What can be expected of a naval architect?
Naval Architects are professional engineers and designers responsible for the design of marine vessels and/ or offshore structures. It is hard to pigeon hole the naval architect into a global definition as so many aspects of the profession exist. Clearly, there will be naval architects that specialise in yachts, ferries, merchant ships, military vessels etc and within the type of vessel, each naval architect will have specialist knowledge.
It is not unusual for one “head” naval architect, to preside over many specialised naval architects to produce a final design. Once the design is finalised, sometimes the naval architect will be appointed by the owner as their representative, to oversee a project, checking that the various contractors (the yard) and sub-contractors (electricians, propulsion experts etc) involved in any project are performing their roles correctly.
However, the most vital responsibility a naval architect has to their client is to ensure that a safe, economic and seaworthy design is produced.
What Can Naval Architects do to limit their Potential Exposure to Liabilities (and substantial Legal Fees?)
Whenever you are appointed by a client, you should make sure the terms of your appointment are recorded in your contract. It is usual for such a contract to be in various parts. For example, you may have your own Standard Terms & Conditions on which you will contract. Such Standard Terms & Conditions will probably be suitable for every contract you enter into. The terms of the specific contract detailing the scope of the services the architect will provide will be stated in a Scope of Work and/or General Agreement. In this document you should detail all the works you are prepared to undertake. You should also pay special attention to any work which is not going to be undertaken by you, but which your client could reasonably assume would be. For example, if you are not intending to select or design propulsion units, this should be inserted, as it is reasonable for a lay client to simply assume that this would form part of your work.
Once your contract is in place, failures to meet the obligations contained in the contract may constitute a breach of contract, for which you could be liable to pay damages. You will have a liability to your client for work you have agreed to perform but have not performed and also for work you have undertaken which is not of a sufficient standard. The usual legal standard applied would be that of a “reasonable” naval architect. Your insurance cover should respond to any legal liabilities that arise. It is therefore important that you should only agree to perform your services to this standard and not impose a higher standard of care on yourself by, for instance, agreeing to use “best endeavours” rather than reasonable endeavours. How does this make a difference? If for example, it was standard practice to only test 2 times or 4 times the natural frequency rate of the hull, and a problem arose which could have been avoided by testing the hull at 8 times the frequency rate, you should be able to avoid liability. However, if you agreed to use best endeavours, then you possibly could not avoid liability by saying the tests you undertook were reasonable, as the test would not be the usual “what would a reasonable naval architect do?” but rather “what would a naval architect doing the best job possible have done?”. Clearly, in the second example, you will have a much higher bar to reach.
You cannot always avoid making errors, or not performing the service in a perfect manner. So you need to employ good risk management which should include professional indemnity insurance along with considering the clauses which should be incorporated in your terms and conditions.
1) An exclusion clause - This is a clause which attempts to exclude your liability should you breach your contract. There are certain liabilities (under English law) which you cannot exclude, such as causing death or bodily harm by negligence. However, everything else can be excluded (in the right circumstances). The most important thing to remember about exclusion clauses (in this context between two or more businesses) is that they are subject to a test of reasonableness as defined in the Unfair Contract Terms Act 1977. If the clause is deemed to be unreasonable, it will be totally ineffective. Therefore, it can be better to limit your liability to a reasonable amount which is deemed fair, than unreasonably seek to exclude all liability and have the clause ruled out.
2) A limitation clause – As you will have seen above, this is simply a more generous form of exclusion clause, which seeks to limit liability rather than to exclude it altogether. Again, the reasonableness of the clause will be taken into account. Therefore, if you are being paid GBP10,000 for your services, it may be reasonable to limit your liability to say, GBP100,000. However, if you are earning GBP100,000, then a limit of GBP100,000 may be held as unreasonably low. Ten times your fees is a reasonable figure to apply.
3) Jurisdiction and Law – When you are dealing with international parties, especially if you have offices in many different countries, it is very helpful to agree a jurisdiction and a choice of law. This may seem obvious, but ITIC see many contracts which do not contain such a clause. The result of which is that many tens of thousands of pounds are spent arguing where the claim should be heard before any substantive issue is even contemplated. It is also helpful to agree a jurisdiction which allows the victorious party to claim back their costs from the unsuccessful party. This potential exposure to costs has the effect of deterring litigious clients from making vexatious claims. The USA is a good example of a jurisdiction to avoid in respect of unrecoverable costs.
4) Time Bar - The usual period in which a claimant has to claim against a party is six years. However, this is just a rule of thumb. When it comes to designs, the time frame can be much longer as it may be unreasonable for someone to realise that there is a problem until much later. For example, if the client wants the paint on an offshore rig to last 20 years, a specific paint may be required. If the designer uses a cheaper paint to save costs that only lasts 10 years, and 9 years later it is noticed that the paint is starting to peel away, it is likely that the claimant could still bring a claim. Therefore, it may be helpful to have a contractual time bar of say one or two years. Again, as this is a form of exclusion/limitation which may be subject to a reasonableness test.
Finally, all your contracts and terms & conditions should be made clearly available to your client before the contract is agreed (and preferably signed). It is extremely difficult, if not impossible, to rely on contractual clauses which were not brought to a client’s attention before they agreed to enter into the contract. The only time you may be able to rely on such clauses is if you have a previous course of dealing with that client and have used such clauses in the past.