application of the tort of negligence

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In this section of the essay we will examine the application of the tort of negligence to the employer-contractor relationship in the construction law context. This one area of the law of tort has been selected as it is often referred to within the JCT 05 Standard Building Contract with Quantities. For example clause 8.11.2 states: “The Contractor shall not be entitled to give notice under clause 8·11·1 in respect of the matter referred to in clause 8·11·1·3 where the loss or damage to the Works occasioned by a Specified Peril was caused by the negligence or default of the Contractor or of any of the Contractor's Persons.”

The tort of negligence in the construction context:

For the purposes of this short presentation, we will assume that the reader is familiar with basic proof elements of the tort of negligence, such as duty of care, breach of duty and damages/causation. This assumption will allow us to concentrate on those aspects of the tort of negligence which are of particular relevance to the construction context, such as the types of loss which are recoverable via the tort of negligence and the interrelationship between the tort of negligence and the principles of contract law which apply to the enforcement of the JCT 05 Standard Building Contract suite.

Recovery of pure economic loss:

A major type of loss, which is often suffered by employers within the construction context, is loss of profits or increased expenditure from delay in commencement or carrying out of construction Works.

This type of loss does not flow from physical damage and as such falls within the category of what is called ‘pure economic loss'. Historically, this kind of loss was generally not recoverable in the tort of negligence. However, in the case of Hedley Byrne v. Heller & Partners Ltd. [1963] 2 All E.R. 575 it was held that where a party negligently makes a false statement upon which the other party reasonably relies, then the author of the statement can be liable for pure economic loss resulting from that misstatement. It now appears that this same principle has been extended into the construction law context; this was confirmed, albeit to a limited degree, in the cases of D & F Estates Ltd v. Church Commissioners for England & Ors [1989] AC 177 and Murphy v Brentwood District Council [1990] 2 All ER 908.

It should be noted that the Courts have held that a contractual term stating that Works will be completed with reasonable care and skill cannot be construed as implying a warranty that the completed Works will be reasonably fit for purpose. However, where a contractor makes an extra-contractual statement that the works will be so fit, then it is likely that pure economic loss can be recovered in reliance of the principle set out in the Hedley Byre case.

It is for this reason that a claimant may choose to rely upon the tort of negligence to mount a claim rather than relying upon the law pertaining to breach of contract. We will examine the interrelationship between tort and contract law towards the end of this presentation.

Recovery of damages for personal injury or property damage caused by defective
building work: Is there a duty of care and who can be sued?

Where defective building work has caused either personal injury or damage to other property, the case law indicates that a duty of care will be assumed9. However, it seems that this duty will only be inferred between the employer and his contractormaking it impossible to sue a sub-contractor directly, even where this would be preferable, e.g. where the contractor has become insolvent and is therefore unable to produce a sufficient quantum of damages. This principle of privity of tort actions was confirmed in the case of Architype Projects Ltd v Dewhurst Macfarlane & Partners [2004] 96 Con LR 3.

The interrelationship between the tort of negligence and the principles of contract law
which apply to the enforcement of the JCT 05 Standard Building Contract suite:

Where the claimant has the option to sue the defendant either in the tort of negligence or for breach of contract, it has now been settled at law that the claimant does not have to choose a single course of action, but rather, can pursue the defendant for both breaches simultaneously. This was settled at law in the case of Henderson v. Merrett Syndicates Ltd. [1995] 2 AC 145.

We have already see one reason why a defendant may prefer to pursue a claim in the tort of negligence; namely, where a representation was made about fitness for purpose which transpired to be false. However, generally, claimants will prefer to rely on a claim for breach of contract because damages for breach of contract are not limited by the ‘reasonable foreseeability' requirement in tort.

Another major difference between claims brought in contract law and those brought in tort is that the Law Reform (Contributory Negligence) Act 1945 does not apply to actions brought for breach of contract.

This has two implications where the breaching even was caused, to some extent, by actions of both the claimant and the defendant: First, a claimant may prefer to bring an action in tort because as long as he can show breach, he will be entitled to reduced damages, even though he was himself somewhat responsible for the loss; and, Second, a claimant may prefer to bring an action for breach of contract because, if he can establish breach and also satisfy the causation test, then the defendant will be liable for all the damages suffered, even though the claimant was partially responsible.