If the architect charges additional fees for work which has to be done as a result of the contractor’s breach of some obligation, can the employer recover such fees from the contractor?
There are two important points to consider. The first is that, if the contractor is in breach of an obligation under the contract, the general law allows the employer to recover damages for the breach. The measure of such damages is that the employer is entitled to be put back into the position he or she would have been in, so far as money can do that, as if the contractor had properly performed its obligations. The second point is that, under RIBA appointment documents, the architect is entitled to claim additional fees if engaged in additional work due to matters beyond the architect’s control.
Therefore, if it can be established that the contractor is in breach of contract and if the breach is the direct cause of additional work being required from the architect, the architect’s fees associated with the additional work would be the damage suffered by the employer as a result of the breach. Therefore, it follows that the employer is entitled to recover the amount of such fees from the contractor. The easiest way for the employer to do that is to issue a withholding notice for the amount and deduct it from payment due to the contractor under a certificate. If no further interim certificates are due, the employer may either issue the withholding notice for the final certificate and deduct the amount from the final payment or take legal action to recover damages for breach of contract. (Note that Part 8 of the Local Democracy, Economic Development and Construction Act 2009 will amend the notice provisions, but at the time of writing, no date has been set for commencement.) Adjudication may be the simplest route, but more complex matters might better be dealt with in arbitration or litigation as permitted under the terms of the contract.
An overriding consideration is whether the building contract contains machinery for dealing with the breach in question. If so, it is that machinery which will take precedence over the common law position. For example, if the contractor is in breach of its obligation to complete the Works by the completion date in the contract, it is a breach of contract for which the employer is entitled to damages. However, under most standard form building contracts there is provision for liquidated damages in such circumstances which will determine what remedy is available to the employer. All the costs resulting from late completion, including additional professional fees, are deemed to be included. Therefore, the employer would not be able to make a separate claim for architect’s fees. There is detailed provision in most building contracts for remedies if the contractor fails to construct the Works in accordance with the contract. Normally, it is those remedies which will apply. Sometimes, clauses are made subject to any other rights and remedies of the parties. SBC clause 8.3.1 is an example. In that case, the parties are not restricted to the remedies set out in the contract and may seek common law remedies instead or in addition. Obviously, the employer cannot recover twice for the same breach.
Less clear is the situation where the architect is entitled to charge additional fees, but it may not be clear that the contractor is in breach. For example, it is not unknown for a contractor to notify the architect that practical completion has been achieved, but the architect finds, on inspection, that is not the case. Sometimes such notifications and abortive inspections occur several times. It is perhaps open to debate whether the contractor’s notification, giving incorrect information, is a breach of contract. On balance, it possibly is in breach of an implied term that the contractor should co-operate with the employer to execute the Works. If the preliminaries to the bills of quantities or the specification expressly require the contractor to notify the architect when practical completion has been achieved, a failure to do so properly, that is to say prematurely, is certainly a breach. What of contractors who submit applications for loss and/or expense under clause 4.23 of SBC which are twice or three times the amount to which they are entitled? There is probably a valid case to be made that a contractor who submits a grossly inflated claim, and thereby involves the architect in substantial expenditure of time and resources in dealing with it, is in breach of its obligation under clause 4.23. The argument would probably be that the contractor is entitled to submit an application for loss and/or expense as permitted under the contract, but plainly it is not entitled to submit a claim for loss and/or expense which is in excess of what is allowed under the contract. Indeed, a contractor which makes a claim for money which is demonstrably wrong may have serious questions to answer related to obtaining money by deception.