Peter Stockill, Berrymans Lace Mawer
If you agree to arrange for a contract to be put in place between two other parties, are you liable if, in spite of your efforts, one party does not sign it? This case offers guidance.
Michael Wight appointed Sweett as quantity surveyor and employer’s agent. Sweett’s appointment required it to “prepare contract documentation and arrange for such documents to be executed by the parties thereto”, the relevant parties being Michael Wight and the main contractor.
The contractor went into liquidation without executing a performance bond and Michael Wight alleged that:
1. Sweett’s obligation was a strict one so it was automatically liable; alternatively
2. Sweett had failed to exercise reasonable skill and care in arranging for the bond to be executed.
The judge found that the obligation was not a strict one and after much argument, that Sweet had complied with its duty of care through a string of emails, telephone calls, meetings and advice to Michael Wight on the risk of carrying on without having the bond in place.
Peter Stockill’s analysis
While this case concerns a performance bond, the principles apply equally to other contracts, such as collateral warranties, although the position may be different where you agree to provide a collateral warranty from your own subcontractor.
The judge’s decision is consistent with previous authority that special circumstances or clear language are normally required to impose a strict obligation on a construction professional. However, the fact that this case went to trial shows that, unless it is clear that a strict obligation is not intended, there may be scope for argument. You would be wise to ensure that your duty to provide your services and where appropriate, other specific obligations in your appointment, are stated to be skill and care obligations.
The finding that Sweett had discharged its duty of care provides some comfort, but caution is needed. In not dissimilar circumstances, the outcome could be different. There was much debate over whether Sweett was negligent for not advising Michael Wight to withhold payment pending execution of the bond. This argument failed for several reasons: work was progressing well on site; Michael Wight was already underpaying the contractor because of funding problems and, it was argued, further withholding would have caused difficulties and possibly hastened the contractor’s demise; Michael Wight was kept appraised of the circumstances and risks and the contractor had offered assurances that the bond would be forthcoming. In another case, it might be held that such advice should have been given.
In my view, this case raises the following questions for those faced with a party who is dragging their feet over executing a document:
Peter Stockill MSc FCIArb is an associate in the construction team at law firm Berrymans Lace Mawer email: email@example.com