NEC ECSC: Contractors Design Liability under ECSC

NEC3 and NEC4 Contracts Risk and Insurance
1

I have a Client who has let an ECSC contract including Contractor design, some of which has turned out to be defective, leading to re-build costs that the Contractor is currently unwilling to meet.

Clause 14.4 suggests that the Contractor has a liability for its design, but Clause 81 Contractor’s Liabilities does not include a liability for costs incurred by the Client for Contractor design failures (unlike PSC Cl. 81, which does). Is this an ambiguity?

Clause 82.1 allows “Any cost which the Client has paid or will pay as a result of an event for which the Contractor is liable is paid by the Contractor”. Is this relevant to the design liability suggested in Cl. 14.4 but not confirmed in Cl. 81?

Clause 82.4 states that “The Contractor is not liable to the Client for the Client’s indirect or consequential loss…” Are the rebuild costs due to defective design a “consequential loss”

Clause 80.1 Client Liabilities, third bullet point, gives a Client liability as:

A fault in the design contained in

  • the Scope or
  • an instruction from the Client changing the Scope.

Given that the normal means of incorporating Contractor design is by an instruction to change the Scope, does this mean that any design faults are the Clients liability?

It seems that Contractor design under ECSC is a minefield! Should we ever be including it in the Scope?!

Does anyone have any thoughts on how/if my Client might be able to recover its costs?

2

The ECSC should not be used for complex, risky design and construct projects. As you have discovered it contains no procedures for the submission of design for acceptance, undertakings to others (collateral warranties), intellectual property or in respect of design liability and insurance against such.

In the absence of this, when used in the UK, the ECSC will have terms implied from statute, in particular the Supply of Goods and Services Act 1982 which says that the materials supplied under the contract are of satisfactory quality and that the finished work will be reasonably suitable for the purpose for which the Contractor knows it is required. If the Client can prove that the Contractor has failed in either regard then the Contractor can be held liable. In respect of design this would normally involve notifying insurers however the Contractor’s insurance won’t extend to work done under the ECSC so there will inevitably need to be some negotiation between Client and Contractor with the Client ultimately seeking satisfaction through adjudication if negotiations fail to get things resolved.