In a standard fitness for purpose warranty, the
"purpose" will be limited to that which is
"likely to be encountered" on the site.
If a principal wants the fitness for purpose warranty to
extend to conditions which it's highly unlikely it will
encounter, the contract must expressly provide for it.
Justice Hargrave's decision in Barton v Stiff
 VSC 307 stands as a reminder that the absolute warranty
for fitness for purpose has limitations - it only relates to
the "purpose" as properly identified. Without a
clause expressly providing that the contractor is to bear all
risk of failure of materials due to adverse site conditions, a
claim by the owner for breach of the fitness for purpose
warranty may be defeated.
Barton v Stiff involved the construction of a house
at Wodonga in 2000. Clause 11 of the contract contained express
terms which were identical to the statutory fitness for purpose
warranties contained in section 8 of the Domestic Building
Contracts Act 1995 (Vic) and provided:
"11.2 - The Builder warrants that all
materials to be supplied by the Builder for use in the work
will be good and suitable for the purpose for which they are
used and that, unless otherwise stated in the Contract, those
materials will be new.
11.5 - The Builder warrants that if the work
consists of the erection or construction of a home, or work
is intended to renovate, alter, extend, improve or repair a
home to a stage suitable
for occupation, the home will be suitable for occupation at
the time the work is completed."
The contract also contained a clause which required the
contractor to give the owners a soil report, however the only
soil report that existed at the time of construction had been
prepared eight years earlier and was given to the contractor by
Disputes arose between the owner and the contractor as to
the quality of the works shortly after construction was
completed in November 2000. The owner was successful in the
Victorian Civil and Administrative Tribunal for a claim that
the bricks used by the contractor in the footings (below the
damp proof course) were not suitable for their intended purpose
as the bricks had been damaged by salty groundwater.
On appeal to the Supreme Court of Victoria, the contractor
did not dispute the presence of an absolute fitness for purpose
warranty but maintained that the intended purpose of the bricks
was to meet the groundwater conditions actually prevailing at
the time of construction or which were likely to be encountered
on the construction site during the expected design life of the
house. As the presence of salty groundwater was found by the
Tribunal member to be "highly unusual" at the
construction site, the contractor argued that the bricks used
were reasonably fit for their intended purpose.
Decision and reasons
Justice Hargrave accepted the contractor's argument. He
applied the reasoning of the English Court of Appeal in
Independent Broadcasting Authority v EMI Electronics
Ltd (1978) 11 BLR 29, which involved a claim against a
contractor who had been responsible for the design and
construction of a television mast in Yorkshire. The mast had
subsequently fallen down due to "vortex shedding"
caused by high winds and the presence of ice on the mast. The
English Court of Appeal, while accepting that there was an
implied fitness for purpose warranty in the contract, said that
this still left unresolved the extent of the contractor's
obligation and concluded that:
"The contractual obligation upon [the contractor] and
[the subcontractor] was to provide a mast which would be
proof against any meteorological conditions likely to be
encountered in that area."
Justice Hargrave applied this reasoning, concluding:
"If [it] is not the case [that the reasoning in
Independent Broadcasting is applicable], it would be
tantamount to finding that the contract provided for the
builders to be insurers of the house. The parties could not
have intended this. I hold that the warranties of fitness for
purpose in this case required the builders to provide
materials, and a completed house, which would be proof
against any groundwater conditions likely to be encountered
at the land."
Justice Hargrave noted that this did not mean the warranty
of fitness for purpose was not absolute, only that the absolute
warranty relates to the purpose as properly identified.
Given that (as Justice Hargrave's reasons make apparent)
the scope of the "purpose" element of any fitness for
purpose warranty is determined by the intention of the parties,
it is clear that it is possible to draft contractual provisions
that avoid the limitations on such a warranty found by Justice
Hargrave in Barton v Stiff by expressly stating that the
contractor is liable for the risk of failure of materials,
regardless of whether unusual conditions are encountered. That
is not to suggest that contractors are likely to accept such
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general guide to the subject matter. Specialist advice should
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