The Association for Consultancy and Engineering has described a recent judgement in the Scottish courts as a significant step in tackling unfair liability on consultants in construction contracts.
Lord Glennie, issuing his decision in the case of Langstane Housing Association Ltd v Riverside Construction (Aberdeen) Ltd and others, gave the green light to include net contribution clauses in duty of care agreements, according to ACE.
Stephen Barklem, legal director at ACE, said: “We welcome Lord Glennie’s decision as it gives judicial force to the net contribution clause in the ACE Agreements. We believe that it also adds further weight to ACE’s ongoing campaign to highlight unfair liability on consultants in construction contracts.
“The case looked at whether the ACE Conditions of Engagement formed part of the contract and if so whether the net contribution clause fell foul of the Unfair Contract Terms Act 1977. (‘UCTA’).
'The standard ACE net contribution clause makes the engineer liable only for the consequences of their own breach of duty and not liable through joint and several liability for breaches by other contractors and consultants.'
The main points of Lord Glennie’s decision are:
• A net contribution clause cannot be categorised as either unusual or onerous;
• There was no need to flag up the net contribution clause to the client;
• The net contribution clause could not be held to exclude or restrict liability and did not fall foul of UCTA;
• The ACE Conditions are an industry standard published by ACE and are not the engineer’s own standard terms. They therefore fall out with UCTA;
• The clause would pass a fair and reasonable test;
• It is up to the client to take the risk that he has adequately covered himself against the possible insolvency of those he has appointed;
• It is up to the client to ascertain that proper insurance is in place;
• The most up-to-date version of the ACE Conditions will be held to apply unless parties intended otherwise;
• The whole terms and conditions apply unless particular conditions are excluded;
• Clauses can be rendered ineffective if blanks are left in the Memorandum of Agreement;
• The guidance is simply guidance and cannot replace the intention of the parties in completing the terms.