Builders Beware: Liability for an Architect’s Defective Design Under AS4300
By Stephen Smith, Managing Partner and Jennifer Barry, Former Solicitor with Lovegrove Smith & Cotton
The AS 4300 are general conditions which are published by Standards Australia for inclusion in design & construct contracts.
Design & Construct contracts are not just simple building contracts, they are complex contracts which combine the ‘design’ and ‘construction’ elements of building works into one contract. Usually, a homeowner would enter into two separate contracts, one with their architect for design of the building, and one with their builder for construction of the building. Instead, design & construct contracts combine both of those into one contract, leading to a far more complex, and potentially perilous, contract.
One of the main issues relating to the AS 4300 and Design & Construct contracts generally is where risk lies for a defect in the design of the building. Logically, it would be arguable that the risk for the defective design should lie with the designer, the architect, however this is not always the case, particularly under the AS 4300.
As the Design & Construct contract is usually made between the owner of the property and the builder, the builder will often sub-contract the design part of the contract to an architect.
Under clause 9.2 of the AS 4300, it is permitted for the contractor (the builder) to, with permission, sub-contract some of the work to a sub-contractor, such as an architect. Whilst it is obviously often necessarily for the builder to do so for the design part of the contract, it is essential to note that under the AS 4300, the builder remains liable for the design work carried out by the architect under the contract. In particular, clause 9.3 of the AS 4300 states that the contractor shall be liable “for the acts and omissions of subcontractors and employees and agents of subcontractors as if they were acts or omissions of the contractor”. It is clear that the builder is liable for the work carried out by the architect and therefore remains liable for any defect in the architect’s design.
If a builder is considering entering into a Design & Construct contract, it would be advisable for the builder to take out appropriate insurance which would also cover liabilities for the design component of the contract, in addition to normal builders warranty insurance. It is an unfortunately reality of Design & Construct and AS 4300 contracts that the contractor is liable for any defects in work conducted by a sub-contractor architect and therefore it is essential for the contractor to take steps to obtain appropriate protection.
It is advisable for a builder who is considering entering into an AS 4300 / Design & Construct contract to seek legal advice from experienced construction lawyers before entering into the contract and/or seek assistance from such lawyers during the contract drafting phase. By doing so, the builder can obtain a full understanding of their potential liability under such contracts and make an informed decision as to whether they wish to enter into a Design & Construct contract at all.
At the same time it may be possible to negotiate a re-drafting of the design-risk clause before the contract is executed to enable the builder to shift the design risk to another party, or at least reduce his liability exposure.
Lovegrove Solicitors provides consultation and advisory services for AS 4300 based contracts.
By Jennifer Barry & Stephen Smith
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© Lovegrove Solicitors 2014