| Date | 25 November 1998 |
|
|
| Judgment | Moores -v- Yakele Associates Limited, TCC 28 October 1998 |
|
|
| The Issue | Limit of liability under the architect's agreement SFA 92. |
|
|
| Implication |
A limit of the architect's liability entered under clause 6.2 of the agreement will generally apply to all those claims which could be made against the architect in respect of breach of contract. The limit may be accepted as a reasonable figure where it equates broadly to the estimate of construction costs. |
printThe Royal Institute of British Architects' standard form of agreement for the appointment of an architect (SFA 92) provides on the memorandum of agreement a series of terms designed to restrict the liability of the architect. For example clause 5 prompts the parties to agree a shorter period for limitation of the architect's liability than would normally apply. This clause would typically have the effect that "no action or proceedings for any breach of this agreement shall be commenced against the architect after the expiry of three years from completion of the architect's services". Clause 6.1 attempts to circumvent the rules of joint and several liability, such that the architect's liability towards its client will be a nett contribution based upon the architect's proportion of responsibility for loss or damage suffered its client. From the architect's perspective clause 6.2 is perhaps the most important. It allows the architect to agree a sum as a limit of its liability for loss or damage suffered by the client. "The liability of the architect for any loss or damage arising out of any action or proceedings referred to in clause 5 shall notwithstanding the provisions of clause 6.1 in any event be limited to a sum not exceeding £……………….". These provisions were closely examined in the recent case of James Moores -v- Yakeley Associates Ltd. Mr Moores is an heir to the Littlewoods fortune and described in the judgment as a very wealthy man. Mr Yakeley is an architect who had been engaged under the RIBA Agreement to provide services in connection with a bungalow to be built on land owned by Mr Moores in County Clare, Ireland. In correspondence immediately prior to entering into the architect's appointment, Mr Yakeley had noted an estimated construction cost of £225,000. At clause 6.2 of the proposed agreement, Mr Yakeley had entered the liability of the architect to be subject to a limit of £250,000. Disputes arose between the parties and Mr Moores sought the repayment of fees paid to Mr Yakeley for additional works on an hourly charge basis. It was alleged that these sums had been paid under a mistake of fact, namely that invoices raised for additional works arose only as a consequence of Mr Yakeley's failure to carry out the contract work with reasonable skill and care. It was argued on behalf of Mr Moores that the architect's limit of liability in clause 6.2 applied only to breach of contract. Since Mr Moores claim was for repayment of moneys paid under a mistake of fact, it was argued, the limit of liability in clause 6.2 would not apply. The Honourable Mr Justice Dyson QC agreed with the contention that clause 6.2 and its related clauses provided a limit of the architect's liability only in respect of breach of contract. This did not however assist Moores' case. The Judge was clear that seeking to recover these moneys under an allegation of mistake of fact amounted to no more than an artifice designed to circumvent the limit on contractual damages. The Judge next had to consider whether clause 6.2 and its related provisions satisfied the requirements of the Unfair Contract Terms Act 1977. This Act imposes limits on the extent to which liability for breach of contract, or for negligence or other breach of duty, can be avoided by means of contract terms. The Act provides that where one contracting party deals as a consumer as defined by the Act, or enters into contract on the other party's written standard terms of business, that other party cannot exclude or restrict liability for its breach of contract except insofar as the contract term satisfies the requirement of 'reasonableness' as laid down by the Act. Schedule 2 to the Act gives guidelines for the application of the reasonableness test. These include (a) the strength of the bargaining positions of the parties relative to each other; (b) whether the customer received an inducement to agree to the term and (c) whether the customer knew or not reasonably to have known of the existence and extent of the term. Section 11(5) of the Act provides that the burden is on the defendant, in this case the architect, to satisfy the requirement of reasonableness. It was clear to Justice Dyson that Mr Yateley had discharged that burden in respect of the £250,000 limit placed on his liability. This was not an arbitrary figure. It had been based upon Mr Yakeley's assessment of the likely cost of the works. This was to be contrasted with other cases where the party seeking to rely on a figure limiting its liability could not provide any rational explanation for the figure. Moreover it was relevant that the ceiling on damages was more than ten times the amount of fee income that would be generated by Mr Yakeley under the contract. In addition Mr Moores had been in a stronger bargaining position than Mr Yakeley and could have instructed any architect. The fact that Mr Yakeley had professional indemnity insurance available with a cover of £500,000 in respect of each and every claim had to be taken into account, but could not be determinative. Accordingly the Judge concluded that the limitation of the liability of the architect in clause 6.2 in the amount of £250,000 satisfied the test of reasonableness in respect of the Unfair Contract Terms Act. Furthermore, this limit applied to all the claims made against the architect in the action.
CJ-9843
|
|||
|
© Brewer Consulting |
|||
 |
|||