsibility: 3 the EPC contractor is
charged with all the constituents of the project works - design and engineering, procurement
of materials and actual construction works. In return the contractor puts project risks into
remuneration as part of the risk premium and, 4 if the risks do not eventuate, wins extra
money.
However, in recent years construction industry, including the oil and gas processing, 5 has
witnessed a rise in popularity 6 of so-called EPCm contracts, where ‘Cm’ stands for ‘construction
management’,7 as opposed to ‘construction’. This little difference in acronym renders EPCm
contracts radically different from EPC in its legal nature and in the way risks are allocated.8
In the EPCm contracting method the contractor produces the design and the employer enters
direct contracts with the suppliers of materials and building (trade) contractors. The EPCm
contractor then oversees and manages these suppliers and contractors by providing
professional services to the employer (rather than performing the actual supply and physical
works).9 In this situation the EPCm contractor acts the employer’s representative, 10 i.e. the
agent.
However, despite the increased use of EPCm contracts no unified forms of contracts have been
produced. There remains uncertainty about the exact legal nature of this type of contract and
the risks and liabilities the contractor is supposed to carry. 11
1.2. Research focus
This research paper addresses a particular part of the EPCm contract’ legal nature. Namely,
whether the EPCm contractor should be liable for fitness of the building, constructed according
the contractor’s design and under his supervision, to its purpose, communicated by the
employer.
The issue involves investigating the level of the contractor’s liability as a professional designer
given his essential role on any project, the numerous functions he performs and the reliance,
placed by the employer.
Fitness for purpose is a strict liability concept. It imposes responsibility for the defects in the
constructed facility or its design without the need to prove the fault on the contractor’s part.
However, the EPCm contractor is a professional, providing a service under a contract with the
employer. Actual physical works are carried out by an independent contractor under a
separate direct contract with the employer.
1
Phil Loots and Nick Henchie, ‘Worlds Apart: EPC and EPCM Contracts: Risk Issues and Allocation’ (2007) 24
International Construction Law Review 252, 1.
2
Lukas Klee, ‘Specifics of EPC and EPCM’, International Construction Contract Law (John Wiley & Sons,
Incorporated 2018) 66 <https://ebookcentral-proquest-com.salford.idm.oclc.org/lib/salford/detail.action?
docID=1829440>.
3
Klee (n 2) 68.
4
Klee (n 2) 74.
5
Loots and Henchie (n 1) 2.
6
Julie Whitehead and Karen Walters, ‘EPCM Contracting: Clearing the Minefield’ (2014) 54 The APPEA Journal 231,
232.
7
8
9
10
Whitehead and Walters (n 6) 235.
11
6
This led some authors to believe, that the EPCm contractor cannot be liable for the defects in
the design unless he breaches an implied or express duty of reasonable care and skill. In other
words, that the EPCm contractor does not underwrite the project delivery risk 12 and is only
liable in negligence.
Before engaging this research a preliminary literature review has been done. It did not reveal
any express and clear answer whether an implied warranty of fitness for purpose in the EPCm
contract exists. Only tangential material could be found, like duty of the EPCm contractor to
control overall project budget or schedule.13 Some authors tend to concentrate on the EPCm
contractor as employers’ agent and discuss their liability as such. 14 Even Hudson, when
discussing the strict liability of the designer, seems to focus on cases where the designer
undertakes a joint and several liability alongside the design-and-build contractor, 15 rather then
EPCm contractor’s own liability.
The overall impression from the initial review of literature on the EPCm contract was that the
contractor is only liable in reasonable care and skill for his services. In other words only if he
was found to be negligent. It is submitted that such can a very difficult hurdle to overcome.
However, if one broadens research to cover supply of goods and services contracts it becomes
evident that although in general “construction professionals do not guarantee results”, 16 there
can be factual situations when such professional, in particular designers, can be found to have
impliedly warranted the fitness for purpose term. 17
This evidences the apparent inconsistency both in legal appreciation of the EPCm contract’s
nature as a consultant and his liability as a designer. Whether he is liable only in reasonable
care and skill in performing services, or carries an elevated fitness for purpose duty in relation
to his design and, possibly, in relation to actual constructed facility.
It submitted that the above facts justified further investigation and research of the issue.
1.3. Boundaries of the research
Due to limitations to the word count this paper mostly avoids discussion of such aspects of the
EPCm contracts as the contract price and a risk premium.
Undoubtedly, pricing can be a good indicator of the contract’s risk profile. It is known that
lump sum usually means that a contractor undertakes extra risks in return for greater profits.
In cost-reimbursable, which is said to be usual for EPCm contracts, it is assumed that the
employer carries more risks in return for a greater control and price saving. Therefore, the
result of the analysis for fixed prices and cost-reimbursable may differ.
As such pricing of the EPCm contract itself deserves its own separate research. In this paper
the price and incentivising mechanisms, like KPIs, and their influence on the parties’ legal
relationship are mostly omitted.
1.4.
12
Klee (n 2) 81; Whitehead and Walters (n 6) 235.
13
Klee (n 2) 80.
14
15
Robert Clay and Nicholas Dennys, ‘Design’, Hudson’s Building and Engineering Contracts 14th Ed. (14th edn,
Sweet & Maxwell UK 2019) 2–041.
16
Clay and Dennys, ‘Design’ (n 15) 2–039.
17
Clay and Dennys, ‘Design’ (n 15) 2–039.
7
1.5. Overall research aim
The overall aim of his paper is to determine whether in English law there is an implied
warranty of a contractor under an EPCm contract that a design he produces (and,
correspondingly, a building, constructed according to the EPCm contractor’s design and
supervision) will be fit for its purpose and, if not – whether there should be such be a
warranty.
1.6. Individual objectives
The aim will be achieved by completing the following objectives.
1. By reference to the professional literature on modern construction law practice it will be
summarised what is the nature of the EPCm contract and what obligations the EPCm
contractor usually carries.
2. English case law on the liability of designers and design-and-build contractors, specifically
involving the fitness for purpose standard of liability, will be critically analysed and
summarised.
3. The three most common construction contract forms will be quickly reviewed to get an
insight on how they treat liability of contractors for the design.
4. English law legal literature (textbooks and journals) will be critically reviewed to
complement findings, gained in the case law analysis.
5. Conclusion as what are the requirements to imply a warranty of fitness for purpose into a
EPCm contract under English law will be drawn.
6. Professional literature on the functions of a construction manager and the role of an
employer will be researched to test the hypothesis that the EPCm contractor’s functions
are such that the employer under the contract should be taken by default to rely on the
contractor, thereby attracting an implied warranty of fitness for purpose.
7. Empirical research will be undertaken in the form of interviewing a small number of
construction managers and other construction professionals, working for an employer
under the EPCm contract, to complement the findings, gained through literature review
and case law analysis.
8. Findings, made under the above objectives, will be consolidated to get to the conclusion
on whether the nature of the EPCm contract is such as to warrant implication of a
contractor’s fitness for purpose guarantee as to the design and / or constructed facility.
8
1.7. Research methods
The research under in the paper was performed through a combination of doctrinal
(blackletter) and socio-legal methods.
Doctrinal (blackletter) research is a traditional method in legal field, which consists of analysing
legal authorities, such as case law, statutes and legal commentaries, 18 legal reasoning behind
them19 and body of rules associated with the relevant legal concepts. 20
Doctrinal method is required in this paper in order to distil the rules, governing the
relationship between the parties to a contract, before applying them to actual business
scenarios and expectations.
Socio-legal method means looking at the law in the context of other disciplines, investigating
how legal rules influence relationships between people and vice versa. Here the context is
developments in construction business practice, in particular the development of a new
method of contracting – EPCm contracts.
EPCm contracts are a rather recent development, produced by the industry. It does not have
its own body of legal opinion or doctrine, whether in statutes or case law. Rather it is a
contractual solution advanced by the business itself. And to understand what construction
industry means by the EPCm contracts the actual business practice needs to be consulted.
Socio-legal method in this thesis allows to do two things: first – analysis construction
management literature to see how the functions of the EPCm contractor fit the English law
paradigm on the implication of fitness for purpose warranty. Second - collecting business
expectations and views on the EPCm contractors liabilities and functions to see whether they
can support the findings, reached as part of the blackletter research.
Thus, application of the socio-legal method helps reaching the objective and supporting the
thesis.
1.8. Research strategies
The individual research objectives will be reached by applying a number of research strategies,
stemming from the methods, described above.
1.8.1. Blackletter research
The remit of this thesis is figuring out whether the legal doctrine of fitness for purpose can be
applied to EPCm contracts. Therefore, the doctrine itself needs to be understood and defined
before proceeding further. This will be performed through formulating the rules on when the
implied warranty of fitness for purpose of design can be found.
English common law research is a major part of the doctrinal research under this paper. The
list of cases includes such highly influential cases on the professionals’ liability as
MT Højgaard v E.On,21 Hancock v Brazier,22 Greaves v Baynham.23 These will be looked at in
details to define the rules on implication of warranty of fitness for purpose liability into design
contracts using a traditional blackletter research.
UK statutes, imposing implied warranty of fitness of purpose for services and goods, namely
the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982 will be looked into.
JCT2016, NEC4 ECC, FIDIC Yellow book will be considered to see their risk allocation method
and whether fitness for purpose liability for design is expressly dealt with.
18
Amrit Kharel, ‘Doctrinal Legal Research’ (2018) 252 SSRN Electronic Journal 1.
19
Kharel (n 18) 2.
20
Kharel (n 18) 2.
21
MT Hojgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd [2017] UKSC 59
22
Hancock v B. W. Brazier (Anerley) Ltd [1966] 1 WLR 1317
23
Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 W.L.R. 1095
9
1.8.2. Literature review
Literature review is the main strategy under this paper and is used in 3 (three) ways:
1. To research what is an EPCm contract (objective 1.) by reviewing professional journal
articles, that discuss the use of EPCm contracts in business practice.
2. To get commentaries on and insights in the court rulings (objective 4.). The review includes
study of the main construction law bodies of knowledge, such as Hudson and Keating, as
well as other specialised books (e.g. Sarah Lupton, Cornes and Lupton’s Design Liability in
the Construction Industry (5th edn, John Wiley & Sons, Ltd 2013)) and journals. This will
complement the blackltetter research with the academics’ view on the matter.
3. To learn the functions and obligations of construction managers (objective 6.) by studying
construction management textbooks and journals.
1.8.3. Empirical research
Empirical research is employed under objective 7. and is performed by way of interviewing a
small number of senior construction managers involved in oil processing plant construction
projects as part of employer’s team. Empirical research in this paper is qualitative in nature
and is based on open-ended questions.
It is used to see whether from the respondents’ experience the relationships between the
employer and the contractor under an EPCm contract were such as to justify application of
doctrine of fitness for purpose.
Empirical research conducted under this paper is rather limited due to small number of
respondents and a substantial potential for bias. But it is sufficient to complement the findings,
made under the literature review section. The limitations and bias are dealt with in the
relevant chapter of the paper (CHAPTER 5 – EMPIRICAL RESEARCH).
1.9. Value of this research
The value of this research lies in bringing the new developments of business practice in the
construction law area, namely the EPCm contracts, within the established legal framework by
applying the findings from case law, literature review and empirical research to such contracts.
The research will help construction lawyers and other professionals in this field to better
understand EPCm contracts and see how they fit into exiting body of legal knowledge.
This study is especially timely due to increasing interest in using the EPCm contracts in
construction industry, which is evidenced by both professional literature and interviews with
the stakeholders.
1.10. Outline of the research’s chapters
The paper is divided into six Chapters.
Chapter 1 provides introduction to the research topic, states the overall aim and individual
objectives of the research.
Chapter 2 deals with individual objective 1. and provides a brief description of the EPCm
contract as a type of both design and construction management contracts.
Chapter 3 covers objectives 2 to 5. and provides a critical analysis of the case law, statutes,
contract forms and legal literature on the implied warranty of fitness for purpose in English
law.
Chapter 4 is devoted to objective 6., covering review of literature on functions and obligations,
usually attributable to construction managers.
Chapter 5 encompasses empirical research, identification of its limitations and a summary of
findings, performed as part of objective 7..
10
Chapter 6 provides a conclusion on the dissertation topic and seeks to answer the question
posed in the title in order to reach objective 8..
11
2. CHAPTER 2 – NATURE OF EPCM CONTRACT
2.1. What is the EPCm contract
The EPCm contracts have experienced rise in popularity in the recent decade. However,
despite the increase in use of the EPCm contracts there remains uncertainty about the nature
of such contracts. Even the acronym itself may be confusing to many. There is evidence that
employers in some cases when negotiating the EPCm contract would instead expect the
regime of liability and risk profile attributable to design-and-build contractual scheme. 24
Under the EPCm contract, as the acronym stands, the contractor undertakes to deliver design
(‘engineering’), manage procurement of materials and equipment (‘procurement’) and
manage construction (‘construction management’). 25
The distinguishing feature of the EPCm contract is that the contractor is only a principal to the
Employer in relation to design. 26 In relation to the supply of materials / equipment and the
actual construction works the EPCm contractor only provides management services, 27 and the
supply and construction contracts (‘trade contracts’) are entered into directly between the
Employer and the trade suppliers / contractors, over which the EPCm contractor exercises
supervision. In this the EPCm contract is not different from a construction management
contract, which is common in the construction business.
Because the trade contracts are entered into directly with the employer the EPCm contract
lacks the advantage of a single point of responsibility for the complete facility, which is a
characteristic of the EPC contracts. 28 In case of delay of construction or other difficulties in the
project, except for design, the Employer has to claim directly against the trade contractors. He
can only seek redress against the EPCm contractor if it can be proved that the latter rendered
his services inadequately. In other words, that the EPCm contractor failed to exercise
reasonable care and skill when providing the services.
This makes the EPCm contractor akin to an ordinary consultant. He does not perform the
construction himself. As such he cannot not warrant fitness for purpose of the constructed
facility.29 Instead, by default he is only liable in negligence in rendering the services. 30 Including
the design.
It is said that proving breach of reasonable skill and care term is a rather high threshold to
satisfy. Proving causality between the EPCm contractor’s negligence and damage can be
problematic.31 There is also evidence that in many cases EPCm contractors simply would not
accept responsibility for consequential loss in their contracts. 32
The said drawbacks are to some extent compensated by the fact that the employer under the
EPCm contract gets a certain amount of flexibility because of the option to control and alter
design as the project proceeds.33
Despite this sources say that the EPCm contracts provide the “least satisfaction” in terms of
the project’s time, budget and quality standard. 34
24
25
Klee (n 2) 77.
26
Andrew Stephenson, ‘Risk Allocation in Process Engineering Projects’ (2003) 22 Australian Resources and Energy
Law Journal xliv, 9.
27
Stephenson (n 26) 9.
28
29
30
Klee (n 2) 80.
31
Klee (n 2) 77.
32
Klee (n 2) 88.
33
34
12
Pricing of the contract is also an important consideration, as it can hint on way the risks are
allocated. With the EPCm contract the contractor is usually paid on a cost reimbursable basis.
In some cases an incentive regime, such as target price mechanism, is applied. 35 These means
that the costs of the EPCm contractor’s services do not usually carry a risk premium.
EPCm contract is also sometimes compared to the Australian management contracting, where
the contractor performs the design and subcontracts the construction contracts, similarly to a
general contractor. The contractor, however, has a lower risk exposure and liability under the
contract then a design and build contractor. A managing contractor's compensation usually
consists of both lump sum and reimbursable parts. 36
EPCm contract should also be contrasted with an American form of a construction
management contract - a so-called “Cm-at-risk contract”. In this type of contract the
construction manager (‘Cm-contractor’) is actually a party to trade contracts. Similarly to
management contracting the Cm-at-risk contractor acts as a general contractor, but, it seems,
carries less liability.37
2.2. Design and build contracts
As was mentioned above, design-and-build contracts, of which EPC is a type, have been a
dominant form of construction contract for years. In a way the EPC contract can be regarded
as a precursor for EPCm. Most sources thus tend to compare the EPCm contract with EPC. It is
therefore worth providing an introduction to the EPC (design-and-build) method of
contracting.
Design-and-build contract is an arrangement between an employer and a contractor, under
which the contractor undertakes to both design the structure (according to the employer’s
specification) and construct it.38 In business practice such contracts are usually termed EPC
contracts with the acronym standing for “engineering, procurement, construction”. They are
also sometimes called “turn-key” contracts. 39 EPC contracts are often used in industrial plant
construction projects.40
The perceived benefit of the EPC contract is its “package deal” nature, 41 allowing for single-
point responsibility42 of the contractor and limiting the employer’s exposure to the projects
risks, such as interface risks (problems arising due to a number of independent parties,
involved in the project, being liable only directly to the employer and only for their respective
functions and performance).
Combining obligations of design and construction on a single entity - the EPC contractor, shifts
the design risks onto the contractor almost entirely. The employer is not involved in the design
at all, only providing his needs as part of the employer’s requirements (specification). The
contractor, at least in theory, is free to design the facility as he finds fit, as long as he satisfies
the specification. In return the contractor includes a premium (‘risk premium’) into the
contract price to cover potential difficulties (which will become an extra money if the
difficulties do not eventuate).
35
Whitehead and Walters (n 6) 237; Klee (n 2) 80; Loots and Henchie (n 1) 1.
36
Arent van Wassenaer, A Practical Guide to Successful Construction Projects (Taylor & Francis 2017) 220.
37
John I III Spangler and William M Hill, ‘The Evolving Liabilities of Construction Managers’ (1999) 19 Construction
Lawyer 30, 31 <https://heinonline-org.salford.idm.oclc.org/HOL/P?h=hein.journals/conlaw19&i=33>.
38
Julian Bailey, Construction Law (2nd edn, Informa Law from Routledge 2016) 29.
39
Stephen Furst and Vivian Ramsey, Keating on Construction Contracts (9th edn, Sweet & Maxwell UK 2015) para 1
031.
40
Bailey (n 38) 43.
41
Bailey (n 38) 30.
42
Bailey (n 38) 29.
13
Such a contracting method may provide a safeguard for the employer as it is said that design
errors constitute three to five percent of any project’s costs. 43 The drawback of the EPC
contract is increased price of the contract.
Because of its “package deal” nature the courts have been traditionally willing to imply a
fitness for purpose warranty into a design-and-build contracts, 44 to some extent equating the
provision of works (of the complete facility) under a building contract to supplying a piece of
goods under a supply of goods contract. The latter is subject to an implication of a fitness for
purpose of the supplied goods warranty under the statutes and common law.
It is interesting to note how the combined obligation to design and construct are naturally
connected with a warranty of fitness for purpose. Hudson goes as far as to point that the
obligation of design in a design-and-build contract arises because of the fitness for purpose
standard of liability, not the other way around. 45
2.3. EPCm as a construction management contract
The letters “Cm” in “EPCm” stand for construction management. Naturally the EPCm contract
is regarded by many as a type of a construction management contract. In a construction
management contract the contractor only provides services of managing the construction on
behalf of the employer without becoming a party to such contracts.
Some sources claim that over the past three decades, construction management services have
developed into a preferred project delivery system. 46 That such an alternative method of
contracting delivers projects better.47
There is some evidence that a Cm contract might be more beneficial to the Employer because
the contractor can concentrate on co-ordination instead of being bogged down with
contractual matters and liability.48 In the words of Uher and Davenport “the principal has on
the his side an experienced contractor to assist the principal and look after the principal’s
interests".49
As opposed to a building contract, including EPC, construction management contract has been
characterised as setting up non-adversarial and cohesive relationship with a goal to serve the
project’s objectives.50 Construction cost, quality and completion schedules are the three things
usually named as prime tasks of a construction manager. 51 The same applies to EPCm
contracts.52
The situation becomes different, however, when the Cm-contractor is also charged with the
design. Imposing a design obligation onto a construction manager can actually create a conflict
of interests for the Cm-contractor, as he is motivated to cover up his design failures with the
building contractor's underperformance. 53
43
McGraw Hill Construction, Managing Uncertainty and Expectations in Building Design and Construction
SmartMarket Report Managing Editor (2014) 1.
44
Klee (n 2) 67.
45
Robert Clay and Nicholas Dennys, ‘Contractor’s Obligations as to Design Under Traditional Building Contracts’,
Hudson’s Building and Engineering Contracts 14th Ed. (14th edn, Sweet & Maxwell UK 2019) para 3 040.
46
Spangler and Hill (n 37) 30.
47
Clifton B Farnsworth and others, ‘Effects of CM/GC Project Delivery on Managing Process Risk in Transportation
Construction’ (2016) 142 Journal of Construction Engineering and Management 1, 1.
48
Thomas E Uher and Philip Davenport, Fundamentals of Building Contract Management (2nd ed., University of
New South Wales Press Ltd 2009) 89.
49
Uher and Davenport (n 48) 123.
50
51
52
Klee (n 2) 83.
53
14
Due to being a construction manager, the EPCm-contractor is treated by many sources as a
consultant.54 As such the sources regard the EPCm contractor’s liability as limited to
reasonable care and skill.
2.4. EPCm as a design contract
When analysing the EPCm contractor it is also important to note that the contractor provides
the design as a primary obligor. 55 Therefore, EPCm contract can be seen as a type of design
contracts. In fact, the EPCm contract has been called as being nothing more than “a
sophisticated variation of an engineering services contract”. 56
Design function may include both detailed design (engineering) and basic design (FEED) stages.
Alternatively the EPCm contractor may incorporate conceptual design, produced on behalf of
the employer, although, probably, with limitation on the risks and liabilities. 57
There is evidence in the sources that in some cases the EPCm contractor may guarantee a
certain level of the facility’s output. 58 Provisions like would set firmly the EPCm contractor’s
obligation in relation to fitness for purpose of the design and, provided there are not
supervening events, in relation to the built facility. However, such guarantee is a matter of
express contractual terms and is, therefore, not analysed in this paper.
The main advantage of the EPCm contract is its flexibility of the scope of design services
(unless the design function is priced as a lump sum, which can cause variation claims). Despite
that, at least in relation to the design the EPCm contracts still provide single point
responsibility.59
Design contracts, although technically being simply a type of a consultancy (provision of
services) contract, which are subject to a reasonable care and skill standard of liability, have
experienced a great deal of attention in English law. Looking at the EPCm contracts through
the prism of the contractor’s design liability is the cornerstone of this research. Critical analysis
of the rules, applicable to design obligations is provided further down in Chapter 3 by means of
case law research and literature review.
2.5. Analysis
The basic investigation of the obligations of the EPCm contractors revealed that it is
‘essentially a professional services appointment’. 60
The contract can be broken down into two types of contract: design services and management
services.61 Therefore, it is evident that the rules and analyses, applicable to these two kinds of
contracts, can be applied to the EPCm contracts.
It can be, of course, argued that simply combining a number of different obligations and
function in a single contractual document does not render the EPCm contract as something
special. However, it is submitted, although EPCm contractor’s obligations are to some extent
standalone obligations and can be severed, when performed as part of package of the EPCm
contract they become inextricably intertwined. The contractor first designs a facility, then
selects materials and equipment according to his design and, lastly, oversees installation of the
equipment and construction of the facility.
The design, therefore, becomes a cornerstone and a principal part of the contractor’s
obligations. It provides basis for the procurement and construction management parts – the
54
Will Hughes, Ronan Champion and John Murdoch, Construction Contracts (5th edn, Routledge) 69.
55
Klee (n 2) 77; Loots and Henchie (n 1) 5.
56
57
Klee (n 2) 81.
58
Klee (n 2) 82.
59
Klee (n 2) 79.
60
Klee (n 2) 81.
61
Klee (n 2) 77.
15
materials and equipment are selected in accordance with the design and the construction
schedule is drawn up to allow materials effective and timely installation.
It is submitted that the addition of the management function to the design may have the effect
of reinforcing the role of the EPCm contractor. In some way the Employer is putting more eggs
into the same basket. Not only the design is expected from the contractor, but also the
implementation of the design becomes increasingly dependent on the same person.
It is therefore submitted, that this extra functionality of the designer broadens the range of the
latter’s functionality and may elevate its responsibility to a new level. Additionally, the
potential for conflict of interests, where the EPCm contractor is, one the one hand, liable for
the design, but, on the other hand, passes liability for its implementation onto the others,
makes the EPCm contractor even more answerable to the employer.
In such a situation it is reasonable that expectations of the employer may also be different
from those, applicable to simple designers. The issue of employer’s expectations as to the
EPCm liability and functions will be analysed in details below, in Chapters 4. and 5..
3. CHAPTER 3 - ENGLISH LAW RULES ON FITNESS FOR PURPOSE

3.1. Case law
There has been a number of cases that concern liability of designers and design-and-build
contractors. Some of the most important of them are analysed below.
Greaves (Contractors) Ltd v Baynham Meikle & Partners 62

This is an essential case, in which a designer subcontractor produced a design, which failed to
take into account the purpose, that was communicated to them by the main contractor. In his
dicta Lord Denning recognised a question in law of whether there should be an implied
warranty of the works’ fitness for purpose, expressly posing a question of whether such an
implication should be found in a contract with an architect or he should be held to be only
liable in reasonable care and skill. 63
However, no answer was given in that case. Furthermore, it was specifically emphasised that
the ruling in Greaves did not provide any rule of law in relation to whether a warranty of
fitness for purpose should be implied into a design or a design-and-build contract.
Instead the decision was based on a warranty found to be implied as a matter of fact, 64
meaning that the facts of situation was such as to assume the parties wanted the
subcontractor to be liable to make sure the design for the building was suitable for its purpose,
because of the reliance and emphasise was put on it by the contractor.
As will be seen below, implication of liability in fact is a common feature of case law on liability
of fitness of purpose in design and design-and-build contracts.
That said, in his ruling Lord Denning underlined that the employer relied on the contractor’s
skill and judgement in performing the works. And that it was this reliance that made the
contractor liable for breach of fitness of purpose obligation. 65
Therefore, the judgement and the reasoning made it reasonable to assume that the decision
can be extended on other cases, where the employer communicated a purpose for which the
result of the works (design or a design and construction) must be suitable for and
demonstrated reliance on the contractor in his ability to ensure such suitability.
62
Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095.
63
Greaves & Co. (Contractors) Ltd. v Baynham Meikle & Partners [1975] 1 W.L.R. 1095 (n 62) 1100.
64
Sarah Lupton, Cornes and Lupton’s Design Liability in the Construction Industry (5th edn, John Wiley & Sons, Ltd
2013) 121.
65
16
In other words, that such a warranty should be implied in law, rather than in fact, provided the
elements of express communication of purpose and reliance have been satisfied.
It is important to note that the main contractor, who subcontracted the design in this case to
the defendant, was himself strictly liable to the employer for the fitness for purpose of the
whole building. Hudson says that it was, inter alia, a possibility of building the chain of liability,
that made the decision possible.66
MT Højgaard v E.On67
Although this recent case is often cited as a landmark case in relation to liability for fitness for
purpose in construction, it also did not deal directly with the issue of implication in law of the
fitness for purpose warranty. Instead this was an example of elaborate exercise on construing
express, through seemingly contradictory, terms of a contract.
Here the contractor had a twofold obligation to follow the prescribed international standard,
set by an independent body, referred to in the specification, which was later found to be
erroneous, and, at the same time, to design and build a wind plant, that would have a lifetime
of 20 years. So the question, which made all the way to the Supreme Court, was whether an
obligation to comply with a the specification overrode the express suitability for purpose
obligation.
The court answered in the negative, ruling that the express term of the contract that the works
would survive for 20 years or would be designed as such was a term of the contract to comply
with, despite the other seemingly conflicting term to comply with the specification.
It is submitted, that although often cited, this case does not purport to answer whether the
fitness of purpose should be implied in a contract. Rather the ruling should be limited to the
question of simultaneous application of two express terms of contract, setting different levels
of liability. Therefore, this case is not very helpful in answering the research question.
Independent Broadcasting Authority v EMI Electronics Ltd 68

Here the subcontractor designer provided a faulty design, which led to the failure and collapse
of the mast, supplied and installed by the main contractor.
The court held that there was a breach, but of the reasonable care and skill term. Thus, the
court did not consider the stringent fitness for purpose standard. This reinforces the opinion
from the literature review and empirical research (both below), saying that the distinction
between the two standards is rather artificial and in many cases unhelpful in practice.
Therefore, this case is also of limited relevance to the research.
In this case Lord Scarman has put forward a clear distinction between a provision of services,
which entails an implied duty to exercise reasonable skill and care, and supplying an article
with a liability as to the fitness for purpose of the supplied article. 69
Also in this case, as Lupton neatly summarised the words of Lord Frase, fitness for purpose was
said to be reasonable because the main contractor generally has a right of redress against his
subcontractor. In other words, the fitness for purpose liability could be applicable because of
the chain of responsibility.70 This corresponds with the facts of Greaves.
66
Clay and Dennys, ‘Design’ (n 15) para 2 039.
67
MT Hojgaard A/S v EON Climate and Renewables UK Robin Rigg East Ltd [2017] UKSC 59.
68
Independent Broadcasting Authority v EMI Electronics [1980] 5 WLUK 151.
69
Independent Broadcasting Authority v EMI Electronics [1980] 5 WLUK 151 (n 68) 208.
70
Lupton (n 64) 111.
17
Norta Wallpapers v Sisk & Sons71
Here the subcontractor designer was nominated by the employer. The main contractor took
no part in performing the design of the superstructure and had no control over the design.
The court reasoning showed that this fact displaced any finding of the employer’s reliance on
the contractor in delivering the design. Therefore, the contractor could not be held to have
impliedly warranted the fitness for purpose of design, despite the fact that he was liable for
workmanship and fitness of the materials supplied.
The case is relevant for the research in that it deals with the fitness of purpose obligation,
although through a qualification of a nominated employer. In particular the judgement
showcased the connection between the reliance and implication of the suitability for purpose
warranty.
Viking Grain Storage v T H White Installations Ltd 72

In this case Judge John Davies QC was not impressed with the argument that the liability for a
completed building had to be divided into liability of reasonable care for design and liability for
fitness for purpose as to the materials. He said that all the parts of the finished building were
interrelated and the building as a whole has to fulfil a purpose.
The judge also held that in the sale of an article there is always and an implied warranty of
fitness due to the factor of reliance on the seller's skill. The learned judge then compared the
construction contract with a supply of a "multi-partite installation [...], where a variety of
different parts of the entity are the subject of specialist sub-contractors". 73
The judge concluded that fitness for purpose should be impliedly applicable to design as much
as it does to materials, especially where there was a clear reliance on the supplier's skill. 74 He
stated that a reasonable care standard is too uncertain to be acceptable or realistic for a
business setting.75
The learned judge seemed to be especially insisting in his reasoning due to the fact that fitness
for purpose obligation is already limited to the 'reasonable' fitness. Lupton confirms the
importance of the reasonableness in fitness for purpose standard in that there may situations
where the contractor in not in breach of his fitness for purpose duty despite the design falling
short. For example when new circumstances arise that require something that could not be
reasonable foreseen, therefore, not being the part of the purpose. As Justice Hargrave in the
Australian case of Barton v Stiff said, an unlimited standard of fitness for purpose would
amount to an insurance of the house. 76
Cammell Laird & Co v Manganese Bronze and Brass Co 77

In Cammell Laird v Manganese Bronze Lord Wright reiterated that reliance of the employer
had to be shown clearly so as to form the basis of a contractual obligation.
He also noted that even where a contractor undertakes to construct a thing according to a
given specification, fitness for purpose is not necessarily excluded. 78
71
Norta Wallpapers (Ireland) Ltd v Sisk & Sons (Dublin) Ltd [1978] 1 WLUK 333.
72
[1985] 33 BLR 103
73
Lupton (n 64) 113.
74
Lupton (n 64) 113.
75
Lupton (n 64) 113.
76
Lupton (n 64) 114.
77
Cammell Laird & Co Ltd v Manganese Bronze & Brass Co Ltd [1934] AC 402.
78
Lupton (n 64) 116.
18
Acme Investments Ltd v. York Structural Steel Ltd 79
This case provided an example of the rule that even if the employer is competent in the
construction of the building generally, he may still be relying on the specialist judgment of the
contractor.80
Hancock v Brazier81
Lord Denning MR in the Court of Appeal's decision on Hancock v Brazier consented that
although the contractor was not himself at fault for the defects in constructed building, he was
nevertheless liable for the breach of an implied fitness for purpose obligation because it was
the contractor's responsibility to see that goods and materials of proper quality have been
used.
This goes in line with the EPCm contractor’s general function to oversee the quality of the
materials, used in the construction project. Not to mention the fact the EPCm can itself be a
supplier of such materials and equipment. 82
The decision also has a limited importance for this research, as the case concerns the
guarantee of the quality of goods, which is already is implied into any contract by statute.
George Hawkins v Chrysler83

Here the court said that fitness for purpose warranty would only be implied where it is needed
to give business efficacy to the contract, i.e. in accordance with general rules of implication of
terms under English law, and that the court should not extend the responsibilities of
professionals beyond the reasonable care standard. 84
In other words this case reiterated the position of English courts that fitness of purpose
warranty can only be implied on proper facts and not something that should be inserted into
every single design contract as a matter of law.
Consultants Group International v John Worman Ltd 85

This was a rare case, although of first instance, where the court did find an implied warranty of
fitness for purpose for the design. The case concerned a subcontract between the design-and-
build main contractor and a subcontractor designer (engineer).
Similarly to Greaves the main contractor employed the designer specifically to provide a design
suitable for the purpose, which was in turn communicated to him by the employer, that the
constructed abattoir would comply with the EU regulations and the corresponding reliance on
the designer has been proven.
Samuel v Davis86
This case is famous for the illustration, given by Lord Scarman, of a distinction between pure
services, such as taking out a tooth, and in supplying an actual thing, i.e. false teeth.
79
(1974) 9 NBR 699
80
Clay and Dennys, ‘Contractor’s Obligations as to Design Under Traditional Building Contracts’ (n 45) para 3 042.
81
Hancock v BW Brazier (Anerley) Ltd [1966] 1 WLR 1317.
82
Lupton (n 64) 118.
83
George Hawkins v Chrysler (UK) Ltd and Burne Associates [1988] 1 WLUK 165
84
Lupton (n 64) 121.
85
(1985) 9 Con LR 46
86
[1943] KB 526
19
However, at the same time Lord Scarman made it plain that an obligation to design can carry a
fitness of purpose warranty:
“[a person] who contracts to design an article for the purpose made known to
him undertakes that the design is reasonably fit for the purpose. Such a
design obligation is consistent with the statutory law regulating the sale of
goods.”87
3.1.1. Conclusion on case law
The critical examination of the English law cases on the liability of the designers or design-and-
build contractors revealed the following.
First of all, it is undoubtable that by a very minimum any designer (engineer) or a design-and-
build contractor is liable for breach of reasonable care and skill obligation, which is implied in
every supply of services contract.
As to an implied warranty of fitness of purpose the position is different. The courts readily
imply such a warranty into a design-and-build contracts. Parallels can be drawn with a supply
of an article contract, under which a suitability for purpose obligation has been long
recognised in common law (which is now codified in statutes).
Design contracts, however, are considered a purely professionals services contracts and, as
such, by default they are only subject to a reasonable care and skill obligation implied
warranty.
However, when a designer undertakes to design an item, which must fulfil a certain purpose,
the courts can imply a warranty that such a design will be fit for such purpose, provided the
element of employer’s reliance can be found.
The problem with this rule, however, is that such an implication depends on the facts of each
case and, as has been emphasised by the judges, is not an automatic rule of law. It seems that
it is the reliance itself that allows such implication to arise, rather than the subject of the
designer’s functions (designing an article).
On the one hand, the findings, received during the case law research do not allow to conclude
that English law recognises an implied warranty of fitness for purpose in design, and by
extension in the EPCm, contracts by default.
On the other hand, the fact that such an implication can be made where an element of
employer’s reliance on the contractor can be found warrants investigation into the functions of
the EPCm to see if such functions can lead to an assumption that the employer should be
taken to rely on the EPCm contractor by default. This could potentially mean that fitness for
purpose should be implied into an EPCm contract by default. At least until rebutted.
3.2. Forms of contracts
There are no established contract forms for EPCm contracts. Instead, the most common forms
of building contracts will be briefly looked at below.
3.2.1. NEC4
NEC4, being in a way a relationship contract, does not specify the level of the contractor’s
liability for the design. It only refers to the scope in the works (clauses 20 and 21 of the NEC4
Engineering and Construction Contract) and the design must comply with it. The contract,
therefore, leaves it to the parties to decide what must be done by the contractor and what
kind of liability he must carry.
87
Lupton (n 64) 111.
20
NEC4 does, however, contain an optional X15 clause, which, if used, would expressly limit the
contractor’s liability in design to the “care and skill normally used by professionals designing
similar to the works”, i.e. the standard of reasonable care and skill.
3.2.2. JCT Design and Build Contract 2016
JCT’s clause 2.17 defines contractor’s liability for the design as that, attributable to
“an architect or other appropriate professional designer who holds himself
out as competent to take on work for such design and who, acting in
dependently under a separate contract with the Employer, has supplied such
design for or in connection with works to be carried out and completed by a
building contractor who is not the supplier of the design.”
In other words the contractor is liable as much as would be liable an independent architect in
on the actual facts. The rest is, it is presumed, left for the court to decide.
As such, the JCT neither confirms nor disproves the remit of this research.
3.2.3. FIDIC Yellow book
Clause 4.1 on contractor’s general obligations makes it clear that the contractor must provide
works, which will be fit for the purpose for which they are intended. As such the Yellow book,
which is FIDIC’s design-and-build contract form, incorporates the position, which has been long
established in English law.
As to the design per se, clause 5.1 obliges the contractor to appoint designers who are
“professionals, qualified, experienced and competent in the design, for which they are
responsible” and to warrant the same. It seems that in its application clause 5.1 will fall close
enough to the reasonable care and skill standard, as the employer would have to prove
incompetency of the designers, performing the design.
3.2.4. Conclusion
It is interesting to note that the three most commonly used form of contracts differ in their
regulation of the contractor’s liability for the design. This can only mean that there is a lack of
consensus among the industry as to what such liability should be, or a lack of need for a
universal approach to the issue.
It seems the drafters want the parties to define the exact nature and liability of the design
obligations in the contractual scope. This goes in line with the English courts’ reluctance to lay
down concrete rules on the implication of fitness for purpose obligation as a matter of law,
preferring instead to rely on the parties’ actual intentions.
Therefore the contract forms review neither support nor disprove the idea of an implied
liability for fitness for purpose on the EPCm contractor.
3.3. Professional literature and legal commentaries
3.3.1. The basics
The basic investigation into the legal literature confirmed the case law findings in that
implication into a usual construction (building) contract is threefold: 88
1) duty to exercise reasonable care and skill in providing the building services (workmanship),
2) duty to use materials of good quality, 89
3) warranty that the resulting structure will be reasonably fit for the intended purpose.
88
HK Gaafar and JG Perry, ‘Limitation of Design Liability for Contractors’ (1999) 17 International Journal of Project
Management 301, 302; Furst and Ramsey (n 39) para 3 052.
89
Bailey (n 38) 192.
21
Reasonable care and skill is a default standard for services contract, including design, whereas
a construction contract, similarly to supply of goods, naturally attracts an elevated fitness for
purpose standard of liability.90
3.3.2. Reasonable care
Being a professional consultant the EPCm contractor, in the absence of express conditions in
the contract to the contrary, is only liable in negligence, i.e. for the breach of an express or
implied obligation to use reasonable care and skill: 91 “where a person is employed in a work of
skill the employer buys both his labour and his judgment.'' 92
Duty to use reasonable care and skill means that a contractor must act as a reasonably
competent contractor performing services in question (Bolam v Friern Hospital Management
Committee):93
“Where you get a situation which involves the use of some special skill or
competence … the test is the standard of the ordinary skilled man exercising
and professing to have that special skill. A man need not possess the highest
expert skill … it is sufficient if he exercises the ordinary skill of the ordinary
competent man exercising that particular art.” 94
Reasonable care and skill is a default term, implied in every contract for services both in
common law and statutes (section 13 of the Supply of Goods and Services Act 1982, now
replaced with section 49 of the Consumers Act 2015). 95
Such a duty can also arise in tort of negligence with the governing rules being mostly the
same.96 Breach of the duty of care is established by proving that the party in question has
failed to act in a certain way, i.e. it acted not in the way it was reasonably expected to do,
“guided upon those considerations which ordinarily regulate the conduct of human affairs”. 97
In other words that it was at fault.
In such a paradigm there might be factual situations where the employer did not get what he
wanted under the contract, but the contractor was not at fault, because he did everything that
was expected from him, and, as such, he was not liable for the breach of a contract.
3.3.3. Fitness for purpose
A warranty of fitness for purpose means that a party (the contractor) undertakes to ensure,
that a certain item that he supplies, including the design, or constructs will be suitable to be
used for a certain purpose, communicated by the other party (the employer).
A warranty of fitness for purpose is a purely contractual concept and can only be implied
provided a contract between the parties can be established. The implication originated in
common law, was codified in section 14 of the Sale of Goods Act 1979, which was replaced
with section 10 of the Consumer Rights Act 2015.
In contrast to the duty of reasonable care and skill a contractual warranty of fitness for
purpose does not require proving fault on the part of the contractor. It is what is called a ‘strict
liability’ concept. The employer only has to prove that a certain condition was not met,
whether or not the contractor was at fault.
90
Lupton (n 64) 107.
91
Robert Clay and Nicholas Dennys, ‘Standards by Which Performance Will Be Judged’, Hudson’s Building and
Engineering Contracts 14th Ed. (Sweet & Maxwell UK 2019) para 2 012.
92
Per Bayley J in Duncan v Blundell (1820) 3 Stark. 6.
93
[1957] 1 WLR 582
94
Per McNair J in Bolam v Friern Hospital Management Committee [1957] 1 W.L.R. 582 HL at 586
95
Lupton (n 64) 97.
96
Lupton (n 64) 98.
97
Blyth v Birmingham Water Works Co [1957] 1 WLR 582, at 586
22
The key requirement, as was seen in the case law, for an implied fitness for purpose liability to
arise is that the employer must be relying on the knowledge, skill and judgement of the
contractor in a substantial, though not necessarily exclusive manner. 98
It must be noted that although the fitness for purpose concept has been present in the English
law for a long time it seems that there is still a lack of a clear definition of what it means. 99
Even the statutes refer to it without any substantive explanation.
Julian Bailey defines it as "a function of what the contract seeks to achieve". 100 The case of
George Fischer v Multi Design 101 has been quoted by some authors as saying that fitness for
purpose is a warranty of sufficiency and operational performance of an item. 102
It is, however, submitted, that there is no need for any formal definition of the said concept. It
can applied following its literal meaning – whether the item or the produced design can be
used to achieve what was intended to be achieved using it. To cite Oliver J. in Midland Bank v
Hett, Stubbs & Kemp:103 whether the contractor supplied “what he was contracted for”.
3.3.4. Difference between the two standards
There is difficulty in distinguishing between the fitness for purpose and reasonable skill and
care standards of liability in the professional literature. 104
Julian Bailey refers to MT Højgaard v E.On105 to state that application of the fitness for purpose
standard is very dependent on the wording of the exact contract and interpretation. 106 Some
authors suggest that it is a default position that a construction contract should attract an
implied fitness for purpose obligation.107
Gaafar and Perry submit (by citing Jackson and Powell) 108 that obligations of a building
contractor are too complex to be defined using only two levels of liability - either as fitness for
purpose or reasonable care and skill. Instead a building contract may actually be a spectrum 109
of different obligations taken together, some of which are strict and others are negligence-
based.110
It must be admitted that the theory of range of liability levels in building contracts does look
persuasive enough. Especially, when one talks about such different obligation as part of the
same contract, as to perform a service to a certain quality (negligence) and before deadline
(strict liability). But it appears obvious that such a situation would be unproblematic in terms
of legal analysis.
What is, however, difficult to comprehend is how a single contractual obligation, such as to
provide a certain item or services, can be both negligence-based and absolute at the same
time.
Despite the long standing position of courts, as seen in the case law, including Geoffrey Lane LJ
dictum in Greaves, where he expressly rejected the idea of existence of a duty, which was
98
99
Gaafar and Perry (n 88) para 301.
100
Bailey (n 38) 172.
101
George Fischer Holding Ltd v Multi Design Consultants Ltd [1998] 4 WLUK 110.
102
Lupton (n 64) 107.
103
Midland Bank Trust Co Ltd v Hett Stubbs & Kemp [1979] Ch 384 434.
104
Gaafar and Perry (n 88).
105
MT Hojgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd [2017] UKSC 59 (n 67).
106
Bailey (n 38) 174.
107
Bailey (n 38) 172.
108
Rupert M Jackson and John Lewis Powell, Jackson and Powell on Professional Negligence (3rd Ed.) (Sweet &
Maxwell 1992).
109
Gaafar and Perry (n 88) 302.
110
23
higher than reasonable care, but lower than implied warranty of fitness for purpose, 111 Gaafar
and Perry suggest that the lack of an express limitation of liability may elevate professional
designer's standard of liability from that of reasonable care to a more onerous strict liability. 112
3.3.5. Fitness for purpose in design
The magnitude of complications in differentiating between the two standards increases when
one has to analyse pure design contracts, as opposed to design-and-build ones.
On the one hand it is a consultancy contract and, therefore, should only make the designer
liable in reasonable care and skill.
On the other hand, it has been seen in the case law above and is confirmed in construction
textbooks,113 that in English law there is a possibility to hold the designer as impliedly
warranted that his design will be fit for the purpose. Van Wassenaer goes as far as to state that
a designer bears the liability to produce a design, that is "technically fit” by default. 114
In the words of Lord Scarman in Independent Broadcasting Authority v EMI Electronics 115 “in
the absence of any terms (express or to be implied) negating the obligation, one who contracts
to design an article for a purpose made known to him undertakes that the design will be
reasonably fit for the purpose”. Some authors go as far as calling “fitness for purpose” a
shorthand for strict obligation in design. 116
Lupton, when considering English law authorities, also draws a conclusion that although fitness
for purpose is unlikely to be implied in a professional designer's contract, it was still possible
for such a duty to arise due to the particular circumstances. 117
However, some authors tend to limit designer’s liability to negligence. Hudson says that the
usual perception of the designer's role (assumingly, as a consultant) prevents finding of an
implied warranty of fitness for purpose, except for the rarest of cases. 118 Unavailability of
professional insurance for such a liability has been named as one the main reasons for the lack
of such implication.119
Hudson gives an explanation of how the difference in standard of liability of a professional
designer (liable for reasonable care) and that of a design and build contractor (liable for
suitability for purpose) can be reconciled. It is because the builder, just like a manufacturer of
goods is always pressed by the market to save on the quality as much as possible, which
necessitated a protection for the employer / purchaser in the form of elevated strict liability of
fitness for purpose. But that is not the case with the pure designers, who do not have such an
interest as designing down the building. 120
The authors of Hudson also make a point that construction profession is rather special in that
innovation and experiment is much more common and is generally encouraged. 121 This
warrants an approach of lessening the liability of a designer, limiting it to reasonable care and
skill.
111
112
113
Bailey (n 38) 192.
114
van Wassenaer (n 36) 13.
115
Independent Broadcasting Authority v EMI Electronics [1980] 5 WLUK 151 (n 68) 41.
116
Lupton (n 64) 107.
117
Lupton (n 64) 124.
118
119
120
121
Clay and Dennys, ‘Standards by Which Performance Will Be Judged’ (n 91) 2 013.
24
Despite the above Hudson does recognise a possibility of a designer carrying an elevated
fitness for purpose obligation and names the need for the employer’s reliance on the
contractor’s judgement in design as a required element. 122
Keating is more straightforward in his analysis, providing conclusions, similar to those, made in
case law research above. In particular, Keating, citing Greaves, confirms that where an
employer has communicated a purpose to the contractor and relied on the contractor’s skill
and judgement in the matter there is an implication of warranty that the work will be
reasonably fit for the particular purpose. 123
Additionally, Keating maintain that a designer subcontractor can be liable in fitness for purpose
if he knows that the general contractor is also absolutely liable to the employer. 124 Lastly, the
authors confirm that fitness for purpose obligation overrides a duty to comply with the
contractual specification.125
3.4. Conclusion on case law and literature review
Based on the literature review, as well as looking at the case law, contract forms and statutes
it becomes evident that even though a default position in English law is that a designer, as a
consultant, is normally only liable for providing services with reasonable case and skill, an
implied warranty of fitness for purpose of the produced design can be found where:
1) the employer expressly communicates the purpose for which the designed item or
structure will be used for, and
2) the employer relies on the knowledge and skill of the designer in a substantial manner, for
example when the designer is a subcontractor to the design-and-build contractor, who is
himself impliedly liable for fitness for purpose of the constructed structure.
As was explained above, the EPCm contract, as the acronym hints, is an amalgamation of
different obligations: designing the building, procuring the materials and equipment and
overseeing the construction.126
Therefore, it is submitted that the EPCm-contractor, as a designer, can be liable for the
suitability of his design, if the employer relies on his services.
The remit of the foregoing part of this paper is to demonstrate that because of the expanded
functionality of the EPCm contractor (namely, procurement and construction works
management) there is a room to argue that the employer to the EPCm contract should be
taken to be relying on the contractor by default.
Thus, a warranty of fitness for purpose should be taken to arise in a EPCm contract by default
unless reliance is rebutted.
122
123
Furst and Ramsey (n 39) para 3 054.
124
125
126
Lupton (n 64) 115.
25
4. CHAPTER 4 - FUNCTIONS OF THE EPCM CONTRACTOR
4.1. General
As follows from the case law and literature, analysed above, the key requirement for finding an
EPCm contractor liable for fitness for purpose of its design is the element of reliance put onto
the contractor by the employer.
On that premise the foregoing part the research will be looking at the EPCm contractor’s range
of functions to see if the role of the latter can be said to be relied upon by the employer by
default.
This will be done both by researching the relevant literature (subsection 4.2.) and via empirical
research, performed though interviewing professionals in the field (see CHAPTER 5 –
EMPIRICAL RESEARCH below).
4.2. Review of the literature
4.2.1. Construction management
As has been explained above the EPCm contractor is the person, employed not only to design
the facility, but also to manage its construction and the procurement of the necessary
materials and equipment. It can therefore be said that the EPCm contractor’s role is
management of a project on a professional level.
Competent management, especially as to the cost and timeframes, has been named among
the most important considerations of a successful completion of a project. 127 Especially, when
third-party stakeholders, such as investors, are involved in the project. 128
The term “management” itself has been defined as “application of knowledge, skills, tools, and
techniques to project activities to meet project requirements”. 129 As a manager of construction
the EPCm contractor is therefore expected to exercise a certain degree of knowledge and skill.
As the functions of the EPCm contractor are performed by people, management is largely
dependent on competent staff and management processes. 130 This includes employing trained
experts in the field of time scheduling 131 and cost control,132 as well as proficient in managing
cultural differences, information overload and stakeholders expectations. 133
Budget control and cost prediction are named as especially important activities of any
megaproject.134 Such activities are a usual part of a construction manager day-to-day
activities.135 Cost estimate is usually produced as part of the design, 136 for which the EPCm
contractor is a party primarily responsible. 137
However, in performing the services the construction manager only acts an agent and
consultant. Due to such nature liability of the construction management services are limited to
reasonable care and skill (although the agency-like nature of the services may lead to some
fiduciary relations of trust, which are not considered in this paper).
127
Patricia D Galloway, Kris R Nielsen and Jack L Dignum, Managing Gigaprojects: Advice from Those Who’ve Been
There, Done That (American Society of Civil Engineers 2013) xi.
128
Galloway, Nielsen and Dignum (n 127) 157.
129
130
Galloway, Nielsen and Dignum (n 127) xi.
131
132
133
134
135
136
137
26
Proving negligence in performing such complex consultancy services as those of the
construction manager is extremely problematic, especially given the intricacies of interfaces,
usual for a construction project. As such, a construction manager is very unlikely to be
successfully sued under the contract.
This fact is sufficient to assume that the employer may be more cautious in its dealings with
the construction manager and undertake a bigger role in project completion. 138 That, in turn,
may provide evidence that the employer may be less likely to rely on the construction manager
in any given project.139
4.2.2. Design
Importance of sound and timely preparation of design, especially in connection with the EPCm
contractor’s construction management functions of procurement and construction
management, cannot be overstated. A lack of it can lead to significant delays, extra costs and
low quality of the construction works.140
Design process can be complicated and involves different phases – from securing planning
permissions to final design preparation to construction support services. 141 It requires effective
management and implementation of various instruments and is fraught with disagreements
between the stakeholders.142
It should also be noted, that design function includes preparation of the cost estimates and
time schedule, which are, as is stated above, essential documents of a successful project. Both
of them have influence on the EPCm contractor’s other functions – management of
procurement and of construction. Therefore, good and efficient management of the design is
increasingly important for EPCm contract.
It should be noted that introduction of a design function to a construction management
contract (as in EPCm contract) creates a strong potential for a conflict of interest between the
obligation of trust, attributable to agency relationship, and a prime obligation of design. It is
said that the contractor may want to “cover up” his own failures, including design, by blaming
the trade contractors.143
4.3. Employer’s reliance
Despite all the critical importance of the functions the EPCm contractor performs, as was
described above, it is certainly wrong to assume that such importance itself can automatically
render the employer being taken as relying on the contractor in any project.
After all, simply hiring others to execute a project or a part of it cannot by itself relieve the
employer of any risks or responsibility for the project’s failure. 144
This can be demonstrated by looking at the difference between the EPCm contractor and the
EPC (design-and-build) contractor. Whereas the EPC contractor is charged with providing a
completed facility, the EPCm is only a primary obligor in relation to the design. The rest is
performed by overseeing third parties (trade contractors) as they supply goods and perform
the works. Such third-party contractors perform their functions under direct contracts with the
employer and are liable directly to him. In such a situation the interface between the EPCm
contractor as an agent and trade contractors / vendors naturally becomes the problem and
ultimate responsibility of the employer. 145
138
139
140
141
142
143
144
145
27
Since the EPCm contractor’s functions are undertaken as part of the services contractual
scheme, the quality of such services need to be constantly checked by the employer, requiring
him to establish an integrated team in order to assist and oversee the EPCm contractor, 146
especially in design, and playing a generally pro-active role in management of the project, 147
instead of “just delegating key work”, even if the EPCm contractor has good reputation. 148
Sources say that with an EPCm arrangement, as with any other construction management
schemes, the employer is required to have its own in-house team to assist the EPCm
contractor in managing trade / vendor contracts. 149 The sources list legal, financial, engineering
and operational staff among such a team. 150 The employer will have to perform a great deal of
functions himself, including managing many contractual matters and communicating with
trade contractors.151
Therefore, the very nature of the EPCm contract, which is a supply of services contract and not
a supply of goods, undermines significantly the submission that the employer should be
necessarily taken as reliant on the EPCm contractor in any part of the latter’s functions.
Some sources go as far as to say that EPCm contracts are only suitable where the employer
itself is “highly knowledgeable in the relevant field” and the choice of EPCm contract is only a
result of the employer’s desire to save costs. 152 Such an argument does sound compelling,
especially taking into account the usual lack of risk premium in the EPCm contracts price.
4.4. Conclusion
Review of the project management literature revealed that the most crucial considerations of
any successful construction project, especially of a major profile, are cost and schedule control
and prediction.
From the above analysis it is clear that cost and schedule management are among the main
functions of the EPCm contract. It therefore becomes evident that the EPCm contractor’s
functions cover the most critical aspects of a given project.
On the other hand, because the EPCm contractor is only a professional consultant, he usually
does not undertake the project’s risks. Neither does he put such risks into a contract price.
Contract-wise the risks, therefore, stay with the employer. Provided it can be assumed that as
a professional the employer understands the limitations of the EPCm contract’s nature, it
seems unreasonable be treat the employer as relying on the EPCm contractor.
The evidence in the literature confirms that the employer is supposed to have a substantial
amount of its own expertise and be involved into the project, especially as regards to
overseeing the EPCm contractor.
Based on that it cannot be safely concluded that when engaging an EPCm contractor the
employer effectively puts the project’s realisation into the hands of the contractor (including in
return for a risk premium), as much as he may want to. It is therefore submitted that in the
absence of evidence to the contrary and express provisions in the contract it cannot be
assumed that the employer relies on the EPCm contractor in a project’s realisation.
146
147
148
149
150
van Wassenaer (n 36) 228.
151
Klee (n 2) 86.
152
28
5. CHAPTER 5 – EMPIRICAL RESEARCH
5.1. General
As briefly mentioned in the introductory chapter the empirical research under this thesis is
performed by applying the social research in form of interviews.
The interviewing strategy is applied as part of socio-legal research methodology and follows a
qualitative approach. Qualitative research is a research that “investigates aspects of social life
which are not amenable to quantitative measurement”. 153 It uses unstructured and non-
numerical data, formulated in a descriptive form. As opposed to quantitative approach, it is
performed though observation, rather than measuring. The qualitative approach allows for
collecting in-depth opinion of the participants and, thus, form an more meaningful insight into
the researched topic.
The quantitative research is, on the other hand, a method performed by collecting information
though well-defined and straightforward answers from a substantial number of respondents
and applying a statistical analysis to form a conclusion based on numbers. This type of research
involves collection of data in numerical form. 154
The qualitative research has its drawbacks and limitations, as opposed to quantitative
approach, which have long been recognised in the academia. 155 The main disadvantage of the
qualitative approach are its unreliability, bias and lack of representation. Opinions of
individuals in real-life setting naturally provide a limited results, because of the great number
of factors influencing their sentiments on the matter. After all they deal with the matter of the
research on a daily basis as part of their work, with all its highs and lows. Their emotional state
is affected and their emotions influence their appreciation and their attitude as to the topic.
Another limitation of the research in this paper is the low potential for generalisation. The
number of respondents is rather low and they all work for the same company. The results of
the research could therefore be totally different if performed with another company, which
experienced a possibly bigger success in realisation of the EPCm contracts-based projects.
Unfortunately, interviewing the individuals in a particular company was all the author could
realistically secure for the research. Neither was it possible to contact any of the contractors,
the respondents work for, to hear the other side of the story. As such, the research only
represents the views of the employer.
Therefore, it is emphasised, that the empirical research under this paper is quite limited and its
findings are in no way conclusive. Its only purpose was to set a vector for future more
substantial and profound research.
It is submitted, however, that despite the limitations the findings of the empirical suffice for
the sake of this paper, as it is only used to complement the conclusions, made through
literature review, rather than forming a standalone conclusion.
5.2. Interviewing
Initially, questionnaires and surveys as a research technique have been considered as a
method of research. They were, however, excluded early on due to impossibility for the author
to arrange for a sufficient number of respondents, in order to be able to draw any conclusion
from the findings.
Instead, the semi-structured interviewing has been chosen. Interviews, it is submitted, are
better suited for a small group of respondents. It allows for longer contact and more rich and
voluminous information to be collected from a single respondent. In other words, interviews
allow to get the most from the research, despite the modest scale of the research. Interviews
153
Victor Jupp, The SAGE Dictionary of Social Research Methods (SAGE Publications 2006) 367.
154
Jupp (n 153) 369.
155
Jupp (n 153) 368.
29
have been labelled as “the single best device for promoting understanding and “getting at the
truth”.156
The main goal of interviewing under this research is to explore attitudes and experiences of
professionals, working with EPCm contracts on major construction projects, to support or
rebut the proposition that EPCm contractors are relied upon in their knowledge and skill,
including as part of design and management services, by their employers.
There was a set of predetermined questions, asked in sequence in every conversation. The
questions were open-ended and the respondents were free to provide any comment they
liked. Open-ended questions, it submitted, are a good way to counter bias, as they are not
“putting the answers in mouth” of the respondents, as opposed to the close-ended ones. 157
The respondents were also given an opportunity to share their memories and stories in
whatever words they wanted. Follow-up (probe) questions were also employed to elaborate
on details of the answers.
It is submitted that this way interviewing was best suited for the aim of the research. On the
one hand it set a comfortable pace and safe environment allowing to tap to the respondent’s
experience, and get a rich insight on the person’s perspective or outlook as to the
phenomenon of EPCm contract. 158 On the other hand, the predefined list of questions helped
keeping respondents on point. It also allowed to compare and contrast information gained
from different respondents159 and sources.
5.2.1. The summary of the interviewing process
The interviewing process, which was undertaken under this research can be summarised as
follows:
 The interviewing included 2 (two) respondents;
 Every respondent has been interviewed separately on a one-on-one basis;
 The interviewing took place during the work day in a closed office;
 Each respondent was asked a sequence of questions (listed below);
 Each interview took around one to two hours;
 The questions asked are listed in Annex 1 (List of interview question) to this paper.
 An interview summary was produced after each interview. The summaries are provided in
Annex 2 (Interview summaries with informed consent forms) to this paper.
5.2.2. Findings
It is submitted that the exercise on empirical research as part of this dissertation was
successful in gathering meaningful and useful information.
Firstly, all of the respondents confirmed the lack of any clear unified definition of what is an
EPCm contract. Understanding of the EPCm contractor’s liability and risk profile differs from a
manager to manager even within the same company. This goes along with findings from the
literature, articulated in Chapters 1 and 2.
All of the respondents expressed cautiousness in dealing with the EPCm contractor. Difference
of interests between the employer and EPCm contractor was acknowledged by all the
156
J Ruane, ‘Chapter 9 Having the Talk: Person to Person Information Exchange’, Introducing Social Research
Methods: Essentials for Getting the Edge (1st edn, 2016) 190
<http://mcgraw-hill.co.uk/openup/chapters/9780335235674.pdf>.
157
Ruane (n 156) 191.
158
Ruane (n 156) 193.
159
Catherine Dawson, Introduction to Research Methods: A Practical Guide for Anyone Undertaking a Research
Project (4th edn, Constable & Robinson Ltd 2010) 28.
30
respondents. One of them went as far as characterise the relationship between the parties as
tainted with adversity.
The general tendency to treat the EPCm contractor as a single point of responsibility for the
projects pitfalls was confirmed during the interviews. However, it was clearly explained that
such proposition only meant that the EPCm contractor was the first one to contact in case a
problem arises. To start the investigation to locate the cause of the problem and the party at
fault. No real legal liability for the projects’ completion regardless of fault was expected from
the EPCm contractor.
This means that the element of ‘single-point of liability’ of the EPCm contract only extends to
status of the EPCm contractor as being an informational centre of the project, rather than a
person liable for failures. This corresponds with the finding on the literature, describing
functions of the EPCm contractor, discussed in Chapter 4, where it said that the EPCm
contractor carries single point responsibility in terms of management of the project.
Talking about the reasons for employing EPCm contractors in the first place the respondents
referred to the lack of sufficient expertise on the employer’s side and a company’s policy of
minimising contracts’ costs at the tendering stage. The factor of the contractor’s expertise and
qualification could potentially support the proposition of existence of the employer’s reliance
in dealing with an EPCm contractor, especially coupled with an overlap in practice between the
design and construction management constituents of the EPCm contract. Reliance on skill and
knowledge of the contractor has been identified as a requirement for implication of fitness for
purpose warranty in the case law analysis part of the research.
However, when asked directly how much the employer in their projects can be said to be
relying on the contractor, the respondents gave a clear answer – such reliance is limited. From
the respondents’ experience employer exercises significant involvement into the project and
has a substantial amount of trained personnel, working on a project. EPCm contractor, by the
words of one respondent, is regarded as a very specialised consultant in a particular
technology, in which the employer himself is not qualified enough, rather than a person who
could make the whole project succeed on his own.
5.2.3. Conclusion
Despite the notable bias and limitations as to conclusiveness of the results, the interviews
provided a handful of relevant information.
Most importantly, the interviews revealed the respondents’ clear appreciation of the limited
nature of EPCm contractor’s obligations and liability. Although noting the lack of unified
understanding of the difference between the EPCm and EPC contracts among the industry in
general, the respondents expressed the views, consistent with the literature, which treats the
EPCm contract as professional services contract. It particular, fault has been named as a
necessary element for holding the EPCm contractor liable.
In relation to the functions of the EPCm contractor and the correspondent reliance of the
employer the respondents’ views were rather reserved, making it clear that the employer’s
responsibilities in a project are at least as important as those of the EPCm contractor with the
latter’s role being equated to a professional, giving specialised advice.
Therefore, it can be concluded that the empirical research confirmed the findings from the
literature review both in relation to the legal nature of the EPCm contract, defined as part of
objective 1., and functions of the EPCm contractor and the degree of employer’s reliance,
established under objective 6.. Namely that it cannot be realistically assumed that the
employer should be taken to be relying on the EPCm contractor in any given project by default
(without additional qualifications).
31
6. CHAPTER 6 – CONCLUSION
This section provides conclusion to the dissertation by revisiting the individual research
objectives and summarising the findings and conclusions, given in the paper. Whether or not
the general aim and individual research objective have been met will be discussed.
Additionally, guidance will be offered on how this research work can be progressed.
6.1. Research Objectives: Summary of Findings and Conclusions
1. Nature of the EPCm contract
The first objective was to state what is the EPCm contract and what obligations does the EPCm
contractor usually carry by reference to the professional literature on the modern construction
law practice.
The literature review (later reinforced with the empirical research) revealed that EPCm is a
contract for professional services, which can be broken down into design services and
management services. The two kinds of services are intertwined and come as a package deal.
The conclusion, drawn from investigating the nature of the EPCm contract was a potential for
finding an elevated liability of fitness for purpose of the contractor.
2. Case law on contractors’ liability
The second objective was to critically analyse and summarise English case law on the liability of
the designers and design-and-build contractors.
If was found that a warranty of fitness for purpose is implied in law only in design-and-build
contracts. As for the supply of services contracts, such as design and management services,
only the standard of reasonable care and skill can be implied by default. Fitness for purpose
may be implied on the facts of a particular case if the element of the employer’s reliance on
the contractor can be found.
3. Contract forms
The third objective was to look at the three main contract forms common in construction
business to see how they regulate the matter of contractor’s liability for the design.
The lack of any consistency between the forms was discovered. Reasonable care and skill was
found to be applicable by default. As to liability of fitness for purpose – it was only found in
FIDIC Yellow book and only in relation to the completed works, rather than just design. Instead
the contract forms rely on the scope attachments to expressly contain a fitness for purpose
duty.
The conclusion, drawn from that was that there is no unified appreciation of the level of the
contractor’s liability for the design. Instead it appeared that the drafters tried persistently to
put the matter into the hands of the parties.
4. Legal literature review
The fourth objective purported to review the legal literature, including such well known
commentaries as Hudson and Keating, to get a further insight into the findings, obtained as
part of the case law analysis.
The review expanded the understanding of the legal regime of the designer. Additionally, it
provided the opinion that the very division of the liability into just two opposing levels may be
misleading and should be reevaluated.
The conclusion on the literature review was drawn as part of following objective no. 5.
32
5. Conclusion on English law rules
Objective five, although stated as a separate objective, was posed only to provide a conclusion
on the research of the three sources of information on English law: case law, contract forms
and legal commentaries.
It was concluded, that, based on English law, a designer can be liable in fitness for purpose if
the elements of express communication of the purpose and employer’s reliance onto
contractor have been established.
This allowed to move further to the following objectives.
6. Literature review on the EPCm contractor’s functions and employer’s reliance
The sixth objective was reviewing the literature on construction management to investigate
the functions of the construction managers (which is a part of the EPCm contract), usual in the
industry, what he usually does for the employer and what role the employer himself usually
plays in the construction projects.
On the one hand, it was as found that a construction manager performs such crucial functions
as cost and schedule control. That partly confirmed the proposition that the employer may be
taken to be relying on the EPCm contractor by default. On the other hand, clear indication of a
lack of such reliance and the need for employer’s own expertise has been found.
It was therefore concluded that it could not be assumed that the employer under the EPCm
contract is necessarily relying on the contractor in the latter’s design and realisation of the
project.
7. Empirical research
The last objective before producing a conclusion on the whole dissertation topic, was to
perform empirical research in the form of interviewing a small group of construction
professionals to complement the findings, obtained from the review of construction
management literature.
The research provided illustration on how an actual employer under the actual EPCm contracts
deals with a contractor in a real world situation, although in a limited cases (within a single
company). In particular, the level of employer’s involvement into projects and the degree of
his reliance onto the contractor was showcased.
The conclusion drawn from the empirical research supported the conclusion, made under the
literature review, that it is wrong to assume that an employer under an EPCm contract should
be regarded as relying on the contractor.
6.2. Conclusion on dissertation topic and aim
The overall aim of his paper was to determine whether in English law there is an implied
warranty of a contractor under an EPCm contract that a design he produces and a facility, built
according to such design under the contractor’s supervision, will be fit for its purpose and, if
not – whether there should be such be a warranty.
Based on the findings made in this paper it can be concluded, that although there are potential
situations in the English law, when a contractor, delivering design, can be found to have
impliedly warranted in fact that such design would be fit for its purpose, the usual functions of
the EPCm contractor as a construction manager are unlikely to be such as to make the
employer to be taken to be relying on the contractor.
Therefore, in English law there is no implied warranty by a contractor under an EPCm contract
that a design he produces and a facility, built according to such design under his supervision,
will be fit for its purpose. Neither such a warranty should be implied into EPCm contracts as a
matter of English law.
33
6.3. Further research
Despite the conclusions made in this paper, it is submitted that a further research into the
matter is possible and would be beneficial.
The court rulings, as was discussed, made it clear that English law does not yet provide a
definitive answer, whether a designer should be taken to be impliedly warranting the fitness
for purpose. Lord Denning in Greaves, when answering a question of whether an architect or
an engineer under an implied warranty that, if the work is carried out to his design, it will be
reasonably fit for the purpose or is he only under a duty to use reasonable care and skill made
it clear that “this question may require to be answered someday as a matter of law.” 160
Since the EPCm contract is a contract where the contractor necessarily provides design and
engineering services, the potential for implication of the fitness for purpose duty as matter of
law, as opposed to as matter of fact, continues to exist.
In terms of researching employer’s reliance it needs to be reiterated that EPCm contract is a
relatively new development in the construction business. There are no unified form and there
is clear inconsistency in the appreciation of the EPCm contract nature among the industry
members. The empirical research as part of this paper was decidedly limited, as it was not
intended to provide any definitive quantitative data.
Therefore, further research into the industry specialists’ understanding of the EPCm contracts
would be very useful. As the practice of EPCm contract develops it may gather a body of
knowledge, comparable to EPC (design-and-build) contracts, which have long been in use in
the industry. That in turn may lead to altering the established views on the legal nature of
construction management and EPCm contracts.
160
34
7. ANNEXES
This paper has the following annexes:
1) Annex 1 (List of interview question)
2) Annex 2 (Interview summaries with informed consent forms)
3) Annex 3 (Research Ethics Statement)
35
Annex 1
LIST OF INTERVIEW QUESTIONS
The following question have been asked to every respondent:

Respondent’s role
1. Does your work include projects, involving EPCm contract?
2. What is your role in the project, involving EPCm contract?
3. Do you deal with the EPCm contractor in your everyday work? In what way?
Definition of EPCm contract
4. What is an EPCm contract, in your opinion?
5. What functions do EPCm contractors perform in the projects you take part in?
6. How important, you think, is the role of the EPCm contractor in a project?
Contrast to EPC contract
7. Why do you think EPCm contracts are preferable to EPC contracts?
Reliance
8. Why do you think EPCm contract is used in contractual schemes in your projects?
9. Do you think the employer in your project could handle the project on its own, by dealing directly
with the vendors / trade contractors? What would that require?
10. Why the companies, that act as the EPCm contractors in your projects, are invited in the tenders?
11. Are the functions, the EPCm contractor performs, connected to each other? Could the contractor
have been given only part of the functions to perform, e.g. only engineering or only procurement
services?
12. Is there anything in particular you can say the employer did in reliance on the contractor’s
knowledge of skill? Do you think the employer did so to its detriment?
13. What would happen if the employer did without the EPCm contractor?
Purpose
14. In your projects, is the purpose of the facility’s use is communicated to the EPCm contractor? In
what way?
15. Does the contractor realises the purpose, suitability for which he has to ensure?
Fitness for purpose
16. What do you think is fitness for purpose?
17. Should a warranty of fitness for purpose implied into EPCm contracts. Why?
36

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The University of Salford

School of the Built Environment

Whether a warranty of fitness for purpose of design should be

1.2. RESEARCH FOCUS 6

1.3. BOUNDARIES OF THE RESEARCH 7

1.5. OVERALL RESEARCH AIM 8

1.6. INDIVIDUAL OBJECTIVES 8

1.7. RESEARCH METHODS 9

1.8. RESEARCH STRATEGIES 9

1.8.1. BLACKLETTER RESEARCH 9

1.8.2. LITERATURE REVIEW 10

1.8.3. EMPIRICAL RESEARCH 10

1.9. VALUE OF THIS RESEARCH 10

1.10. OUTLINE OF THE RESEARCH’S CHAPTERS 10

2. CHAPTER 2 – NATURE OF EPCM CONTRACT 12

2.1. WHAT IS THE EPCM CONTRACT 12

2.2. DESIGN AND BUILD CONTRACTS 13

2.3. EPCM AS A CONSTRUCTION MANAGEMENT CONTRACT 14

2.4. EPCM AS A DESIGN CONTRACT 15

3. CHAPTER 3 - ENGLISH LAW RULES ON FITNESS FOR PURPOSE 16

3.1. CASE LAW 16

3.2. FORMS OF CONTRACTS 20

3.2.2. JCT DESIGN AND BUILD CONTRACT 2016 21

3.2.3. FIDIC YELLOW BOOK 21

3.3. PROFESSIONAL LITERATURE AND LEGAL COMMENTARIES 21

3.3.1. THE BASICS 21

3.3.2. REASONABLE CARE 22

3.3.3. FITNESS FOR PURPOSE 22

3.3.4. DIFFERENCE BETWEEN THE TWO STANDARDS 23

3.3.5. FITNESS FOR PURPOSE IN DESIGN 24

3.4. CONCLUSION ON CASE LAW AND LITERATURE REVIEW 25

4. CHAPTER 4 - FUNCTIONS OF THE EPCM CONTRACTOR 26

4.2. REVIEW OF THE LITERATURE 26

4.2.1. CONSTRUCTION MANAGEMENT 26

4.3. EMPLOYER’S RELIANCE 27

5. CHAPTER 5 – EMPIRICAL RESEARCH 29

5.2.1. THE SUMMARY OF THE INTERVIEWING PROCESS 30

6.1. RESEARCH OBJECTIVES: SUMMARY OF FINDINGS AND CONCLUSIONS 32

6.2. CONCLUSION ON DISSERTATION TOPIC AND AIM 33

6.3. FURTHER RESEARCH 34

3. CHAPTER 3 - ENGLISH LAW RULES ON FITNESS FOR PURPOSE

Greaves (Contractors) Ltd v Baynham Meikle & Partners 62

Independent Broadcasting Authority v EMI Electronics Ltd 68

Viking Grain Storage v T H White Installations Ltd 72

Cammell Laird & Co v Manganese Bronze and Brass Co 77

George Hawkins v Chrysler83

Consultants Group International v John Worman Ltd 85

LIST OF INTERVIEW QUESTIONS

The following question have been asked to every respondent:

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