Claims · Defect Liability

Design Defect Claims: Liability, Remedies and Damages

When design errors compromise a building’s safety, quality, or functionality, how are claims assessed and damages calculated under construction contracts?

7 min read · Updated 24/04/2026

In this article

1. Design Defect Claims: Overview and Liability Framework
2. Categories of Remedies: Expectation, Reliance, and Restitution
3. Design Responsibility Under FIDIC Contracts
4. Common Types of Design Defects and Claims
5. Assessment of Damages for Design Defects
6. Expert Determination and Dispute Resolution

Key takeaway

Design defect claims arise when design errors cause economic loss or physical damage. Recovery depends on framing the claim correctly—as expectation damages (to complete the work properly), reliance damages (for wasted expenditure), or restitution. Contractual allocation of design responsibility is critical; arbitrators assess liability by reference to professional standards, compliance with building codes, and the contractual duty to design with reasonable skill and care.

1. Design Defect Claims: Overview and Liability Framework

Design defect claims arise when a design professional (architect, engineer, or design consultant) fails to design a building or structure in accordance with the contract specification, applicable building codes, or the professional standard of care required. The result is a defect that compromises safety, functionality, durability, or value.

In construction, design defects can trigger claims by multiple parties:

• Owner/Employer Claims: Against the designer for cost of remedial works and loss in value.
• Contractor Claims: Against the designer for cost of correcting design errors and delays caused by design issues.
• Subcontractor Claims: Against the designer or main contractor for cost and delay arising from design defects affecting their scope.
• Third-Party Claims: In cases of safety failures, third parties (injured workers, neighbouring properties) may claim for personal injury or property damage.

The Standard of Care

A designer is required to exercise reasonable skill and care in the discharge of their professional duties. This standard is not perfection; it is the level of competence expected of a reasonably competent designer at the time the design was prepared. Important points:

• An error of judgment or selection of a method later shown to be suboptimal does not necessarily breach the duty, if conflicting professional opinion existed at the time.
• The designer cannot lower the duty by claiming “ordinary competency”; if they hold themselves out as a specialist, a higher standard applies.
• The designer may rely on the “state of the art” defence—the standard of care depends on what was expected of competent designers at the material date (date of design), not hindsight.
• Designers must keep abreast of advances in methods, materials, and codes; passive reliance on outdated knowledge is negligent.

Contractual allocation of design responsibility is critical. Under FIDIC, the Engineer (or Design Consultant, if employed separately) is responsible for design unless the contract explicitly allocates design to the Contractor or third-party designers.

2. Categories of Remedies: Expectation, Reliance, and Restitution

When a design defect is established, the injured party may pursue relief under three distinct legal frameworks:

Expectation Damages

Expectation damages aim to place the non-breaching party in the position they would have occupied if the contract had been performed correctly. In design defect claims, this typically means the cost to remedy the defect or the diminution in property value.

Expectation damages may also include consequential losses, such as business interruption, temporary accommodation costs during remedial works, and financing costs if the owner had to borrow money to fund repairs.

Reliance Damages

Reliance damages compensate for losses incurred in reliance on the designer’s promise or design specification. The aim is to place the non-breaching party in the position they would have been in if the contract had never been formed—that is, they are refunded for wasted expenditure.

In construction, reliance damages might cover:

• Cost of work already performed based on the defective design.
• Mobilisation costs, site establishment costs, and preliminary expenses incurred in reliance on design specifications.
• Cost of materials procured to the defective design.

Reliance damages are often lower than expectation damages, so a claimant may choose this basis if it yields a higher recovery or if proof of actual loss is difficult.

Restitution

Restitution aims to restore the non-breaching party to their original position prior to the breach. In design defect claims, restitution is less common but may apply where:

• The designer was paid a fee for services not properly performed, and the owner seeks recovery of fees paid.
• The designer was wrongfully enriched by receiving payment for defective work.

Restitution is typically a recovery of the design fee, not the cost of remedial works. It is pursued when the owner wishes to recover what they paid rather than claim for downstream losses.

3. Design Responsibility Under FIDIC Contracts

Under FIDIC Red Book 1999 and 2017, the Engineer is responsible for preparing design, specifications, and drawings. Key contractual provisions include:

• FIDIC 1999 Clause 5: The Engineer shall perform design services in a professional and timely manner, providing detailed drawings and specifications to enable the Contractor to execute the work.
• FIDIC 2017 Clause 3: The Engineer shall provide design information, specifications, and drawings that enable the Contractor to plan, resource, and execute the work safely and efficiently.

The contract may allocate portions of design to the Contractor (design-and-build contracts). In such cases, the Contractor bears design liability for those elements, subject to compliance with the brief and performance specifications provided by the Employer.

Design Liability: Designer vs. Contractor

A critical distinction: The designer is not liable for defects in the Contractor’s execution, even if the designer performed site supervision. However:

• If the defect arose from design errors or omissions, the designer is liable.
• If the designer performed site inspection duties and failed to identify and report defects, the designer may bear shared liability for failure to warn.
• If the designer delegated design responsibility to the Contractor or specialist subcontractors and failed to check their work, liability may attach if the delegation was improper or the failure to review was negligent.

In disputes, arbitrators carefully assess the scope of each party’s contractual obligations and whether the defect flowed from design error or execution failure.

4. Common Types of Design Defects and Claims

Design defects fall into several categories:

• Structural Defects: Errors in foundation design (subsidence, settlement), structural analysis, or load calculations resulting in inadequate capacity or unplanned deformation.
• Constructability Issues: Designs that are unclear, incomplete, or practically impossible to construct without major rework. Examples: conflicting dimensions, omitted details, impossible tolerances.
• Specification Non-Compliance: Designs that fail to comply with applicable building codes, regulations, or performance standards (fire safety, thermal efficiency, accessibility).
• Material/System Selection Errors: Selection of materials or systems unsuitable for the environment, with inadequate durability or performance.
• Coordination Failures: Lack of coordination between architectural, structural, mechanical, and electrical designs, resulting in clashes, rework, and delays.
• Omissions: Critical elements omitted from design (e.g. waterproofing details, drainage, expansion joints) resulting in water ingress or deterioration.

5. Assessment of Damages for Design Defects

Calculating damages for design defects requires careful analysis of the nature of the loss and proper substantiation with evidence.

Cost of Remedial Works

The primary measure of loss is the cost to remedy the defect and bring the building into compliance with the design brief and applicable codes. This requires:

• A detailed remedial design prepared by a qualified engineer.
• A cost estimate prepared by a quantity surveyor or contractor based on the remedial design.
• Evidence of the scope and quality of remedial works (quotations, invoices if work has been completed).

Arbitrators will scrutinise remedial cost estimates to ensure they are reasonable and not inflated. A competitive tender or market rate comparison strengthens the claim.

Diminution in Value

If remedial works are not economically justified (i.e., the cost to fix exceeds the loss in value), the claimant may recover the diminution in property value instead. This requires valuation evidence from a property appraiser or real estate expert.

Consequential Losses

If remedial works cause delay or business interruption, the claimant may claim consequential losses:

• Accommodation and Relocation Costs: If the building is uninhabitable during remedial works, cost of temporary accommodation or relocation of occupants.
• Financing Costs: Interest on loans taken to fund remedial works.
• Lost Income: For commercial properties, lost rental income or business revenue during closure for repairs.

Consequential losses are only recoverable if they were reasonably foreseeable at the time of the breach and properly substantiated with evidence.

6. Expert Determination and Dispute Resolution

Design defect disputes almost always require expert evidence. The typical experts instructed are:

• Structural or Civil Engineer: To assess whether the design complies with applicable codes and professional standards, and to advise on remedial design.
• Quantity Surveyor: To quantify remedial costs and analyse the cost-benefit of alternative remediation strategies.
• Building Surveyor or Property Appraiser: To assess diminution in property value.

Under DIAC Rules (2022) and FIDIC arbitration clauses, expert evidence must be independent and objective. An expert acting for a party must maintain impartiality and declare any conflicts of interest. Arbitrators place significant weight on credible, well-reasoned expert opinion and often dismiss speculative or partisan evidence.

Early expert assessment—even before formal arbitration—can clarify liability, quantify remedial costs, and often lead to negotiated settlement. Many design defect disputes resolve when liability is clear and costs have been objectively quantified by independent experts.

Resolve Design Defect Disputes Through Expert Assessment

Design defects can be costly and complex to resolve. Whether you are pursuing a claim for remedial costs or defending allegations of design negligence, expert engineering assessment and early negotiation often achieve fair resolution faster than protracted arbitration. Our team of experienced consultants and expert witnesses can evaluate design liability, quantify remedial costs, and advise on the strongest strategy for resolution.

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