Is There a Duty to Warn?

June 30, 2003

A consideration of this issue is important and raises the essential question of whether a supplier is entitled simply to sit back and adhere literally to the terms of the contract, all the time knowing that what is proposed by the user is not practicable or even technologically possible.

Those involved in disputes will immediately recognise the wide ambit of such a duty. Can a consultant be held liable for the failure of a supplier to implement a system – how far should a consultant go in cross-checking claims made by a supplier in the tender process? If a user wants certain features implemented during requirements analysis, is the supplier under a duty to warn that inclusion of these features will (or may) lead, for example to performance problems, or should the supplier simply do exactly what the user wants?

Services: the obligation to provide “reasonable care and skill”

The law has traditionally been stated at common law but now finds statutory expression in the Supply of Goods and Services Act 1982, s 13. This section states:

“In a contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill.”

Whereas the standard of reasonable care and skill is easy to state, it is rather harder to apply in marginal cases, in particular where there is a mixed supply consisting of goods and services. The principal question in such cases is whether the standard to be applied is the strict liability called for by the Sales of Goods Act 1979 (as amended) or the lesser standard of reasonable care and skill. Thus, in Dodd v Wilson[1] a vet inoculated cattle with defective vaccine bought from a third-party supplier. It was held that the vet’s liability, as he was a professional person, was strict – in other words, he was strictly liable for the vaccine’s being defective, although he could have had no prior knowledge of this.

Even where the supplier appears to be supplying a service, there will frequently be deliverables of one sort or another. A consultant will often supply a service which culminates in some sort of written deliverable. This does not, of itself, appear to raise the standard of care from one of “reasonable care and skill” to a strict standard.

Further reflection will show that the standard raises more questions. Can a supplier of services nonetheless be taken to be warranting that the end result will be achieved? The cases are mixed and difficult to reconcile. What is the appropriate warranty when sub-contractors are used? A simple statement that services must be provided with reasonable care and skill raises more questions than the cases give answers for.

Consultancy in the IT context

However, when turning to see how these principles are applied in the IT industry, there is next to no authority. Indeed, the only decision relating to the liability of an IT consultant is Stephenson Blake (Holdings) Ltd v Streets Heaver Ltd.[2] The plaintiff had retained the defendant to advise it in connection with the acquisition and implementation of a computer system to automate its business (which was manufacturing). The defendant had, among other things, to write the requirements specification, against which the various potential suppliers made their tenders. They assisted in selection and, during implementation, they prepared plans and advised on change management in the plaintiff’s business. As may be seen, the services supplied were of a broad nature, but all of them were strictly services without the delivery of any tangible.

Judge Hicks QC found that the standard to apply was that of reasonable care and skill – this much is not surprising. However, in applying that standard, he made the following findings about the way in which the defendant should have discharged its duty to use reasonable care and skill:

1. to ensure that the recommended system conformed to the statement of requirements, or to warn the plaintiff “in plain terms” if no such system could be recommended;

2. to ensure that the suppliers were competent and used sound methods and that the system recommended would carry out the functions for which the plaintiff required it efficiently and would have a minimum of “bugs”;

3. to ensure that the hardware recommended would perform in conjunction with the recommended software so that the plaintiff’s computer operations could be carried out with reasonable speed;

4. to ensure that the recommended supplier had the requisite skilled staff and could reasonably be expected to show the necessary stability (in financial and organisational terms) to maintain and support the system for a substantial period;

5. to ensure that the recommended supplier would be in a position to deliver the system by the required date (it being known by the defendant that support for the existing ageing system was to be withdrawn as from a specified date).

In this case the supplier recommended by the consultant was Offline Systems Limited. In spite of the requirement being for a packaged software solution that needed minimum modification and which was well proven, in fact early experience with the software showed that it did not function as required and was subject to numerous errors. Moreover, the software was not “well proven”, and in some instances much had not even been written yet.

Offline had been somewhat evasive about the availability of its software and one question for the judge was the extent to which the consultant should have informed himself about the true position. It was held that the consultant should have taken further steps to be in a position to form a personal view of the software, it was not sufficient that he should rely on what Offline had said without some sort of checking. Furthermore, the consultant should have challenged the recommendations with regard to hardware, and to rely on some “wait and see” principle was not acceptable.

The case is short on discussion of legal principle, and it exists only as an illustration of how the principles discussed above might be applied in practice. With the caveat that the case was decided at first instance and was dependent on the actual evidence heard by the judge, the proposition can be deduced that consultants should be proactive in their duties, in the sense that in this case there was some duty to verify what the supplier was claiming and to form some independent view of the situation.

However, the case does serve as useful background for a consideration of how a duty to warn might be implied (or, perhaps, applied) in IT contracts.

The “duty to warn”

Mention is sometimes made in the construction and engineering sphere of a so-called “duty to warn” – that is to say, a duty on a contractor not only to perform its contract according to the letter, but also proactively to warn the other party of any perceived risks or dangers in proceeding with the contract. This duty would affect the strict performance of the contract, so that if a contractor saw problems in performing the contract strictly according to the letter, then there is a duty to give a proper warning to the other party.

However, an analysis of the cases shows a somewhat chequered history of the concept in the courts. The only court which appears to have dealt expressly with such a duty is the Technology and Construction Court. It is not a concept that appears to have arisen in other contexts or which has received a definitive treatment in the case law. The case law in the TCC is rather ambiguous, although, as will be seen, the Court of Appeal has recently had cause to deal with the concept but unfortunately did not pronounce definitively on all aspects of the concept. Some history is therefore necessary so that the doctrine and its possible limitations can be understood. All the cases concern building contracts, although the principles of law are general and could be applied to any IT projects.

Lynch v Thorne[3]is a difficult case to reconcile with modern trends in the law, which is now tending to move away from an over-strict application of the principle of caveat emptor. However, it is some authority for the proposition that a contractor is only under a duty to perform according to the contract, even where the contract contains a duty to do something which is obviously liable to give rise to later problems. In this case, land was sold together with a house in the course of construction. The contract provided a precise specification of the details of the house, one of whose specifications was that the south wall should be nine inches thick and made of solid brick. The builder proceeded to build the house to this precise specification. In fact, there was nothing wrong with what the builder actually did – the workmanship and the quality of the materials used were beyond criticism. However, as anyone involved in the building trade would know, building a outside wall with solid brick in this manner was an improper way of constructing a building, and the house in fact soon started to let in damp to such an extent that that part of the house became uninhabitable.

The decision of the Court of Appeal was that the builder warranted no more than that the building should be constructed in accordance with the plan. The Court of Appeal appears to have been impressed by the details of the plan, which left little room for manoeuvre on the part of the builder. It was not the builder’s job to provide skill and advice in relation to the original design or, as Lord Evershed MR put it, the plaintiff’s failure to take proper advice in the first place as to the correct design of the house did not put a higher duty on the builder than he actually had.

This seems a hard decision seen from the claimant’s viewpoint. It should be noted that this case concerned a contract for the sale of land, and this may be some indication of the reasoning behind the decision. The law of contract as it relates to the sale of land has always taken a strict view of contracts, and is still probably the last place where caveat emptor is still applied[4].

Lindenberg v Canning[5] was a decision of Judge Newey in the TCC. The plaintiff developer wanted to redevelop a block of flats, by making two basement flats in a house in Kensington. This necessitated some work of demolition for which purpose there was an oral agreement with the defendant builder. The plaintiff supplied some plans, which showed load-bearing walls around the chimney-breasts with dotted lines and indicated that they were not load-bearing. The defendant builder therefore removed these walls without providing any propping. The result was deflection in the floors above.

Judge Newey held that the plans were so obviously wrong that the defendant should have had “grave doubts” about what they showed. It was clear to anyone in the industry that chimney-breasts were load-bearing parts of the structure and that they should not be removed, at least without propping. There was an implied term of the contract that the builder should use the care to be expected of any competent builder and anyone in that position should have realised from the plans that, if a chimney-breast was shown as not load-bearing, the plans were at best suspect. Such a builder would have realised that nine-inch walls were load-bearing. Put at its lowest, these points should have been raised with the surveyor, and in any case temporary propping should have been used – even if the surveyor had provided assurances about the plans.

This was not the first case in which Judge Newey had considered the law in this area. In Lindenberg itself, he referred to two of his earlier decisions. In Equitable Debenture Assets Corporation v Moss[6] a contractor had been employed to construct a new office block. Certain parts were being supplied by a third-party contractor (curtain walling). Judge Newey held that there was a duty to report to the architect design defects of which the contractor had knowledge. The judge said:

“I think that if on examining the drawings or as the result of experience on site Moss formed the opinion that in some respect the design would not work, or would not work satisfactorily, it would have been absurd for them to have carried on implementing it just the same. In my view, if the Directors of EDAC and of Moss had been asked at the time when the contract was made what Moss should do in those circumstances, they would have agreed at once that Moss should communicate their opinion to [the architect]. I think, therefore, that in order to give business efficacy to the contract the term requiring Moss to warn of design defects as soon as they came to believe that they existed was to be implied in the contract.”

Victoria University of Manchester v Wilson[7] was another decision by Judge Newey to the same effect and concerned defects in tiled cladding to certain buildings that had been installed by third-party contractors. It was in fact an application of the Equitable Debenture case in holding that there was an implied term in a main contract requiring the contractors to give a warning to the architects if they believed defects in the design to exist.

The result of these decisions was that the device of the implied term was being used to justify a further and specific obligation on a contractor. This approach was not, however, adopted by other TCC judges. Notably in University of Glasgow[8] Judge Bowsher limited the doctrine considerably in a case that was based on tortious, not contractual, principles (the limitation period for contract having expired). The case concerned the construction of an art gallery for which purpose contractors were engaged in 1972. As from 1978, there were problems with leaks and condensation. The University brought proceedings against the architect, and the architect sought a contribution or damages from the builder, on the basis either of negligence in their construction of the gallery or their failure to warn the University about the possible defects in design. It was alleged that the builders either knew or ought to have known about the potential defects.

In this case, it was held that the duty in tort was no more than a duty of care to avoid acts or omissions that were liable to cause injury to persons or damage to property other than the building actually being constructed. In fact, in this case, no such danger was being alleged. As there was no tortious duty owed by the builder to the University, there could be no question of contribution. In any case, there was no implied term in the contract between the builder and the University to the effect that there was some duty to warn the University of defects in the architect’s design; that being so, there could be no wider duty in tort. Furthermore, there was no duty on the builder to warn the architect – neither Equitable Debenture nor Victoria University were authority that there was some duty to warn the architect, as these cases were concerned with a duty to warn the employer. Judge Bowsher also considered that where there was some sort of reliance being put on the builder, then a duty to warn might exist – this might happen if the builder had undertaken in the contract some duty to achieve a particular purpose.

Another case where doubt was thrown on the duty to warn was Oxford University Press v John Steadman Design Group[9]. This case was factually complex, involving as it did a number of claims, but in essence concerned a contract for the construction of a warehouse for storing books. The problems related to the floors. One third-party contractor had laid defective topping and another had designed the sub-structure and provided steel reinforcement for the floors. The architects came to a settlement with the employer but sought contribution from the main contractor, using the argument (as in the University of Glasgow case) that there was a duty to warn the employer about defects in the floor design.

Judge Lewis concluded that there was no such duty. The fact was that the OUP had retained expert architects to produce a design, which meant that they were not in fact relying on any expertise provided by the building contractors. Judge Lewis therefore expressly agreed with Judge Bowsher in the University of Glasgow case. He said:

“In my view, it would be undesirable, as it would give rise to practical difficulties, if builders were obliged to raise with their employer matters of design for which they had no express contractual responsibility where the employer has commissioned the design from an expert.”

Recent authority: Plant v Adams [1998] EWHC QB 335

We have looked in some detail at these cases, as did the Court of Appeal in Plant v Adams,¹° since they are the only authorities on the matter (in this jurisdiction) and the Court of Appeal was clearly in some doubt as to which line of authority to follow. As May LJ (giving the judgment of the Court of Appeal) put it,

“The judgments of these three Official Referees and of the judge in the present case are to be given great weight as expressing the opinions of those having great experience in the law and practice of construction contracts. That they do not express an entirely unanimous opinion throughout only underlines the difficulty of the subject matter.”

The Court of Appeal was clearly reluctant to find that one or other line of authorities was wrong. One difference that the Court of Appeal found in the two lines was that the line represented by Lindenberg v Canning were cases where there was some element of physical danger in the alleged defects, whereas in the cases of University of Glasgow and the Oxford University Press there seemed to be no such element. This distinction was probably a deliberate attempt on the part of the Court of Appeal to understand the cases in the light of the traditional types of recoverable loss and damage in tort actions (ie some sort of physical loss or damage to property other than the building which was the subject of the contract or injury to persons). Other economic types of loss fall outside the traditional tort categories of recoverable loss, and this factor may have weighed heavily with the Court of Appeal.

However, the Court of Appeal dealt with the matter on the basis of whether there was an implied term in the contract to the effect that there was a duty of care. This avoided the problems of deciding whether the duty dealt with some irrecoverable form of economic loss – as May LJ put it:

“Nor is it relevant whether the loss which Plant claim should be categorised as economic loss, since economic loss is a problem which arises in the analysis of duties of care in tort.”

The facts of Plant v Adams were perhaps somewhat unusual – although anyone familiar with IT projects will immediately understand the general scenario. Ford wanted some excavation work done at a site for the installation of new plant. This meant removing part of the support for a roof stanchion, and propping the roof. Ford’s site manager had very fixed and firm views on how this should be done and issued very precise orders to the sub-contractor, which duly carried them out. The orders were not safe, and were obviously not so. The roof collapsed, fortunately at a time when no-one was around to be injured. In IT project terms, it is very like the users insisting on some detailed item of functionality at the requirements analysis stage and the supplier agreeing without demur.

The Court of Appeal proceeded in accordance with the reasoning of Lindenberg v Canning, although some important reservations have to be made. Firstly, the sub-contractors in Plant v Adams knew that the design was defective – it was manifestly dangerous. In Lindenberg v Canning, while the contractor did not appear to realise that the walls were load-bearing, he should certainly have appreciated that fact. Secondly, the design defect in Plant v Adams was potentially dangerous in the sense that people could be injured (or even killed). The Court of Appeal expressly left for consideration in a further case what the law would be if the contractor did not actually know of the defect but should have done, or where the defect was not actually dangerous. Understanding the Court of Appeal in Plant v Adams must take these factors into account – the decision is not to be taken as an unqualified approval of a duty to warn in all cases.

However, in a case where there was a clear and obvious danger to life and limb, such a duty to warn was to be implied. May LJ made it clear that two factors in particular were crucial – that the works were obviously dangerous and the sub-contractor actually knew them to be so.

Other comments of the Court of Appeal also need to be taken into account. The Court of Appeal did not find that there is a principle of law independent of the actual contract to the effect that a duty to warn exists. The Court of Appeal at several instances points to the need to understand the particular contract in dispute. For example, in discussing Lynch v Thorne, May LJ said,

“The decision, however, remains an example of the principle that terms are less readily implied in a contract containing detailed express terms and that you cannot normally imply a term which is inconsistent with an express term.”

Again, the finding as to the particular contract in Plant v Adams was that its terms were on this issue “unsophisticated”. It all comes down to the principle of upholding the freedom of contract[10] – the principle that the parties should make their own bargains and the court is not involved in the exercise in writing in terms for the parties based on general principles of law such as a duty to warn.

In the case where there is a defect that does not threaten personal injury and there is a detailed contract, the duty to warn can perhaps best be seen as an aspect of the general duty to take reasonable care and skill. Again, to quote from the judgment of May LJ:

“[t]he question is not whether [the roof-propping contractor] owed a duty of care to someone who was injured, but what was the scope of the implied contractual term in their subcontract with [the main contractor].”

Observations on a “duty to warn”: damages for breach

It is perhaps regrettable that the Court of Appeal did not consider the matter fully and come to a definitive decision on the question of whether such a duty to warn will always be implied in cases where there is a duty to take reasonable care and skill. In principle, where there is such a contractual duty of reasonable care and skill, so that there are no difficult questions about whether the loss claimed might include irrecoverable economic loss in a tort action, there seems no reason why a duty to warn cannot be implied. The difficulty will be in finding the grounds for making such an implication. In a case where the contract is detailed and already provides for the respective obligations of the parties, there will, according to the case-law coming out of the Court of Appeal at the moment, be little scope for judicial intervention in finding the existence of such an implied term. In a case where the obligations are generally expressed, however, there remains scope for the implication of such a term.

One further point should be made about the “duty to warn”. The point relates to damages and what could be claimed assuming the success of a claim that a contractor failed in discharging a contractual obligation to warn. The temptation is to conclude that a failure to warn leads to a full recovery on the part of the claimant for the loss it suffered through not having been warned, but this is not necessarily so. The Court of Appeal in Plant v Adams had great difficulty in this part of the case. The correct course is to ask what would have happened if the warning had been given? This involves a hypothetical exercise, based on the surrounding evidence, as to what the recipient of the warning would have done with the information. It may be that the recipient of the warning would have taken it to heart, and acted promptly to avert the danger. On the other hand, it is common practice in major projects (construction, IT or whatever) for written warnings to be given, risk registers to be prepared and circulated to all parties, and for nothing to be done about them at all.

The conclusion must be that good evidence would be required showing that the recipient of the warning would have heeded the warning and taken steps to avoid the loss. It would also be necessary to show on the evidence that the recipient of the warning was in a position to act on the warning. The Court of Appeal remitted this part of the case back to the trial judge for further findings. In a clear case like Plant v Adams, it was not difficult for the trial judge to hold that the contractor, aware of the dangers of the course insisted on by Ford, should have warned progressively more and more loudly, escalating the matter up the management chain for action. Ultimately, given the obvious danger to life and limb, the sub-contractors should have refused to carry out the dangerous instructions.

Plant v Adams is clear on its facts. Where the type of loss is not a danger to persons or property, the answer is more difficult and becomes a hypothetical exercise whose outcome at trial is hard to predict. English law does not have a highly developed body of law relating to causation, and perhaps it would be hard to frame such a law. There is little authority as to how judges would carry out such a hypothetical exercise, and accordingly much scope is left to the individual judge’s discretion. Other cases have said that, in assessing questions of causation of a loss, the standard is that of “the standard of common sense of the ordinary man”[11]. This would leave little in the way of concrete guidance that could be given in individual cases.

Conclusions on the law

The following propositions can probably be deduced from the above discussion, with the proviso that the Court of Appeal in Plant v Adams expressly said that it was not dealing with the matter on the basis of delivering a definitive decision that could be applied in all cases.

1. The standard of reasonable care and skill should not be seen as a purely negative obligation; the only case on the duty of an IT consultant (Stephenson Blake) shows that the courts will impose a duty to take positive steps to verify what is being said and to make positive proposals for action.

2. Following on from the last point, there is no independent “duty to warn” existing as a legal principle in all cases.

3. The correct approach is to construe the individual contract, and the more detailed the contract, the less room there is to imply a term imposing a “duty to warn”.

4. A “duty to warn” can be seen as an aspect of the general duty to exercise reasonable care and skill in cases where the contractor is expected to provide expertise.

5. The most difficult question will concern the calculation of loss if the duty to warn is not performed, since a hypothetical exercise in assessing what the recipient of the warning would have done must be undertaken. This would by no means automatically lead to the conclusion that the warning would have been heeded and the consequences of the defect averted.

Richard Stephens is a Partner at Field Fisher Waterhouse.

[1] [1946] 2 All ER 691

[2] [1998] Masons CLR Rep 25

[3] [1956] 1 All ER 744

[4] See the comments on this by Lord Upjohn in Young & Marten v McManus Childs [1969] 1 AC 454, 472

[5] 62 BLR 147

[6] (1984) 1 Const. LJ 131

[7] (1984) 1 Const. LJ 162

[8] (1988) 42 BLR 66

[9] (1990) 34 Con LR 1

[10] It is perhaps noteworthy that the Court of Appeal included Chadwick LJ, who has recently given two significant judgments upholding freedom of contract principles in Grimstead v McGarrigan and Watford Electronics v Sanderson.

[11] See Yorkshire Dale SS Co Ltd v Minister of War Transport [1942] AC 691, quoted by Devlin J in Heskell v Continental Express [1950] 1 All ER 1033, 1048A