Contractor not liable for failings due to the wording of the ‘warranty’
A contractor was not liable for the failure of some of its work despite apparently giving a 20-year “warranty”.
That was the decision of the Court of Appeal in a case involving a multi-million pound project.
The contractor, MT Hojgaard, had been hired by the power company, E.ON, to build the foundations for a set of wind turbines providing renewable energy. It installed the foundations in 2007 in accordance with E.ON’s requirements and the specifications laid down by the certifying authority.
In 2010, the foundations began to fail and remedial work was required at a cost of £26.25m. Legal action ensued and the judge held that Hojgaard was liable for breach of contract on the basis that the design was not fit for purpose and did not meet the requirement of a service life of at least 20 years as specified in the contractual documents.
However, the Court of Appeal overturned that decision. The Appeal Court judges ruled that although at first sight the contract required that the foundations would function for 20 years, that requirement was inconsistent with other references in the specifications.
These other references mentioned a “design life of 20 years”. The court held that a design life of 20 years did not mean that something would inevitably function for 20 years, only that it probably would.
Weather conditions at sea and the forces imposed upon offshore structures could not be predicted with certainty and so the authors of the certifying authority’s specifications had prescribed what needed to be done in order to create a structure that had a sufficiently high probability of functioning for 20 years.
The contract between Hojgaard and E.ON did not contain any free standing warranty or guarantee that said the foundations would definitely function for 20 years and so the contractor was therefore not liable for damages.
Please contact Sarah Liddiard if you would like more information about the issues raised in this article or any aspect of contract law.