Civil Engineering Reference
In-Depth Information
The straight answer is that it all depends on circumstances, but the architect may be liable
if the advice to use a letter of intent results in additional costs for the employer. In
Trust-
arose out of a contract between the Trust and Kier (the contractors). Turner and Townsend
(TT) were the project managers. It was intended that the contract would be a JCT Design
andBuildContract. Intheevent,theproject wascompleted muchlater thanexpected. There
was a formal mediation between the Trust and Kier which resulted in an agreement that the
Trust would get no liquidated damages and Kier would get no additional payment.
The project had been carried out under a series of letters of intent. No building contract
had been executed, and therefore there were no liquidated damages applicable. The Trust
broughtanactionagainstTTforprofessionalnegligence,allegingthattheyshouldhavepro-
cured the execution of a contract. If they had done so, Kier would have been liable for li-
quidated damages.
Althoughitwasthelowesttenderer,Kier'stenderwashigherthantheTrust'sbudget,and
lengthy discussions were held in order to reduce the contract sum. It soon became clear that
the discussions would overrun the expected pre-Christmas start date, and a letter of intent
wasissuedforworkuptoastipulatedsum.Nofewerthansevenfurtherlettersofintentwere
issued.Itwasonlyatthemediationaftertheprojectwascompletethatacontractwasfinally
signed on agreed terms which excluded the right to liquidated damages. The trust sued TT
for negligence.
TT denied liability but also said that its liability was limited under a clause stating, 'in no
event shall our liability exceed the fees paid to us or £1 million whichever is the less'. The
trust argued that it never signed TT's terms of appointment and the clause did not apply.
The court examined several issues of general interest to architects, and its conclusions
were as follows:
•
Among TT's duties as project manager was facilitating the procurement of a building
contract. TT had no absolute duty to procure the contract, and in the circumstances of
thesituationitwasnotwrongtostartworkunderaletterofintent.However,TTshould
have advised the Trust of the dangers of a letter of intent compared to an executed con-
tract. This was particularly marked with regard to liquidated damages.
TT should have advised the Trust to take firm action to obtain the execution by Kier of
the contract. This should have been done, at latest, at the time of the fourth letter of in-
tent.
It was negligent of TT to believe that the letters of intent gave rise to an entitlement to
liquidated damages.
•
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