Commercial building and engineering projects are delivered by a team comprising building and design consultants, main and sub-contractors. When something goes wrong more than one of the team can be responsible for losses which arise.
English law provides that where more than one party is found to be in breach of their contract or in negligence and this has caused a loss, they will be responsible jointly for all of the loss suffered by the wronged party.
This means that the building owner/employer can pursue whichever of the responsible parties he chooses to recover his loss (even where they are not to blame to the same extent, provided they all cause the loss). The onus is then on the wrongdoer to claim a contribution (under the Civil Liability (Contribution) Act 1978) from those who are also responsible for the loss.
This means that a joint wrongdoer has to pursue a claim against those who are also responsible (in court proceedings this might be in the same action commenced by the building owner/employer, but this may not be permitted in arbitration or adjudication claims). It also means that the wrongdoer against whom the building owner/employer has pursued the claim will be saddled with the whole loss if those jointly responsible become insolvent.
To avoid a risk of the insolvency of other team members, consultants in particular often include in their appointments (or collateral warranties) what is known as a “net contribution clause”. Typical drafting of a simple net contribution clause limits the liability of the consultant (or contractor) to a just and equitable proportion of the employer’s loss.
The just and equitable proportion is assessed on the basis that:
- All team members have also entered into contract/appointment in favour of the employer;
- The other contract/appointment include similar terms as to the standard of care to be taken in the works/services;
- All team members have paid the employer the proportion of his loss that it would be just and equitable to require them to pay, given the extent of their responsibility for that loss.
If you need assistance in drafting or reviewing a net contribution clause, please contact a team of Nelsons’ Construction team on 0800 024 1976 or contact us via the online form.