In law, in the absence of written terms to the contrary, a professional designer will have a duty to complete its services using reasonable skill and care. A professional will generally not be considered negligent if the services are completed using the same standard as would be expected from a competent member of its profession (i.e. the usual practices and professional standards applicable to the relevant design or works).
A fitness for purpose obligation takes the designer, contractor or developer (as the case may be) beyond this common law duty to exercise reasonable skill and care and imposes an absolute legal duty or responsibility to achieve a particular outcome, standard or result. It is essentially a promise or guarantee that the design, components or finished product will be fit for the intended 'purpose'.
If a fitness for purpose obligation is imposed, then the designer, contractor or developer will be held accountable regardless of the reason why the design or works do not achieve the desired outcome. As this is an absolute obligation to achieve the required result, a breach of a fitness for purpose warranty will not require proof of negligence.
Drafting considerations
Where a designer, contractor or developer is carrying out a professional activity, a strict legal responsibility to achieve the result may apply unless it is clear from the contract that the parties have agreed a contrary position. Where the intended purpose for which the works are carried out is clear the relevant party has held itself out as being able to achieve that purpose and the employer has relied on that result being achieved, a warranty that the completed works will be reasonably fit for their intended purpose will be implied.
Contract drafting on design standards and responsibility should be clear and concise. It is important to note that the words 'fitness for purpose' do not necessarily need to be used in order to impose a fitness for purpose obligation. Simply including an obligation to warrant that the completed works will comply with the requirements of the employer, or will achieve any particular performance standards, could achieve the same result. A fitness for purpose obligation can also be implied from performance standards, requirements of specifications set out in the technical annexures to a contract. Complex construction projects can involve numerous annexures making it more difficult to determine exactly what the 'purpose' is – any subjective wording should be avoided.
A design and build contractor is held to a higher standard, in terms of providing a finished product, than a design consultant who might be providing the same service. An obligation on a contractor or developer in relation to design (where they are appointed under a design and build contract) could be construed as imposing a fitness for purpose obligation if the contract does not contain express wording stating that the standard of care required from the contractor or the developer is limited to reasonable skill and care.
The JCT design and build contract limits the contractor's liability for design to that required of an architect or other appropriate professional designer and expressly excludes fitness for purpose in new clause 2.17.1.2 in the 2024 edition ('…under no circumstances shall the Contractor be subject to any duty, obligation or liability which requires that any such design shall be fit for its purpose'). By contrast, the NEC4 remains silent on fitness for purpose and the obligation to provide the works in accordance with the Scope could amount to a fitness for purpose obligation in the absence of the Client including optional clause X15 into the contract.
Why does it matter
Contractual fitness for purpose obligations are generally uninsurable. Most professional indemnity policies will cover claims arising out of negligence or failure to exercise reasonable skill and care. Some policies will expressly exclude fitness for purpose risks and an insured’s opportunity to recover under its insurance policy could be reduced if a fitness for purpose obligation is included. Similarly, entering into a collateral warranty which contains a fitness for purpose obligation could automatically increase liability and result in the obligations under the collateral warranty not being covered by the PI policy.
Contractors and developers should seek to resist fitness for purpose obligations, and to the extent that they are included in contracts, seek to limit their scope or their overall liability in respect of such obligations. Contractors and developers should ensure they have a proper understanding of the required standards, be clear as to what the intended 'purpose' is (to be expressed in an objectively measurable way) and flow this down to their supply chain. Employers are likely to require fitness for purpose obligations in complex or high value engineering projects, where the performance of the project is critical. In such circumstances, employers must consider the requirement to achieve the desired outcome alongside the potential for imposing obligations which are uninsurable.
