Fitness for Purpose, Ordinary Purpose, and Built-to-Specification Obligations in Offshore Oil & Gas EPC Contracts

Marthinus Vermeulen

MBA, LLM, LLB 

Consura, Managing Partner

Introduction

This Consura Insight examines the differing legal standards of “fitness for purpose,” “ordinary purpose,” and “built to specification” in offshore oil and gas EPC contracts. It uses as illustration a contractor engaged to design, procure, install, and commission a Produced Water Treatment Unit required to achieve an effluent quality of less than 10 parts per million (ppm) oil prior to discharge or reinjection. The discussion explores how each standard affects the contractor’s obligations, allocation of risk, and potential liabilities.

1. Fitness for Purpose

A fitness-for-purpose obligation requires that the completed works or supplied goods are capable of achieving the purpose expressly or impliedly communicated to the contractor.Liability arises if the works fail to achieve that purpose, even where the contractor has exercised reasonable skill and care or complied with the employer’s specifications.

This principle was affirmed by the UK Supreme Court in MT Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg East Ltd [2017] UKSC 59, [2018] AC 1473, where a contractor was held liable for foundation defects in an offshore windfarm despite compliance with the international standard DNV-OS-J101. The Court held that, read as a whole, the contract imposed an overriding obligation that the foundations would achieve a 20-year design life.

Similarly, in Fluor Ltd v Shanghai Zhenhua Heavy Industry Co Ltd (ZPMC) [2016] EWHC 2062 (TCC), the Technology and Construction Court confirmed that “fitness” is assessed by the system’s ability to perform its intended function at the time of delivery, not simply by conformity with drawings or materials.

Accordingly, where a Produced Water Treatment Unit must deliver effluent below 10 ppm oil, that requirement constitutes a fitness-for-purpose warranty; failure to achieve it would be a breach irrespective of the care or compliance otherwise exercised by the contractor.

In addition, under sections 4(4) and 4(5) of the Supply of Goods and Services Act 1982 (UK), where goods are supplied in conjunction with services, an implied term arises that the goods will be reasonably fit for the purpose made known to the supplier. These provisions may apply where a design-and-build contractor provides both design and equipment supply.

2. Ordinary Purpose

In the absence of a defined performance target, the standard may revert to fitness for ordinary purpose.

Under section 14(2) of the Sale of Goods Act 1979 (UK), goods supplied in the course of business are impliedly warranted to be of satisfactory quality and fit for their ordinary use.Where the buyer makes a particular purpose known to the supplier, section 14(3) implies that the goods must be fit for that purpose.

Where the transaction involves design or system-engineering services, the obligation is usually one of reasonable skill and care, not a guarantee of outcome.

This distinction was emphasised in Trebor Bassett Holdings Ltd v ADT Fire and Security plc [2012] EWCA Civ 1158, where the Court of Appeal held that the defendant, having designed and installed a fire-suppression system, was bound by a duty of reasonable skill and care but not a fitness-for-purpose warranty.

3. Built to Specification

Under a built-to-specification arrangement, the contractor’s obligation is to construct the works strictly in accordance with the employer’s prescribed design and specifications.If those specifications are met, the contractor is not generally responsible for performance failure unless:

1. the contract includes an express performance warranty; or

2. the contractor knows, or ought reasonably to know, that the specifications are defective and fails to warn.

This distinction between design responsibility and compliance with specification was recognised in ICI v Henry Boot Construction Ltd (1989) 47 BLR 1 (CA), where a contractor following the employer’s design was not liable for resulting defects.

The duty to warn of obvious design faults was developed further in Plant Construction plc v Clive Adams Associates (No 2) [2000] BLR 137 (CA) and Co-operative Insurance Society Ltd v Henry Boot (Scotland) Ltd [2002] EWHC 1270 (TCC), both confirming that a competent contractor must alert the employer to design errors that should reasonably have been apparent.

4. Conclusion

The contractor’s obligations depend fundamentally on the contractual allocation of risk.

Standard	Core Obligation	Extent of Liability
Fitness for Purpose	Ensure the works achieve the specified operational result (e.g. < 10 ppm oil).	Strict liability for failure to meet the purpose, irrespective of design or workmanship.
Ordinary Purpose / Skill and Care	Supply goods or perform services suitable for general use and exercise reasonable professional skill.	Liability arises only for negligence or lack of skill and care.
Built to Specification	Construct strictly in accordance with the employer’s design.	No liability for performance unless an express warranty exists, or the contractor failed to warn of known defects.

In the Produced Water Treatment Unit example, these distinctions determine whether the contractor must deliver a guaranteed performance outcome or merely demonstrate professional competence.

Clear drafting that defines performance criteria, establishes the hierarchy between specifications and warranties, and clarifies the applicable standard is essential to achieve balanced risk allocation and minimise disputes.

Table of Authorities

• MT Højgaard A/S v E.ON Climate & Renewables UK Robin Rigg East Ltd [2017] UKSC 59, [2018] AC 1473

• Fluor Ltd v Shanghai Zhenhua Heavy Industry Co Ltd (ZPMC) [2016] EWHC 2062 (TCC)

• Trebor Bassett Holdings Ltd v ADT Fire and Security plc [2012] EWCA Civ 1158

• ICI v Henry Boot Construction Ltd (1989) 47 BLR 1 (CA)

• Plant Construction plc v Clive Adams Associates (No 2) [2000] BLR 137 (CA)

• Co-operative Insurance Society Ltd v Henry Boot (Scotland) Ltd [2002] EWHC 1270 (TCC)

• Sale of Goods Act 1979, ss 14(2)–(3)

• Supply of Goods and Services Act 1982, ss 4(4)–(5)

Recommended Full Citation

Consura Legal Consultancy, ‘Fitness for Purpose, Ordinary Purpose, and Built-to-Specification Obligations in Offshore Service and Supply Contracts’ (Consura Insights, 2025) https://www.consura.ae/insights accessed [_?_].