Rights for Third Parties - Scottish Construction Contracts - page 307

Construction (Aberdeen) Limited and others ( 2 009). The challenge was made on the
basis that the net contribution clause fell foul of the Unfair Contract Terms Act 1977,
being,itwasclaimed,unusualandcontroversialinthatitsigniicantlyalteredthecom-
mon law position by placing the risk of insolvency of the contractor or one of the other
consultants onto the employer. As such, so the argument ran, it was for the engineer to
demonstrate that it was fair and reasonable to include the clause in the contract. The
judge did not consider net contribution clauses to be either unusual or controversial.
He further held that the net contribution clause was neither an exclusion nor a restric-
tion of liability for the purposes of the Unfair Contract Terms Act, being designed
instead simply to ensure that the engineers were held liable only for the consequences
of their own breach and not (due to joint and several liability) for the breaches of oth-
ers. In West and another v Ian Finlay & Associates (2013), the architect's appointment
with the homeowners contained a net contribution clause providing that the archi-
tect's 'liability for loss or damage will be limited to the amount that it is reasonable for
[the architect] to pay in relation to the contractual responsibilities of other consul-
tants, contractors and specialists appointed by [the homeowners]'. The architects had
design responsibilities for the main contractor's work. The court at first instance held
that, notwithstanding the net contribution clause, the architect had liability for loss
anddamagecausedbythemaincontractor(whichhadgoneintoliquidation).herea-
soning was based on the particular circumstances of the case, where the homeowners
had employed a number of contractors themselves in addition to the main contractor,
and which were outside of the arrangement with the architect. The court considered
that these contractors could be distinguished from the main contractor, and it was
only the former who were 'other' contractors for the purposes of the net contribu-
tion clause. Although overturned on appeal, the lesson is that a properly drafted net
contribution clause should specifically name the 'other' parties.
13.3.5 Equivalent rights of defence
The [Contractor/Sub-Contractor] shall be entitled in any action or proceedings by
the Beneficiary to rely on any limitation in the [Building Contract/Sub-Contract]
and to raise the equivalent rights in defence of liability as it would have against
the [Employer/Contractor] under the [Building Contract/Sub-Contract], had the
Beneficiary been named as [Employer/Contractor] under the [Building Contract/
Sub-Contract].
The intention of this clause is to ensure that liability under the collateral warranty
is co-extensive with that under the primary contract. For example, the contractor or
sub-contractor would be able to raise in defence of liability any rights of retention,
set-off or counterclaim that it has against the employer under the building contract
(see also Section 13.3.10). However, in the drafting of this type of clause (which may
bewordedinanumberofdiferentways)caremustbetakentoensurethatitdoesnot
confer a 'no loss' right of defence on the grantor. The limits to this clause were also
recentlyillustratedinthecaseof OakappleHomes(Glossop)LimitedvDTR(2009)Lim-
ited (In Liquidation) and others (2013). In that case, the beneficiary under a collateral