Supreme Court ruling will have wide ramifications for contract agreements

News Article

The Supreme Court has ruled in favour of an appeal by Eon Climate & Renewables UK in a long running dispute which involves the failure of foundations on the Robin Rigg offshore windfarm.

E.ON appointed Denmark-based MT Højgaard A/S (“MTH”) to design, build and install two offshore wind farms.

E.ON’s fitness for purpose standard stipulated that the foundations of the two offshore wind farms should last for 20 years without requiring replacement. Despite this, it was found that the foundations needed repair shortly after construction.

Problems arose because the contract contained conflicting information, regarding the fitness for purpose standards required.

In August, the Supreme Court held that where two fitness for purpose standards coexisted the ‘more rigorous or demanding of the two standards or requirements must prevail’.

The Court also stated that a minimum standard was just that – a minimum. MTH was therefore under a duty to improve upon the design to ensure adherence to the fitness for purpose standards.

As a result of the Supreme Court ruling, the original court decision stands and MTH has been found to have breached its fitness for purpose obligations under the contract and is liable for the costs of the remedial works to the wind farms.

Adam Davis, a partner with Palmers, who specialises in construction and engineering law, said: “This is a hugely significant decision, which will undoubtedly have ramifications for the entire construction industry.

“In court, Lord Neuberger pointed out that it was up to the contractor to identify areas where the works needed to be designed more carefully, stating: ‘Generally speaking, 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’.

“The Supreme Court’s judgment – that MTH was responsible, primarily because the contract provided that it needed to ensure the life of the foundations for 20 years – illustrates the need for contractors to pay very careful attention to the wording of contractual agreements.”

For help and advice on construction contracts whether standard form contracts or bespoke and construction and engineering disputes, please contact Adam Davis or a member of the construction and engineering law team at Palmers.