Fitness For Purpose In Marine Construction Contracts

The UK Supreme Court has overturned a decision of the Court of Appeal and in doing so has reaffirmed the principle that a fitness for purpose obligation in a construction contract was to be given its natural effect.

The decision arose out of a long running dispute between a contractor, MT Højgaard A/S, and E.ON, the employer, regarding some failed grouted connections on foundations at the Robin Rigg offshore windfarm in the Solway Firth. 

The contractor had been appointed by E.ON to design , fabricate and install 60 wind turbines and this included engineering the transition piece to connect the monopole foundation to the towers for the turbines.

After the monopole foundations had been built the grouted connections soon began to fail causing the transition pieces to slip down the piles.  The cost of remedial works was EUR26.25 million and the dispute between the parties was who should bear that cost.

The Supreme Court had to reconcile apparent inconsistencies between different parts of the contract. In its technical requirements the contract included a reference to an international design standard J101 that incorporated an error in a mathematical formula, meaning that the strength of the foundation structures was significantly over-estimated. Other provisions required the foundations to be designed to have a lifetime of twenty years. The contract also contained a fitness for purpose provision that linked back to the technical requirements.

Was the contractor in breach of contract despite the fact that it used due care and professional skill, adhered to good industry practice and complied with the specifications incorporated into the contract which, as it turned out, were not capable of achieving the performance criteria?

The Supreme Court unanimously held the contractor liable. In doing so, and applying ordinary English legal principles of contractual interpretation, it found that in the event of a contractual conflict between an obligation requiring adherence to a certain specification, on the one hand, and an obligation requiring adherence to certain performance criteria, on the other, the performance criteria obligation will generally prevail.

Lord Neuberger, giving the lead judgment, said that the contractor is “expected to take the risk if he agreed to work to a design which would render the item incapable of meeting the criteria to which he has agreed”.

This important case highlights that parties should do everything they can to ensure careful definition of the scope of any works and clarity about which party should bear responsibility for design risks and whether the design obligation is one of reasonable skill and care or one of achieving an end result of being fit for purpose.

MT Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg East Limited and another – [2017] UKSC 59