Authors: Stephen Chessher, partner, Beale & Co and Fiona Mackey, solicitor, Beale & Co
In this article, we look at professional appointments for consulting engineers: how to ensure that an enforceable contract has been formed, how to ensure as far as possible that the terms of the contract will be upheld and, in the event of a dispute, how to provide the best means of resolving that dispute.
The first thing to bear in mind is that professional appointments are contracts that are fundamentally the same as any other contract and are governed by the normal laws of contract. There must be an offer and an acceptance. Consulting engineers are often invited to tender for a project. An invitation to tender will not normally be construed as an ‘offer’. It is the tender itself that will generally comprise the ‘offer’ which is then accepted, or not, by the client.
What if the client seeks to negotiate on the tender and/or seeks to impose its own terms? The revised proposals from the client are likely to be deemed a counter offer which, in turn, is capable of acceptance or rejection by the consultant. This sometimes leads to what lawyers call a 'battle of the forms' where, in the event of a dispute, each side asserts that its own terms and conditions prevail.
It is not unusual for work on a project to be commenced before terms have been finalised or any formal appointment is put in place. If clear terms have been proposed by one party and no objection is raised by the other party in the full knowledge that work has started, it is likely that the terms will be deemed to have been accepted.
A fundamental characteristic of a contract is consideration: the concept that each party to the contract is receiving a benefit or suffering a detriment. This is not normally an issue in professional appointments. The consideration flowing from the client to the consultant will invariably be the payment of a fee and the consideration flowing in the opposite direction will be the provision of services.
TERMS OF CONTRACT
It is implicit in the concept of offer and acceptance that there should be clarity and certainty as to the terms of the contract: there should be consensus ad idem. This is a fertile area for disputes. It is common practice in professional appointments (and even more so in construction and engineering contracts) for the contract to be concluded before all terms have been fully agreed. That is in order provided that the contract sets out a mechanism to determine how outstanding terms may be finalised or, just as important, how and when terms may be changed or varied. If, however, the mechanism is vague and unclear, the entire contract may be struck down for uncertainty.
The final basic constituent of a contract is that there must be an intention on the part of both (or all) parties to create legal relations. This is generally self-evident for business relationships but even here, there are traps for the unwary. For example, what happens if a client asks for informal advice? The lawyer can only answer, “It all depends.”
In general terms, only the parties to a contract will be bound by the terms of the contract. This is known as the privity of contract rule. It follows that it is important to identify the parties with precision. In a straightforward professional appointment, there will normally be two parties: the client and the consultant. But who is the client? Suppose that all dealings with the consultant are conducted by or through a project manager or other lead consultant.
Is the consultant’s client intended to be the ultimate client or is it intended to be the other consultant? If the latter then the arrangement is likely to be a sub-consultancy agreement with potentially very different rights and responsibilities from an agreement between ultimate client and consultant.
In any event, is there any doubt as to the nature of the contracting entity? If it is a company and there is a group of associated companies, has the correct company been named? If it is a partnership, is that clear?
FORM OF CONTRACT
As with most contracts, there is ordinarily no requirement for a professional appointment to be in writing but if it is not, the scope for disagreement as to the terms of the contract (or even whether a contract existed) is magnified.
Consultants will commonly use standard forms of contract prepared by the professional bodies such as SE9101 or ME2000. These terms of engagement are comprehensive and will cover most if not all issues that the consultant should have regard to. But the client may, of course, seek to impose its own conditions or, on large projects, bespoke terms may be put forward (generally on a take it or leave it basis). If a non-standard form of contract is used, the important thing is to make sure that key areas are dealt with. These will include but are not necessarily restricted to: