Reliance letters in design and construction
Reports are often commissioned by parties involved in the design and construction of built assets that another party (other than the original client) then has to rely on to support or inform their own activities. Under such circumstances, the author of the report might issue a reliance letter, confirming that the third party can rely on the contents of the report, or can rely on a specific part of the report.
For example, an organisation selling a site might commission an assessment of geotechnical or environmental conditions that a purchaser later relies on when deciding whether to buy the site and at what price. Under these circumstances, the author of the report might issue a letter confirming that the purchaser can rely on the contents of the report.
Such a letter might include:
- A description of the report(s) to which the letter relates.
- The reason for the reliance.
- A warrant that the author exercised reasonable skill and care in preparing the report.
- Details of the original appointment agreement, perhaps limiting liability to that under the appointment (this requires that a copy of the appointment is provided).
- Other limitations to liability, such as a limiting period.
- A licence for use of the report.
- Confirmation of professional indemnity insurance.
- Consideration from the beneficiary to the consultant.
- A right to assign the benefit of the letter (for example to funders).
- Execution, perhaps as a deed.
This can be seen as a quicker and easier arrangement than providing a collateral warranty, or relying on the provisions of the Contracts (Rights of Third Parties) Act. However, it is important to ensure that the letter is carefully drafted and that the correct details are entered. Whether the result of a reliance letter is simply a common law duty to use reasonable skill and care, or whether it amounts to a contract between the parties that may introduce a greater duty will depend on the wording of the letter.
There are four essentials of a contract:
- Two or more parties; and
- An intention to create legal relations; and
- An agreement; and
- Consideration
The two essentials that might be disputed are an intention to create legal relations and consideration. This might be demonstrated by a consideration clause and by both parties executing the letter. However, even in the absence of such provisions, it may be apparent from the actions of the parties that the recipient of the letter has relied on it to their detriment, and this may be sufficient to establish ‘consideration’.
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
UK Construction Week, London is here !
Debuting major international pavilions and much more.
Getting the most out of heat pumps and heating
How heat pumps work and how they work best.
Plumbing and heating for successful retrofit and renovation
Low temperature underfloor systems and heat pumps.
Cost-of-living crisis and home improvement plans
Starting on the right footing and top tips for projects.
Delays on construction projects
Types, mitigation and the acceleration of works.
From Chaucer to Fawlty Towers.
Electrotechnical excellence, now open for entries.
Net zero electricity grids BSRIA guide NZG 5/2024
Outlining the changes needed to transition to net zero.
CIOB Global Student Challenge 2024
Universitas Indonesia wins for second year running.
New project and cultural district described in detail.
The nature of EPCs, crticism and inaccuracies.
History, issues and redesign.
From waste recycling to energy performance the hierchy.
ECA 2024 Apprentice of the Year Award
Entries open for submission until May 31.
UK gov apprenticeship funding from April 2024
Brief summary the policy paper updated in March.
Comments