When Is Work Fit For Purpose?

Ever since John Reid's famous statement that the UK Home Office (his department at the time) was "not fit for purpose", this term has been heard increasingly frequently in the media, applied to a range of situations. Perhaps it is timely to consider its proper application. One of the advantages of choosing English law as the governing law of a contract is that there are few situations where terms are implied (or where express terms are deemed inapplicable). One such situation is in relation to contracts for the provision of goods, where there is an implied term that such goods must be "fit for purpose".1

This technical area of law is of great relevance to the oil and gas industry, both because many agreements for the supply of goods and services are governed by English law, but also because the underlying issues are relevant in any contract between operator and contractor/supplier, regardless of the governing law. Such contracts frequently require the contractor to confirm expressly that it is familiar with (a) the nature and scope of the work required (including supplies, equipment, materials and facilities necessary to complete the work) or (b) the equipment. This broad approach in effect requires the contractor to acknowledge that it understands – irrespective of the statutory implied term – the fitness for purpose standard which its goods and services must attain.

The question of fitness for purpose is at the heart of the allocation of risk between operator and contractor, in circumstances where both the technical and the contractual background are frequently complex.

The complexity arises, on the technical side, from the demanding conditions in which equipment is to be used and the involvement of large multi-disciplinary teams which are required to translate the project from early design stage, through detailed specification, to development and manufacture/installation, so that it is able to meet performance criteria and tests. Frequently, these multi-disciplinary teams represent a number of parties, including operator and contractor, which may complicate what would otherwise be a clear allocation of contractual responsibility (generally imposed on the contractor) in the formal documentation.

Operators are sometimes successful in agreeing with contractors that the purpose for which their work is intended will be specified in the contract, without any discussion of the warranty of fitness for that purpose, where this is implied.

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