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Workshop 13 Design - Build

Workshop 13 Design - Build. Onerous Terms in D&C Agreements in Australasia. Tony Barry, President Association of Consulting Engineers Australia. Onerous Terms. High standard of care Responsibility for client supplied information Absolute Fitness for Purpose warranties Strict compliance

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Workshop 13 Design - Build

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  1. Workshop 13 Design - Build Onerous Terms in D&C Agreements in Australasia Tony Barry, President Association of Consulting Engineers Australia

  2. Onerous Terms • High standard of care • Responsibility for client supplied information • Absolute Fitness for Purpose warranties • Strict compliance • Open ended Indemnities • Duty of Care to multiple parties • Liability for delays outside control • Disclosing terms of PI Policy

  3. Standard of Care • High standards of care should only apply to expert commissions • Highest – well there is only one and you aren’t it • Must be sustainable

  4. Client Supplied Information • Client takes responsibility • Client requires consultant to check/verify before use • Client denies liability for it • Client seeks warranty consultant does not rely on it • Client requires consultant to take responsibility for it

  5. Fitness for Purpose • Reasonably suitable for specified purpose given assumptions engineer might reasonably make • Suitable for purpose specified • Suitable for purpose by reference to third party documents eg leases • Absolute fitness for purpose warranty – guaranteeing performance outcome

  6. Strict Compliance • Professional duty and judgement • Explicit and detailed requirements – process for reasonable departure • Multiple specified outcomes and methods – with highest standard applying • Strict compliance contracts – declare non-conformances • Strict compliance • Multi-party, multi contract compliance

  7. Indemnities • None – common law professional duty, common law exposure • Fault based indemnity, common law exposure • Fault based indemnity, all losses • Open indemnity with “Astley” reduction for client’s negligence • Open indemnity (“arising out of or in connection with the provision of the services”)

  8. Duties to Multiple Parties • Common law duty to public and third parties • Contractual duty to client • Implied duty to others in delivery process • Deeds of covenant creating obligations to say client’s Principal, Financier, Government – what are their requirements – can you meet them? • Duties are independent

  9. Time and Delays • No common law right to an extension of time • Many contracts enable client to independently determine EoT entitlement without giving the consultant an express entitlement • Obligation for client to act reasonably is helpful but not safe • Must be explicit entitlement in the contract, otherwise can be held liable • If no entitlement, get no liability clause for delays beyond reasonable control

  10. PI Policy Terms • May not be specifically dealt with in policy • May be regarded as prejudicing rights of subrogation of insurer by allowing client to target claims • Increasing trend to disclose by those with captives – dangerous • Captives may act independently as may upper layers or re-insurers • May have obligation to disclose exclusions relevant to services provided – get advice

  11. The Solution • Don’t accept unreasonable terms – walk away • Negotiate a good contract to maintain a good relationship and a good business • Use Limits of Liability above which Clients carry the risk • Adopt commercially sustainable PI Insurance levels and guidelines

  12. Limits of Liability - the Firms’ Perspective • reduces the impact of unreasonable indemnities • dissuades clients from taking legal action where the prospect of recovery is small (often less than the legal costs involved in mounting and succeeding in a claim) • assists in maintaining the firm as an attractive risk to insurers • protects the livelihood of thousands employees • protects the owners interests in the firm • assists to maintain the professions as an attractive career

  13. Limits of Liability - the Clients’ Perspective • reflects a realistic allocation of risk between the Consultant and the Client • forces the Client to properly consider managing (and insuring) the risk which it in reality retains • protects the Client from the impact of adverse outcome of proceedings against the Consultant which might be taken out by another client

  14. Limits of Liability - the Clients’ Perspective • maintains PI insurance as being available to Consultants generally • keeps the cost of providing consulting services reasonable • assists to maintain professional services for the community • equitable basis for tendering – all required to offer same capacity • avoid unsustainable risk culture

  15. Tony Barry Connell Wagner Pty Ltd on behalf of Level 12, 75 Miller Street | North Sydney NSW 2059(02) 99224711 | www.acea.com.au | acea@acea.com.au

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