Product Insurance

Technological developments make reliance on design advice from manufacturers, suppliers and specialist contractors increasingly necessary.  Employers all too readily look to the insurance policies of the traditional design consultants.  It would be advisable for these consultants, where they rely on specialist advice obtained from others, to advise on the need for each party to hold suitable insurance cover.

Suppliers are more likely to have insurance against the risk of their products being found not to be fit for purpose than for design.  Thus, where a supplier is brought into the design process, it would be advisable to check that suitable insurance is in place. 

A difficulty with a supplier and their insurers has recently arisen because of the supplier’s contribution to the design of a building. 

The product they supplied was not fit for its purpose because it was wrongly selected, not because it was badly made or due to faults in the materials used.  The supplier had been involved in the design development and, through the advice they gave, had directly caused the error in selection of the component they supplied.  Their insurance did not provide indemnity for errors in the design of the buildings which used their products but would indemnify them for errors in the design of the products themselves.  The sum in dispute is large and the supplier is resisting the claim because his insurance is inappropriate.  Had the nature of their insurance been looked into earlier, appropriate insurance cover could have been obtained.

Civil Liability (Contribution) Act 1978

The Civil Liability (Contribution) Act provides, subject to certain other provisions, ‘any person liable in respect of any damage suffered by another person may recover contribution from another person liable in respect of the same damage.’ [1]  
Subject to the exact meaning of ‘the same damage’ this gives a wide scope for actions for damages being brought against architects, engineers and the like by people they have not even met – let alone contracted with.

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[1] The Civil Liability (Contribution) Act 1978, s.1 (1).

Law Reform (Contributory Negligence) Act 1945

The architect’s, engineer’s, builder’s etc. liability to the employer for negligence may be reduced to the extent that the employer has also been negligent and, in so doing, has contributed to the damage suffered.  This arises under the Law Reform (Contributory Negligence) Act 1945.

Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage [1]

It is well established that this applies to claims in tort.  It may apply to a breach of a general duty of care under a contract, which duty is the same as would exist in common law, but it most probably is not applicable to a claim in respect of a breach of a strict contractual duty: ‘Provided that this subsection shall not operate to defeat any defence arising under a contract’.[2]

It does not alter the effect on any claim of the Statute of Limitations:

Provided that where any contract or enactment providing for the limitation of liability is applicable to the claim, the amount of damages recoverable by the claimant by virtue of this subsection shall not exceed the maximum limit so applicable.[3]

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[1] 130 Law Reform (Contributory Negligence) Act 1945 (8 & 9 Geo. 6 c. 28) s. 1 (1).

[2] Law Reform (Contributory Negligence) Act, 1945 1945 (8 & 9 Geo. 6.) c 28 s.1 (1) (a).

[3] Law Reform (Contributory Negligence) Act, 1945 1945 (8 & 9 Geo. 6.) c 28 s.1 (1) (b).

Privity of Contract

A well-established principle of contract law is that only the parties to the contract can make claims against it. 

Dunlop sold tyres to Dew & Co., with a term in the agreement that Dew would not sell more cheaply to anyone else, and that Dew would not enter into a contract with anyone else except on the same terms.  Dew sold tyres to Selfridge at the stipulated terms, but Selfridge sold them more cheaply.  Dunlop brought an action against Selfridge, which failed on the basis that Dunlop had no contract with Selfridge, and was not a party to the contract which had allegedly been breached.

Presumably Dunlop could have taken an action against Dew, who in turn could have taken action against Selfridge.[1]

Clearly, it is fair that people should not incur obligations in respect of contracts to which they are not party and which offer them no benefits.  However the principle of ‘privity’ does mean that it is difficult to enter a contract that benefits a third party without taking out a separate contract with the third party. 

Woodar contracted to sell some land to Wimpey for £850,000 on the understanding that £150,000 would be paid to a third party on completion.  Wimpey backed out of the deal without paying any money, leaving Woodar to make a claim under the contract.  This they could not do, because Wimpey pointed out that Woodar would have no claim on the £150,000 (privity), and the beneficiary of this money would have no claim as there was no contract in place to support it.[2]

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[1] Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847.

[2] Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277, [1980] 1 All ER 571.

Roof Slates Melting in the Sun

A manufacturer produced an imitation Welsh roofing slate using slate particles bonded together with resin.  The manufacturer had the product independently tested by a reputable independent body and published the results.  The tests showed his man-made slate to be a serviceable product.

In time failures became apparent.  Initial inspection of one poorly performing roof showed many slates to have concave curves, and the tiling to be loose.  It was decided to re-roof with the same materials, which the slate manufacturer agreed to provide free of charge. 

The remedial work commenced in early summer. 

An Adjudicator Takes Advice Which He Does Not Follow

An adjudicator telephoned an expert to ask about the correct method of constructing a sand-and-cement floor screed.  The case the adjudicator was considering involved the incorrect placement of a reinforcing mesh in a screed. 

The expert described to him the alternatives which would have ensured correct construction.  The expert gathered from his conversation with the adjudicator that the mesh was generally laid below the screed but was in some places poking out from it.  No other fault was reported.

An Arbitrator Takes Advice

Ordinarily a tribunal – whether judicial, arbitral or adjudicatory – may obtain technical advice at need through the appointment of experts.  In this way, the tribunal need not contain members who are personally familiar with all aspects of the type of construction which is in dispute.  Expert witnesses may assist the tribunal properly to understand the technical matters they are asked to decide.  Expert witnesses are distinct from witnesses of fact in that they are allowed to provide evidence of opinion. This may involve interpretation and reliance on hearsay.

Arbitrators and adjudicators have taken expert advice outside the formal boundaries of the tribunal over which they preside. This happened quite recently where an arbitrator, outside the hearing, telephoned an expert for technical advice.