Karen Morean is a construction partner and Patrick Trevor is a solicitor at Devonshires
Most standard construction contracts provide for the role of an independent party who makes administration decisions under the contract. The JCT Design and Construction Suite refers to this role as the Employer’s Agent (EA), while other standard JCT forms refer to a Contract Administrator. Some Federation of International Consulting Engineers (FIDIC) forms of contract similarly appoint the engineer for this role, while NEC contracts use the project manager.
“When exercising a decision-making function under the contract, the EA should not determine such matters as directed by the employer.”
The role is not intended to be that of a hired gun, but rather an independent person paid by the employer. However, the dual nature of this role can sometimes create tensions at the site.
What are the duties of an EA?
Although the scope of an EA’s services will be defined in its appointment documents, these obligations should be consistent with those given to the EA under the construction contract. For example, Article 3 of the 2016 JCT Design and Build Contract states that an EA “shall have full authority to receive and issue requests, consents, instructions, notices, requests or statements and otherwise manner, act on behalf of the employer under any of the conditions”. .
As summarized in section 4.6 of the Royal Institution of Chartered Surveyors (RICS) Rules and professional guidance, an EA is bound by his appointment with the employer to act as if he were the same as the employer. As a result, the duties an EA owes their business client include the following:
- Not to disclose any confidential or private information provided by the employer when the employer expressly requests it.
- Warn the employer of any possible breach of contract and ensure that the employer fulfills its contractual obligations in a timely manner.
- Provide advice based on their knowledge and experience to help the employer make informed decisions on matters relating to the construction contract.
However, this does not mean that an EA is always obliged to act in the best interests of the employer (ie the party appointing it). Rather, case law makes it clear that an EA must act impartially when performing certain functions.
For example, the court in Imperial Chemical Industries v. Merit Merrell Technology [2017] EWHC 1763 (TCC), approved the following description:
“When exercising their decision-making role, the decision-maker must act in a manner that has been variously described as independent, impartial, fair and honest. They recognize that the decision-maker must ‘use their professional skills and best efforts to make the right decision, as opposed to the decision that favors the employer’s interests’.
This duty of impartiality is codified in section 4.5 of the RICS guidance, which states:
“While the employer’s agent is bound to the employer in his actions, the employer’s agent is required by law to remain impartial with regard to the valuation of the works, the processing of claims and duties related to certification”.
Therefore, when exercising a decision-making role under the contract, the EA should not determine these matters as directed by the employer.
Does an EA have a duty to contractors?
Despite this duty to act fairly and impartially, EAs owe no duty to contractors, as the Court of Appeal confirmed in Pacific Associates v. Baxter [1988] 44 BLR 33. It would take exceptional circumstances to deviate from this position, such as collusion or fraud.
Disputing the decision of the EA
It is common for contractors to disagree with an EA’s decision in relation to the assessment or evaluation of their claims. In our experience, however, contractors alleging a breach of duty by an EA are unlikely to get much traction. This is doubly so if such allegations are made mid-project, where an ongoing working relationship is required.
Instead, we advise contractors to consider what additional information they can provide to the EA to justify a different result. Examples may include:
- Provide a critical path analysis showing the anticipated delay if an extension of time is sought.
- A comparison of the tender drawings with the updated design drawings showing the extent of an indicated change.
- Examples of market prices obtained by variations.
This strategy will also pay dividends if adjudication becomes a necessity. Adjudicators, except in exceptional circumstances, rarely engage in arguments about the independence or impartiality of an EA, focusing instead on the assessment/evaluation exercise. For this exercise, contemporary documentation carries a lot of weight.
A difficult role
The tension between an employer seeking to control budgets, time and quality on the one hand and a contractor seeking valid compensation on the other is a reality in many construction projects. It is the EA, hired and paid by the employer, whose duty is to be the independent arbiter between the two in the project. It is often an unenviable task.
