Guide to Using the RIBA Professional Services Contracts 2018 - Other - Page 61
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Guide to RIBA Professional Services Contracts 2018
the remedies available for breaches are extinguished and no action may be taken in
the courts in respect of those breaches.
Liability of employees
The refusal of the House of Lords Appeals Committee to grant Leave to Appeal in the
case of Merrett v Babb exacerbated the risk that all professionals and employees who
provide specialist advice on behalf of their employers may face claims for negligence.
Employees would be particularly vulnerable if their firm or company:
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•
•
•
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is insolvent
has ceased trading and has no run-off cover
is under-insured and cannot meet the full claim
is unable to pay the excess due under the policy
is unable to obtain indemnity from their professional indemnity insurers.
Such claims could be made by:
• Clients, particularly where an employee is named in the Contract between an
Architect/Consultant employer and the Client, and/or the employee is required
to certify something in a personal capacity, e.g. prepare a valuation for mortgage
purposes
• third parties, for instance purchasers or tenants of properties affected
• the Architect/Consultant employer to recover uninsured damages.
For that reason, the RIBA Professional Services Contracts 2018 provide that
employees of the Architect/Consultant are not personally liable to the Client or to
third parties for any negligence or other default.
Net contribution
The net contribution provision in clause 7.3 of the RIBA Professional Services
Contracts 2018 establishes that the Architect/Consultant’s liability will be limited
to the share of any loss that can be shown to be the Architect/Consultant’s
responsibility – the ‘net contribution’. The objective of the clause is to provide a
fair balance of the risks between the Architect/Consultant and Client, where the
latter has entered separate Contracts with others for the Project, such as other
Consultants, Contractors and Sub-Contractors.
The introduction and wording of the clause arises from the case of Co-operative
Retail Services Ltd. v Taylor Young Partnership [2002], where the operation of
the joint names (i.e. the Employer, the Contractor and certain Sub-Contractors)
insurance taken out under a JCT contract prevented the Architect and engineer
from claiming a contribution although a Contractor and a Sub-contractor were also
responsible for the damage. It provides that the appropriate contributions from
others are deemed to have been made, whether or not that is the case, and on
the assumption that ‘there are no exclusions of or limitations of liability, nor joint
insurance or co-insurance provisions between the Client and any other party’.
This is a key limitation of liability for Architects and Consultants. If a court found an
Architect/Consultant to be 60% liable for damages and a Contractor 40% liable
for damages, then if a net contribution clause is included, the Client is restricted to
claiming 60% from the Architect/Consultant and would have to bring a separate
claim for the 40% against the Contractor. Without a net contribution clause, a Client
can claim 100% of the losses entirely from the Architect/Consultant even though
there are other parties, i.e. the Contractor, that contributed to the loss. This would
be a greater problem for the Architect/Consultant if the Contractor has become
insolvent or if they no longer maintain adequate insurance to defend a claim, as the
Client is much more likely to bring a claim against the Architect/Consultant who is
more financially viable.
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