One of the most overlooked risks in D&C contracts is the fitness for purpose obligation.
This obligation is often buried in a few short lines of contract text, but its consequences can be enormous. Unlike the typical “due care and skill” standard owed by consultants, fitness for purpose is an absolute obligation: the works must achieve a specific result or performance outcome, regardless of how carefully they were designed or built.
The danger?
If the design underperforms or fails — even when it has been prepared, signed off, and certified by an independent consultant — the liability can land on you as the builder. Under many D&C contracts, the builder doesn’t just construct to the drawings; they inherit the full design risk, effectively guaranteeing that the design will work as intended.
This often arises where:
- The contract imposes a fitness obligation on the entire works
- Consultants are novated mid-project, breaking design continuity
- The builder doesn’t verify if designs meet performance specs
What you can do:
- Remove or limit fitness obligations and replace with “due care and skill” where possible
- Ensure consultant contracts include equivalent obligations so liability doesn’t solely rest with the builder
- Review your PI insurance as many policies exclude fitness for purpose liability
- Clarify the intended use of the project in writing
Fitness for purpose clauses can transform a construction risk into a professional liability risk—and most builders aren’t insured for that. For builders in the D&C space, this is not a clause to gloss over, and the safest and most cost-effective time to manage the risk is before the contract is signed. Once you’re locked in, you’re potentially committing to a performance guarantee you can’t fully control.
Treat it as a red flag, and deal with it early, clearly and in writing before you sign.