Article Loss Prevention

Duress or Commercial Reality?

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By Zita Mansi, BLM Solicitors

An AGS member queried whether he has any redress in circumstances where he is obliged to sign a contract with onerous terms in order to receive payment for work he has already carried out.  The onerous terms might include, for example, provision of a Limit of Indemnity of £5million where the fee is only £5,000, the risk of which had not been priced into the fee agreed for the work, or long payment periods of 60 or 90 days.

In such a situation, the member must choose between agreeing to the onerous terms or suing the client for its unpaid fees (which is often a commercially unattractive option).  The member queried whether this qualified as “duress”.

The necessary ingredients for a successful economic duress claim are:

  1. Pressure which is illegitimate;
  2. This pressure is a significant cause inducing the “victim” to enter into the contract; and
  3. The practical effect of the pressure is that there is compulsion on or a lack of practical choice for, the victim.

If the above ingredients are established then the victim of the duress is entitled to accept the term and later pursue a claim for undue influence in order render the contract void.

The courts have held, that “illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.”  Cases where pressure has been considered “illegitimate” are those where the perpetrator has committed a crime, a tort or a breach of contract.

Establishing that the victim had no realistic practical alternative but to submit to the pressure is also a high hurdle to overcome. In the scenario described above, the AGS member could (a) refuse to commence work until satisfactory terms are agreed or (b) carry out the work and then sue the client for payment if reasonable terms cannot be agreed.  Although these options are commercially undesirable, they are practical options nevertheless

Ideally, no AGS member would carry out any significant work unless and until satisfactory contract terms had been agreed in writing.  However, there are many reasons why this may not happen in practice.  For example, the works may be required urgently so that only the most basic terms, such as the scope of works, price and timescale, are discussed verbally beforehand.  AGS members would do well to have a set of their own standard terms and conditions that can be quickly adapted and sent to their clients before commencing work, for use in such situations.

Members can also refer their clients to the AGS Client Guide on Limitation of Liability Clauses, and Professional Indemnity Insurance which may assist their negotiations.

Article Business Practice Data Management Loss Prevention

Retention of documents – how long is long enough?

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How long is a piece of string?  Tricky.  Twice the length from one end to the middle, you say?  Well, yes, but still not very helpful in determining how long the string actually is, is it?  We can do slightly better with the question as to how long a business should retain its professional appointment documents; but a definitive answer is almost as elusive.

Firstly, it should be emphasised that this note deals with general considerations relating to professional appointment documents only.  For the myriad of other documentation and regulatory intervention that today’s firms need to be aware of, for example, in the fields of financial and accounting information, personal information and when dealing with public bodies, specialist advice should be sought.

With the increasing sophistication of computer storage systems, it is now possible to store many hundreds of thousands of documents relatively cheaply.  With the drop in price of file servers and the associated backup hardware, digitising newly produced documentation is a real possibility for many.  Many practices may never need consider purging documents; they simply digitise newly produced documentation as it is created.  Nevertheless, for those of us with many years of old paper files to consider, the cost and time implications of digitising these can be a drain on resources.

As arrangers of Professional Indemnity (PI) insurance to various professions, the document retention question is one which we are often asked.  If it is one you have already grappled with, then hopefully, this paper will do nothing more than reinforce the advice already given.  Alternatively, if it’s something you have never considered, now might be the time to do so.  With many practices struggling with burgeoning documentation, deciding when it is finally safe to destroy files is of increasing importance.

Document retention

Be it schematics for the construction of a building, advice issued to clients on a negligence claim, or papers supporting the valuation of a house, documents are produced which are vital to the service that is provided.  Indeed, the documents produced might be the very service itself.  Storage space is finite for all businesses – everything cannot be stored indefinitely.  The danger with destroying document early, however, is readily apparent.

Document retention

Although general guidance can never address the specifics of individual situations, and we always recommend that you take specific advice, the following areas should definitely frame the debate:

  1. PI policy requirements
  2. Contractual requirements and liability periods
  3. Other factors

Professional Indemnity policy requirements

We suggest the first port of call in trying to answer this question is to look at the terms of your PI policy.  Different insurers have different requirements ranging from remaining silent on the issue, to imposing quite onerous terms as to both how long you must store your documents and in what state they must be retained.  The reasons for insurers taking an interest in how you keep your documents are obvious; in the event of an allegation of negligence, the notes you have taken, the minutes of meetings held and the written advice given, will all be crucial to mounting a defence.

Griffiths & Armour’s PI insurance schemes for construction professionals have no particular requirements relating to the retention or storage of documents and you are at liberty to make whatever arrangements you consider commercially prudent.  It would be extremely foolish, however, to ignore the issue.  As previously mentioned, project documents can be crucial in mounting a defence and as our latest risk management book ’Reinforcing the Simple Messages’ shows, a claim can fail or succeed on the accuracy and/or sufficiency of project records.

Other PI policies, however, can contain fairly demanding requirements, such as:


‘The Insured, as a condition precedent to their right to be indemnified under the Policy, must keep all documents in a suitable secure location outside of normal business hours and shall maintain duplicates of all computer related records off site for a period of not less than 12 years following completion of the commission to which the documents relate.’
‘The Insured shall make available to Insurers at all reasonable times and Insurers shall have a right to inspect and copy during the period of insurance and thereafter, all books, papers and other records of the Insured and its agents or brokers in connection with this policy or the subject matter hereof.’







It is important that you check with your broker exactly what conditions apply to your particular policy, so as to ensure that you can comply.  Often, retaining the documents for the period and in the manner specified in the policy will be a ’condition precedent of cover’ (i.e. if you don’t comply, the policy will not respond to the claim).  Even conditions at the less onerous end of the spectrum can allow insurers to reject claims, should they consider your actions ‘prejudice their position’.

Contractual requirements and liability periods

Quite aside from the conditions within your PI policy, your client may well require that you retain documents on a particular project for a specified number of years.  Although it is unusual for clients to specify the manner in which the documents are kept, the requirement to store project documentation for ‘x years’ will often be combined with a right for the client to inspect the documents too.

The document retention period imposed by clients in contract often matches the relevant limitation period applicable to the project in question (i.e. the period after which claims become ‘time barred’).  Knowing when your liability expires is essential when considering how long to retain your documents, even if the contract is silent on the matter.  Usually, the liability period will expire a number of years following completion of the services you are providing or completion of the project to which they relate.  The limitation period is usually six or twelve years depending on the form of contract and what you have agreed with your client.

In certain circumstances, where so-called latent defects are present, the law can impose liability up to 15 years following completion of your services and this, for most categories of claim you are likely to face, should be considered the ‘long-stop’ of liability.  It follows that, generally, speaking this can also be used as the ’long-stop’ for retaining documents

Other factors

Many more issues may well impact upon your decision as to whether or not to retain documents and, if so, for how long.

Some clients view historical records as a potential revenue stream. They view them as a useful tool in securing work in the future from, for example, clients refurbishing a building an engineer had previously worked on.

Special consideration should be given to certain categories of documents, for example, the certain financial documents (for example, balance sheets etc) as there may well be specific legislation (e.g. the Companies Act) which deals with how long these should be kept and specialist advice should be sought in this regard.

Article Business Practice Data Management Loss Prevention

EN 1990 Alteration

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EN 1990 Altered to Avoid UK Liability Problems

The head code, EN 1990, has been changed to make sure that civil and structural engineers avoid potentially uninsurable ‘fitness for purpose’ liabilities when using Eurocodes in the UK.

One of the basic requirements of EN 1990, as set out in clause 2.1 (1)P, was that a structure had to ‘remain fit for the use for which it is required’. This has now been altered to, ‘meet the specified serviceability requirements for a structural element’.

The changes have been made as the original version suggested a fitness-for-purpose obligation that would not be covered by professional indemnity insurance. The trouble arises because ‘fit for the use for which it is required’ has a legal meaning in Britain which is does not have in mainland Europe.

BSI is planning to publish a corrigendum to BS EN 1990 shortly which will be free to download from the BSI Eurocodes website.( )

Further information can be found on this article at

Article Loss Prevention

Are your e-mails and websites legal

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Requirements of the Companies Regulations 2006

From 1st January 2007 external business emails issued by public and private companies and limited liability partnerships MUST include the following information in legible text:

  • Company or partnership registration number
  • Place of registration (ie: England & Wales or Scotland)
  • Registered office address

These requirements were introduced in The Companies (Registrar, Languages and Trading Disclosures) Regulations 2006 which updated the Companies Act 1985 in order to comply with European law, namely the First Company Law Amendment Directive.  They effectively extend the requirements to show this information on companies’ “business letters” to all electronic documents and order forms.

The same information must also be displayed on the websites of these classes of organisation.  This requirement removes the ambiguities previously associated with the requirements of the E-commerce Regulations 2002 which referred to “geographic address” and required the registration number of organisations “registered in a trade or similar register” to be listed on their websites.

This article is provided solely to raise readers’ awareness of new legislation.  Readers should seek professional legal advice to ensure that their emails websites and documents comply with all relevant legislation.

Article Business Practice Data Management Loss Prevention

Equitable contribution clauses

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Scenario: a homeowner decides to have an extension built at his house and employs a consultant and a contractor to carry out work relating to the foundations.  Two months after the work is completed, the roof of the extension collapses because a wall structure was badly constructed and was unstable. The homeowner wants compensation, claiming that both the contractor and the consultant are to blame; he claims that the contractor provided poor workmanship and the consultant failed adequately to assess the ground conditions.


But who can the homeowner sue? Can he sue the contractor, the consultant, or both?


  1. Why include an equitable contribution clause in a contract?

An equitable contribution clause, sometimes known as a net contribution clause, contract seeks to ensure that where two or more parties (e.g. consultants and contractors in our scenario) are liable for the same damage, the liability of each party is restricted to the amount for which that party is responsible.  Such clauses have been included in professionals’ conditions of engagement and collateral warranties for some time.  They are included in the standard terms of engagement published by various professional bodies such as the Royal Institute of British Architects and the Association of Consulting Engineers.

  1. How does an equitable contribution clause operate?

In our scenario, an equitable contribution clause in the homeowner’s contract with the consultant would state that if the consultant is liable, that liability will be capped at whatever it is just and equitable for the consultant to pay having regard to his and any other person’s fault.  In the absence of the equitable contribution clause, the homeowner is free to sue the consultant for 100% of the damages he has suffered.  The consultant can then rely on the Civil Liability (Contributions) Act 1978 to seek to recover a contribution from the contractor.

  1. The law

If parties have joint liability, then they are each liable up to the full amount of the relevant obligation; the converse is several liability, where the parties are liable for only their respective obligations.  Joint and several liability is a hybrid of both; with respect to our scenario, the consultant and the contractor are jointly liable, but as between themselves, their liabilities are several.

The Civil Liability (Contributions) Act 1978,  s. 1(1) provides that a person who is liable in respect of any damage is entitled to recover a contribution from any other person liable in respect of the same damage.  This means that if the homeowner pursues the consultant for damages, and receives payment in full, the consultant can then pursue the contractor for a contribution to their share of the liability.

  1. Shifting risk and responsibility

Back to our scenario: in the absence of an equitable contribution clause, the homeowner decides to sue the consultant for the damage he has suffered.  By paying all of the damages to the homeowner, the consultant takes the risk that the contractor is solvent and so will be able to meet any claim under the Civil Liability (Contributions) Act 1978.  If the contractor is insolvent, then the consultant will not have a meaningful remedy.

But if the consultant is a party to a contract which contains an equitable contribution clause, the risk of the contractor’s insolvency shifts to the homeowner.  If the consultant is 30% responsible and the contractor 70% responsible, then the consultant will be liable only for 30% of the homeowner’s loss, even though under the joint and several principle he would be responsible for 100%, and even if the contractor is insolvent. The equitable contribution clause means that the contractor’s 70% fault is funded by the homeowner rather than the consultant.

Invariably, developers and investors are not keen on equitable contribution clauses as they can affect recovery of losses.  Insurers, on the other hand, welcome such clauses. For consultants and contractors they have an important role to play in an effective risk management strategy.

  1. Example of an equitable contribution clause

This example is shown for illustrative purposes only and should not be regarded as a substitute for taking legal advice.

Without prejudice to any other exclusion or limitation of liability, damages, loss, expense or costs the liability of [the Consultant] for any claim or claims under this Agreement shall be further limited to such sum as it would be just and equitable for [the Consultant] to pay having regard to the extent of his responsibility for the loss or damage giving rise to such claim or claims (‘the loss and damage’) and on the assumptions that:

  1. all other consultants, contractors, sub-contractors, project managers or advisers engaged in connection with [the Project] have provided contractual undertakings on terms no less onerous than those set out in Clause [ ] to the [the Client] in respect of the carrying out of their obligations; and
  2. there are no exclusions of or limitations of liability nor joint insurance or co-insurance provisions between the [Client] and any other party referred to in this clause and any such other party who is responsible to any extent for the loss and damage is contractually liable to the [Client] for the loss and damage; and
  3. all such other consultants, contractors, sub-contractors, project managers or advisers have paid to the [Client] such sum as it would be just and equitable for them to pay having regard to the extent of their responsibility for the loss and damage.


Dr Alan McBride

Steven Francis

Eversheds LLP solicitors

Article Business Practice Loss Prevention

Electronic Tenders and Email

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Both the Loss Prevention WG and the Business Practice WG have raised questions about e-business and email that highlight a degree of confusion and uncertainty in this area.

If you share this sentiment, you will be interested in guidance from the Construction Industry Council (CIC). This can be found on the website: and following the links to liability/contracts.

The publication ‘e-Business or e-Business’ contains links to answer a number of pressing questions which include:-

Setting up a Website eMAIL
Formation extranets
eRetention & Archiving
Computer Disposal
Relevant Legislation/Codes of Practice

A useful list of publications for purchase or free download can be found there, including the new collateral warranty for consultants and a new liability briefing which is worthy of further study entitled ‘Managing liability through financial caps’

Note: The CIC is the representative forum for the industry’s professional bodies, research organisations and specialist trade associations. The AGS is a Member via its membership of The Ground Forum.