In this blog article, Beth Abbott from our Conveyancing team demystifies the term ‘Caveat Emptor’, the principles of which are key when buying or selling a new home. What does Caveat Emptor mean? Put simply, Caveat Emptor is a Latin term...
Supreme Court Pins £26.5 Million Bill on Wind Farms Contractor
Construction contracts frequently require works to comply with recognised standards set by independent bodies – but what happens if those standards are wrong? The Supreme Court tackled that issue in the context of two offshore wind farms that began to fail soon after their construction, leaving a £26.5 million repair bill.
Following a tendering exercise, a power company employed a contractor to design and install the foundations of 60 turbines. The tender documents required the work to be carried out in accordance with an internationally recognised standard. Only after the foundations began to fail was it realised that one of the mathematical values stated in the standard was wrong by a factor of about 10. That had resulted in the foundations being far weaker than they should have been.
The company argued that the contractor should bear the remedial costs because the foundations did not have a lifespan of 20 years, as required by the contract. The contractor, however, submitted that it should not have to bear the loss as it had complied with the industry standard. The company’s arguments prevailed before the High Court, but that decision was later reversed by the Court of Appeal.
In unanimously upholding the company’s appeal against the latter ruling, the Supreme Court found that the contractor had warranted that the foundations would have a minimum lifespan of 20 years. Alternatively, it had undertaken to provide a design that could be objectively expected to last for that period.
The technical requirements in the contract specified only a minimum standard and it was the contractor’s responsibility to design the foundations to a more rigorous standard if that was required to make them fit for purpose. The contractor could be expected to shoulder the risk in that it had agreed to work to a design standard that was incapable of delivering the required 20-year lifespan.