Contract administrator’s liability for pure economic loss

Abstract

Employers engage contract administrators to assist them in administering their construction works. Contract administrators are those that claimed to have knowledge regarding construction works. The contract of engagements and the construction contracts set out the duties and roles of contract administrators. The duties may differ according to the type of standard form of contract used; such as PAM 2006, PWD 203 or 203A (Rev 1/2010), AIA, FIDIC, AS 2124, etc. In the performance of their duties, contract administrators may be held liable in negligence if they fail to carry out their duties with reasonable skill and care. Thus, the objective of this research is to determine the liability of contract administrators against claim from contractors for pure economic loss. This research firstly establishes the essential duties and liabilities of contract administrators under contract. Secondly, it discusses the concepts of pure economic loss under the law of contract and tort. It is settled that the contract administrators’ standard of duty is to perform their duties with reasonable skill. The damage that the injured party intends to be compensated for must not be too remote and is foreseeable. It is also settled that claims under tort of negligent requires injury or damage to property. In the absence of injury or damage, recovery for claim that is purely economic may not be successful. Pure economic loss in tort arises when the claim is either for diminutive value of building, loss of profit or cost of repairing. There appears to be some confusion in claim for economic loss under law of contract and law of tort. Regarding contractors’ claims on pure economic loss against the contract administrators, the courts seem to favour that the claims are made under contract rather than under tort. The only exception where the court may allow for recovery of pure economic loss under tort is when the principle fall under the principle as established in Hedley Byrne v Heller or fulfilled Caparo test of proximity, foreseeability and it is just, reasonable and fair to do so.