This judgment illustrates the importance of compliance with functional requirements unless express reservations are made and illustrates the rule of interpretation contained in NS 8407 and NS 8417, paragraph 2.2, first paragraph.
In addition, the Court of Appeal sets out how to reason about the claims arising from the contract on the basis of paragraph 14 of the two contract standards.
The parties to the case were a general contractor and a total subcontractor, and the contract was based on NS 8417. The result would still have been the same if the contract was based on NS 8407 and if the dispute concerned the builder and the general contractor.
The case concerns a settlement following the construction of a new sewage treatment plant in Porsangmoen camp where Arctic Entreprenør AS (Arctic) was to construct a new treatment plant in a turnkey contract based on NS 8407. Defence Buildings was the builder. Arctic engaged Ipec Miljø AS (Ipec) as a total subcontractor for the delivery of a complete processing plant.
Ipec was supposed to meet the functional requirements resulting from the Defence Building's competitive basis.
Of particular relevance to IPEC's commitments, it was clear from Defence Construction's competitive basis that the entire delivery was to be placed inside an operational building. The processing plant was to be complete and it involved sludge treatment, dewatering/thickening and sludge storage.
In the competition basis, there were also provisions that the plant should “be of such a nature that they require little follow-up and maintenance”. On page 15 of the judgment, it is stated that the plant should not require anything other than regular supervision from the operating staff in normal operation, and that the need for access and inspection opportunities should be met in such a way that “laborious measures” are not required. Since the plant was supposed to handle sewage, requirements were made such as “discharge of odours not accepted” and a suitable high pressure washer was to be fitted to clean the process equipment.
The competition basis also described the functional requirements imposed on the building where the processing plant was to be located. The court has cited, among other things, that the building was designed and described as an expression of “desired quality in terms of management, operation and maintenance. The floor plan shows what functions need to be attended to and clearly illustrates the distinction between clean and dirty zone”. On page 5 there is also information that the competition grounds had also described any “need for walkways, stairs and repos” which presupposes a building.
It is also clear that the building should “designed and executed in accordance with the laws and regulations in force at all times”, and deviations from preaccepted solutions must be approved by the builder. This meant, among other things, that TEK17 had to be complied with, while deviations from solutions specified in the TEK17 Supervisor (VTEK) had to be pre-approved by Forsvarsbygd.
Based on this, Ipec supplied only a mud press that was placed inside a 20-foot container, which stood in the open air. Furthermore, Ipec stated that it was not obliged to supply a sludge treatment plant.
It falls too far to render all conditions the court considered before concluding that the mud press placed inside such a cramped container was something entirely different from what followed from the competitive basis, namely placed inside a building. The court also concluded that the plant
With this as a starting point, the Court of Appeal first had to rule on the question of whether Ipec had made an express reservation not to deliver what resulted from the competitive basis and its functional requirements.
It follows that paragraph 2.2, first paragraph of NS 8417 and NS 8407 respectively, that “(F) unit requirements and requirements for solutions, quality or brand specified in the Offer or Competition Basis apply in front of solutions or constructs in TUE's offering, unless he has made express reservations.”
The court therefore reviewed Ipec's offer, email correspondence between the parties, meeting minutes etc to clarify whether such an “express reservation” had been taken on Ipec's part.
In that regard, the Court of Appeal writes on page 13 that there was nothing in the offer that implied that Ipec expressed or did “note that the container solution will not fully or partially meet the requirements imposed by the builder on the subject of the contract”.
On page 14 of the judgment, the Court of Appeal summarises the evidence on this subject. There, the court writes the following:
“In summary, the Court of Appeal finds that the container solution was not a fully designed or final solution at the time the offer was made. Also, no documentation has been submitted to the Court of Appeal showing that Ipec has expressed that the offered container solution did not meet the functional requirements of the competitive basis. The rule in NS 8417 paragraph 2.2. is a result of the general subcontractor having responsibility for meeting functional requirements within its area of responsibility. This also implies that Ipec itself must bear the responsibility for not giving clearer expression to a reservation in its offer”.
Subsequently, the Court of Appeal considered whether the container solution was contractual, and we have already written that it was not. What might be appropriate to highlight here is that the court took as its starting point NS 8417 paragraph 14 “Requirements for the subject of the contract”. We have written a separate article about this provision that exists here.
The court then reviews paragraph 14.1 “Agreed requirements”, point 14.2 “Unspecified parts”, point 14.3 “The purpose of the builder” and indirect point 14.4 “Laws, Regulations and Public Decisions”.
We cannot account for everything the Court of Appeal writes in connection with these provisions, and our article provides a good representation of how these are to be understood and applied.
The brief nevertheless mentions that the Court of Appeal did not consider Ipec to have delivered in accordance with the agreed claims, ref what has already been written above.
In the case of unspecified parts, the Court of Appeal wrote, among other things, it is “typical that the contract documents do not contain specific requirements, but specify functions the contract subject should have and often combine with quality requirements. It is then up to the total subcontractor through further engineering to provide a solution that meets these requirements”. In this regard, the Court of Appeal also referred to NS 8417 paragraph 16.1 where it is stated that the general subcontractor shall “provide all necessary engineering in order to deliver the contract object in accordance with the contract, including the rules of paragraph 14”.
NS 8417 paragraph 14.3 which states that the subject of the contract should fit “for the purposes which the contractor has with it and of which the general subcontractor was or must have been aware at the time of the conclusion of the contract“. The Court of Appeal then explains the conditions at Porsangermoen in winter, how the container's narrow space would have made operation virtually impossible, etc., before the court concluded that the builder's purpose had not been met.
With regard to the requirements in paragraph 14.4, which states that the subject matter of the contract must comply with laws, regulations and public decisions, this is not discussed in particular. However, it emerges that the parties agreed that Ipec's solution did not satisfy TEK 17, and that was also the court's conclusion.
The conclusion was that Ipec had delivered inadequately, and Ipec became responsible for reimbursing Arctic's costs of erecting the building where the processing plant should be.
The judgment also contains a couple of other points of contention, including about daymulk, but we do not go into more detail on these.
