Contractor: "Fitness for purpose? We never agree that. We can't get our insurers to cover it."
"Nonsense. It's a standard provision."
"Is not."
"Is."
And so on until the coffee runs out.
So who's right? On the one hand, the contractor is correct that there is no standard clause obliging the whole of the contracted works to be constructed so as to be fit for their purpose. However, the solicitor is referring to a term of the contract, implied by general law, that goods and materials supplied under it will be reasonably fit for the specific purposes for which the client has said it wants them. Yes, as well as all 90 pages of the JCT contract, there are even more contract terms lurking out there in the general law. In this case, they come from the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982.
Last summer, the Court of Appeal had a rare opportunity to tell us exactly how these implied terms operate in the context of construction contracts. The case is called Jewsons Ltd vs Leanne Boykan and it is all about boilers. Tony Bingham looked at this case when it first came to court (25 October 2002). This time the court focused on a slightly different issue and came up with the opposite answer.
Thomas Kelly, a property developer, was converting a building into flats. Jewsons, the builders' merchant, was to provide electrical boilers to replace the communal heating. Kelly met Jewsons and the supplier it had chosen. The supplier said the boilers were just what were needed – more efficient and cheaper than gas boilers and compliant with all relevant legislation. The deal was done and the boilers were installed.
However, the rules required the flats to have a Standard Assessment Procedure energy efficiency rating. With the boilers in, the SAP rating had to be reassessed. It turned out that these boilers had not been checked out by the construction research group BRE. As a result, they had to be given a default score in the SAP assessment. The overall SAP rating of the flats was ruined, making them less attractive to buyers. Kelly then refused to pay for the boilers. Jewsons sued him. Kelly got clever.
Anyone supplying goods and materials needs to be aware of the implied fitness for purpose rule
Under the Sale of Goods Act, the law implied a term into Kelly's contract with Jewsons that where Kelly expressly or implicitly made known to Jewsons any particular purpose for which the boilers were being bought, the boilers had to be reasonably fit for that purpose, even if it was not a purpose for which the boilers are commonly supplied. Jewsons knew the boilers were for flats and should have known the importance of the SAP rating. The implied term of the contract was breached and Jewsons should stand by the consequences, said Kelly.
However, the implied term does not apply if the developer did not rely on the skill or judgment of Jewsons in this specific regard. Disagreeing with the original trial judge, the Court of Appeal decided that in fact Kelly had not relied on Jewsons in relation to the SAP rating and, even if he had, it would have been unreasonable for him to have done so in the circumstances.
It all revolves around who knew what at the time of the contract. Kelly did not tell Jewsons much about the nature of the development and did not raise the issue of SAP ratings. Also, Kelly was being advised by his own engineer and should have relied on him.
Jewsons was not liable but anyone supplying goods and materials needs to beware of this implied fitness for purpose rule.
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