United States: Gone With The Wind: Little Sympathy For Contractors On Design Obligations


Energy, engineering and construction disputes often give rise to the issue of what design standard a design and build contractor should be held to. The issue is particularly marked where a contract provides that the contactor must design and build in accordance with a prescribed standard but also that the product must be fit for its intended purpose. What happens when the contractor meets the standard but, through no fault of its own, the product remains unfit for its purpose?

The Supreme Court took the opportunity to address this question in the recent case of MT Høgaard A/S v ON Climate and Renewables UK Robin Rigg East Ltd [2017] UKSC 59. The decision provides some important practical lessons for parties negotiating and drafting design and build contracts.


In Højgaard, the appellants ("E.ON", as employer) had engaged the respondent ("MTH", as contractor) to design and install the foundation structures of two offshore wind farms in the Solway Firth. The parties' bespoke contract contained a variety of provisions relating to the standard to which the foundations were to be designed and built by MTH. In the main contract, clause 8.2 provided:

"The Contractor shall, in accordance with this Agreement, design, manufacture, test, deliver and install and complete the Works:

(i) with due care and diligence expected of appropriately qualified and experienced designers, engineers and constructors ...

(x) so that each item of Plant and the Works as a whole shall be fit for its purpose as determined in accordance with the Specification using Good Industry Practice ...

(xv) so that the design of the Works and the Works when completed by the Contractor shall be wholly in accordance with this Agreement and shall satisfy any performance specifications or requirements of the Employer as set out in this Agreement ..."

The employer's requirements included detailed technical requirements. Paragraph 1.6 of the technical requirements provided:

"The Works element shall be designed for a minimum site specific 'design life' of twenty (20) years without major retrofits or refurbishments ..."

Paragraph 3.1 of the technical requirements included the wording:

"(i) ... the requirements contained in this section ... are the MINIMUM requirements of [E.ON] to be taken into account in the design.

(ii) It shall be the responsibility of [MTH] to identify any areas where the works need to be designed to any additional or more rigorous requirements or parameters."

Paragraph 3.2 of the technical requirements dealt with design and required the contractor to prepare its detailed design in accordance with international standard DNV-OS-J101 ("J101") for the design of offshore wind turbines. Paragraph went on to state that:

"The design of the foundations shall ensure a lifetime of 20 years in every aspect without planned replacement ..."

Unknown to either party, however, the international standard J101 contained a critical flaw. Section 9 of J101 dealt with the design and construction of grouted connections, which connect the bottom of the turbine tower to the top of the monopile. It contained a number of parametric equations, one of which calculated the fatigue strength of the grouted connection and their susceptibility to stress fractures. A constant in that equation was incorrect by a factor of 10. The effect was that using the equation as stated would significantly overestimate the grouted connection's ability to withstand the constant stresses placed on it by the wind and sea.

MTH duly proceeded with the works and developed a detailed design for the grouted connections based on J101. Pursuant to the contract they appointed Det Norske Veritas ("DNV"), the authors of J101, as the Certifying Authority. Rubber-stamping their own standard, DNV evaluated and approved MTH's designs.

MTH commenced the installation of foundations in the Solway Firth in December 2007 and completed the work in February 2009. Later that year a serious problem came to light in a different wind farm, Egmond aan Zee, where J101 had also been used in the design. The grouted connections had started to fail. The transition pieces, steel cylinders connecting the foundations to the towers, began to slip down the monopiles.

DNV carried out an internal review in September 2009. They discovered the error in section 9 of J101. DNV immediately sent a letter to MTH and others in the industry alerting them to the situation. Of course this alert was already too late for MTH. It was only a matter of time before the grouted connections at Robin Rigg began to fail.

This is exactly what happened from April 2010. The transition pieces began to slip down the monopiles. If this were not halted the towers would buckle and collapse into the sea. The parties agreed a scheme of remedial works in the sum of €26.5 million and started proceedings in court to determine which of them should pick up the tab. ON argued that MTH was in breach of its overriding fitness for purpose obligations, while MTH argued that it had exercised reasonable skill and care and that any fitness for purpose obligation was qualified by its duty to comply with J101.

In the High Court, Edwards-Stuart J held in favour of E.ON and found that MTH was liable for the cost of the remedial works. He held that the relevant contractual obligations were not mutually inconsistent, but rather additional to one another, and that MTH had breached a warranty that the foundations would have a service life of 20 years.

MTH appealed to the Court of Appeal, which reversed the decision. In his lead judgment, Jackson LJ's starting point was that all of the provisions in the technical requirements, with the exception of paragraph, were compatible with the proposition that the entirety of the contractor's obligation was to construct the works with reasonable skill and care while adhering to the relevant contractual standards and specifications.

By contrast, paragraph suggested that the contractor was required to produce wind turbines with a guaranteed operational life of 20 years. Jackson LJ held that this was inconsistent with J101 and the remainder of the technical requirements and was "too slender a thread" on which to impose what was in effect a 20 year warranty on MTH.

In support of that approach, Jackson LJ appears to have relied heavily upon Re Sigma Finance, where Lord Collins held that an "over-literal interpretation of one provision without regard to the whole may distort or frustrate the commercial purpose." He also relied on the qualification to the fitness for purpose obligation in the contract, namely that the Works were to be fit for purpose "as determined in accordance with the Specification using Good Industry Practice." He held that MTH had met that standard and E.ON were liable to pay for the remedial works.

Decision of the Supreme Court

The case reached the Supreme Court, which unanimously reversed the decision of the Court of Appeal. Lord Neuberger gave the lead judgment along orthodox lines. His starting point was to clarify the meaning of paragraph It was not, as suggested by the lower courts, a warranty that the foundations would have a lifetime of 20 years.

Instead, it was a warranty that the design of the foundations was such that they would have a lifetime of 20 years. J101 itself required that the annual probability of failure should be in the range of one in 10,000 to one in 100,000. An absolute 20 year guarantee would be unrealistic and uncommercial. On an objective reading of the contract that was not what the parties intended.

In accordance with well-established principles of contractual interpretation, Lord Neuberger held that this natural and ordinary meaning of paragraph should be given effect to unless there was a good reason to depart from it. The foundations had not been designed to have a lifetime of 20 years and so MTH were prima facie in breach of contract.

In his view MTH had two arguments available to it as to why that paragraph should not be given its natural meaning. First, that such an interpretation results in an obligation which was inconsistent with MTH's obligation to construct the Works in accordance with J101. Second, that para is "too slender a thread" on which to hang such an important and potentially onerous obligation.

Inconsistent obligations

Lord Neuberger considered a number of cases in which there was an obligation both to provide a product in accordance with a specified design and to ensure that the product satisfies specified performance criteria, in circumstances where those criteria cannot be achieved by complying with the design. There was no better summary of the law than the dictum of Lord Wright in Cammell Laird and Co Ltd v The Manganese Bronze and Brass Co Ltd [1934] AC 402, where he said:

"It has been laid down that where a manufacturer or builder undertakes to produce a finished result according to a design or plan, he may be still bound by his bargain even though he can show an unanticipated difficulty or even impossibility in achieving the result desired with the plans or specification."

Lord Neuberger emphasised that the parties' obligations would be determined in accordance with orthodox principles of contractual interpretation. He did, however, give a general reformulation of the law:

"Where a contract contains terms which require an item (i) which is to be produced in accordance with a prescribed design, and (ii) which, when provided, will comply with prescribed criteria, and literal conformity with the prescribed design will inevitably result in the product falling short of one or more of the prescribed criteria, it by no means follows that the two terms are mutually inconsistent. ... In many contracts, the proper analysis may well be that the contractor has to improve on any aspects of the prescribed design which would otherwise lead to the product falling short of the prescribed criteria, and in other contracts, the correct view could be that the requirements of the prescribed criteria only apply to aspects of the design which are not prescribed."

He went on to say that the courts are generally inclined to give full effect to the requirement that the item as produced complies with the prescribed criteria, on the basis that, even if the customer or employer has specified or approved the design, it is the contractor who can be expected to take the risk if he agreed to work to a design which would render the item incapable of meeting the criteria to which he has agreed.

Applying this to the facts of Højgaard, Lord Neuberger found that there was an insurmountable difficulty with the argument that paragraph was inconsistent with the remainder of the contract. Paragraph 3.1(i) of the technical requirements provided that the requirements, including those in J101, were the minimum requirements to be taken into account in the design. Further, the effect of paragraph 3.1(ii) was to place the burden of identifying any discrepancies in the technical requirements and improve on the design accordingly. The obligations were not inconsistent but overlapping, and in those circumstances it was appropriate to hold the contractor to the higher standard, a 20 year design life.

Too slender a thread

MTH relied on a number of factors to support Jackson LJ's argument in the Court of Appeal that paragraph was too slender a thread on which to hang a 20 year warranty (or, more accurately, a 20 year design life requirement).

They pointed to the fact that the contract was badly drafted, with various ambiguities and inconsistencies throughout. Lord Neuberger queried the relevance of this, reminding MTH that "inelegant and clumsy" drafting of a badly drafted contract is not a reason to depart from the fundamental rules of construction of contractual documents.

MTH argued that it was surprising that such an onerous obligation would be "tucked away" in a technical document rather than spelled out in the main body of the contract. This was a point that had impressed the Court of Appeal but it was dismissed by the Supreme Court. The only question was whether the provisions in the technical requirements were intended to be of contractual effect. It was clear that they were.

Finally, MTH suggested that because a complete set of obligations with regard to design were expressly included, or impliedly incorporated, in clause 8.1 of the contract, it was unlikely that an additional further and onerous obligation was intended to have been included in the technical requirements.

Lord Neuberger's incisive response was that while it is possible to avoid giving a redundant clause its natural meaning, especially in a diffuse and multi-authored contract, it is very different, and much more difficult, to argue that a contractual provision should not be given its natural meaning, and should instead be given no meaning or a meaning which renders it redundant.

This led the Supreme Court to find that MTH had not designed the structure to last for 20 years and were therefore liable to pay for the costs of remedying that defect.

Practical Lessons

The Supreme Court decided the case on orthodox principles of contractual interpretation. The Court of Appeal, on the other hand, seemed to be driven by sympathy for a contractor who had performed the work with reasonable skill and care, had complied with the contractual standards, and had its designs verified by an independent certifying authority.

If you happen to share some of this sympathy it is worthwhile remembering that an employer is free to propose that a contractor comply with a range of overlapping and diffuse obligations when negotiating the terms of a contract. If the contractor accepts these obligations then it ought to comply with all of them, irrespective of the variance between them.

To treat an obligation as inconsistent with another, just because it is more onerous, would deprive the employer of his bargain and relieve the contractor of the risk allocated at the point of contract.

Wherever your sympathies lie, there are some practical lessons that can be drawn from the Høgaard It is a stark reminder that parties should address the level of the contractor's design responsibility up front and ensure that the contract clearly sets out the parties' respective design responsibilities.

In particular, if the completed product is required to meet certain performance criteria, this should be set out clearly in the contract. Saying that the finished product should be fit for purpose is insufficient. The contract should clearly set out what the purpose is. A good example is clause 4.1 in the FIDIC 1999 Yellow Book, which provides:

"When completed, the Works shall be fit for the purposes for which the Works are intended as defined in the Contract."

Following Høgaard, it is in both parties' interests to clarify:

  1. whether compliance with a prescribed design will, of itself, be deemed sufficient to meet any separate obligation to achieve prescribed criteria (e.g. would satisfying J101 itself mean that the wind turbine was fit for purpose?);
  2. which obligation takes priority where there is an inconsistency between the obligation to comply with a prescribed design and the obligation to achieve prescribed criteria (e.g. which obligation prevails - adhering to the contractual standards or ensuring the product is fit for purpose?); and
  3. whether the obligation to achieve prescribed criteria only applies where the contract does not prescribe the design (e.g. only where J101 did not apply to the design would the fitness for purpose obligation bite).

At the very least, contractors should take steps to ensure they are satisfied that compliance with the contractual standards and specifications will bring about the end result that the employer is contractually entitled to expect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions