Out-Law / Your Daily Need-To-Know

In a construction project specialist professional advisers (consultants) will usually be appointed by the employer or by the contractor (for example in a design and build structure) to provide advice in relation to the project, while the contractor and its subcontractors carry out the building work for the employer. It is important to be clear about the balance of risk between the different parties, and to reflect this in the appointment documents.

This guide provides a basic outline of some of the main issues to consider in relation to professional appointments, and should be read in conjunction with our guide to Collateral Warranties.

Types of professional appointment

A wide range of specialists may be engaged depending on the needs of each individual project:

The most common are: architect, structural engineer, mechanical & electrical engineer, project manager;

More specialised consultants include: archaeological consultant, traffic management consultant, surveyor.

Particular consultants may be required by law - for instance a CDM co-ordinator in relation to health and safety.

The consultants are often described collectively as the 'professional team'.

Basic provisions

This section outlines the basic provisions in deeds of professional appointment, some of which are discussed in more detail later in this guide:

  • the obligations and services to be performed by the consultant;
  • the standard of care required of the consultant (see 'Standard of care' below);
  • payment – the fee to be paid for the professional consultancy service and an indication of how any additional services will be calculated. For more detail see The Construction Act and its amendment – payment issues;
  • assignment and novation: the original appointment may be signed between the employer (for instance a property developer) and a consultant. The employer may go on to employ a building contractor to carry out the building works for them. If the building contractor will be taking responsibility in relation to design then the building contractor will typically require a direct contractual relationship with those consultants who have prepared the design prior to the building contractor being engaged. This is usually achieved through a novation of the professional appointment from the employer to the building contractor. For more detail on assignment and novation in construction contracts please see Assignment and novation;
  • prohibited materials: the consultant will be prohibited from using certain materials, such as asbestos, which may be listed in the appointment as being regarded as deleterious to health and/or the durability of the building. Often, however, appointments will refer to generally accepted industry best practice;
  • copyright and use of information: the employer will require the right to use the design information generated by consultants for the project. It is common to include clauses to allow for that right which often restrict the use of design documents to purposes connected with the relevant project;
  • professional indemnity insurance (see 'Professional indemnity (PI) insurance' below):
  • collateral warranties provisions/schedule of third party rights -  the consultant may have to give these in favour of third parties with an interest in the project such as buyers, tenants and/or funders (see Collateral warranties);
  • adjudication provisions: for more detail see The Construction Act and its amendment – adjudication;
  • termination and suspension provisions: for more detail see Termination and suspension of construction contracts for more detail;
  • a number of standard (boilerplate) provisions: these cover matters like confidentiality, how to give valid notices (for more detail see Notice provisions in construction contracts) and the governing law of the appointment.

Other clauses which are sometimes requested by consultants

  • aggregate liability cap – consultants may request an overall limitation on liability in the appointment.  This will usually be a monetary cap or may be limited to the amount of professional indemnity insurance the consultant maintains;
  • net contribution clause:
  • if two consultants are each liable to an employer for the same defective work, the employer could seek to recover 100% of its damages from consultant 1, despite the joint liability of consultant 1 and consultant 2 in relation to the relevant defects. Consultant 1 could then seek to recover a share of those damages from consultant 2 through the Civil Liability (Contribution) Act 1978 ;
  • net contribution clause can take various forms. However, it will often state that where two or more consultants involved in a construction project are each jointly liable for the same defect, the liability of each consultant will be limited to the amount which would be just and reasonable (having regard to their contribution to the problem). This means that an employer has to pursue each consultant who may have contributed to the defect. Effectively this transfers the burden of pursuing the other defaulting parties for their contribution from the consultant to the employer and can be problematic if one of those defaulting parties is insolvent. This is why net contribution clauses are often resisted by employers.

Standard of care

Professional appointments will set the standard required from the consultant.  A basic standard of care is to state that the consultant will use 'reasonable skill and care' in performing its services. This however is not considered to be the 'highest possible' degree of skill and care, as the consultant will be judged against an average consultant in the same profession. The contract might therefore strengthen the standard of care by, for example, referring to a consultant having the appropriate qualifications for a particular industry and/or being an experienced consultant on projects of a similar size to the project in question.  This ensures that the consultant is tied to measurable standards.

Reasonable skill and care can have a higher threshold in cases where a consultant has held himself out as having skills and abilities above the norm. The sort of words that will raise the standard of care above the norm are:

  • indicating that the consultant is 'experienced, 'competent' or a 'specialist' in a particular field;
  • acknowledgement from the consultant of the contractor's reliance on his advice.

A stronger standard is "fitness for purpose".  This means that when the project is completed it will be fit for its intended use. It means that the consultant is effectively guaranteeing that, for instance, its design will be fit for purpose.  Consultants will often attempt to resist a fitness for purpose obligation, as it is possible it will lead to them having difficulties backing that liability off under their professional indemnity insurance.

To illustrate the difference between the two standards, if an architect designs a hospital which cannot be used as a hospital once construction is complete:

  • if the design standard is "reasonable skill and care": as long as the architect can prove that it used reasonable skill and care in its design, it will not be liable regardless of the hospital not being fit for purpose;
  • if the design standard is "fitness for purpose": even if the architect can prove that it used reasonable skill and care in its design, it will be liable for the hospital not being fit for purpose.

Professional indemnity (PI) insurance

PI insurance insures the consultant against claims for professional negligence, for instance design defects. It is often required by professional bodies as a condition of membership.

Things to watch out for are:

  • the level of cover required and the excess (deductible);
  • whether cover relates to an (annual) aggregate amount or to each individual claim;
  • whether a particular or 'reputable' insurer is required. Appointments usually contain  obligations relating to insurers with good reputation and based in for instance the UK/EU;
  • exclusions from the policy, such as claims relating to asbestos;
  • an obligation to maintain insurance to cover the period when claims relating to the appointment can be made: this is generally tied in to six or twelve years after practical completion;
  • the consequences of failure to maintain PI insurance: the employer might be able to put insurance in place itself and reclaim the cost from the consultant;
  • evidence that insurance is maintained including renewals: while insurers will generally not provide copies of insurance polices, they usually provide certificates noting the amount and duration of the cover in place. It is important for the employer to ensure that the consultant is obliged to provide evidence that it is maintaining cover as required by the contract.

Different forms of appointment

When drafting an appointment the parties might use different approaches, each one having its advantages and disadvantages:

  • bespoke appointment: this will often be based on a form of appointment which has been prepared by the consultant's employer or their solicitors.  The appointment will then be amended to suit a particular project and/or particular circumstances.  This is the most common approach, particularly on complex projects, as standard form appointments are usually perceived to not be robust enough (please see below).  While they do allow the parties to address any unique issues, they may take longer to complete;
  • standard form (template) appointment: there are many different standard forms of appointment which are recognised in the construction industry.  These seek to provide an "off the shelf" contract for the parties to use, avoiding the need to draft the appointment from scratch and hopefully saving time negotiating the contract.  However, they will usually be drafted to benefit one party more than the other.  Therefore, it is important to remember that it will be necessary to still review the appointment and it is possible that amendments will be needed.  As a result bespoke forms of appointment are more common.
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