Civil Engineering Reference
In-Depth Information
Most terms of appointment of construction professionals contain what is known as a 'net
contribution clause'. A typical net contribution clause is as follows:
TheliabilityoftheArchitectshallnotexceedsuchsumasitisjustandequitableforthe
ArchitecttopayhavingregardtotheextentoftheArchitect'sresponsibilityfortheloss
and/or damage in question and on the assumptions that all consultants and contractors
providing work or services for the Project have provided to the Client contractual un-
dertakingsontermsnolessonerousthanthoseoftheArchitect underthisAppointment
and that there are no exclusions of or limitations of liability nor joint insurance or co-
insurance provisions between the Client and any other person referred to in this clause
and that all the persons referred to in this clause have paid to the Client such sums as
it would be just and equitable for them to pay having regard to the extent of their re-
sponsibility for that loss and/or damage.
The purpose of the clause is to make sure that the architect, or other professional who is
sued by a client, pays no more than the amount of damages for which the architect is actu-
ally responsible. In the absence of such a clause, a consultant could be found to be liable to
paythewholeofaclaimfordamageseventhoughotherconsultantswerepartlyresponsible.
Thusaconsultantmighthavetopay100percentofaclaimforwhichtheywereonly30per
cent responsible. That is because such claims are made on the basis of joint and severable
liability, and a client is free to choose which of the consultants to pursue for damages. The
difficultyforaconsultantpursuedinthiswayisthatheorshehastotakelegalactionagainst
the other consultants in order to recover the part of the damages for which they are liable. A
danger is that one or more of the other consultants may become insolvent and unable to pay.
These clauses are usually resisted by clients on the basis that it is unfair that a client should
be obliged to take legal action against several consultants and possibly the contractor when
there is a defect.
Net contribution clauses have been challenged in the courts on wording as being unfair
under the Unfair Terms in Consumer Contracts Regulations 1999 and unreasonable under
theUnfairContractTermsAct1977,buttheyhavebeensupportedbytheCourtofAppeal.
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The reference to co-insurance provisions was added to net contribution clauses following
another case in the House of Lords.
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