Case of Fabrication Systems Uganda Limited v Zeus Agro Limited
When a contractor undertakes both the design and construction of a project, its responsibilities can extend far beyond simply putting materials together on site.
But where exactly does that liability begin? And where does it end?
The decision in Fabrication Systems Uganda Limited v Zeus Agro Limited, Civil Suit No. 115 of 2022 [2025] UGCommC 316, provides a useful illustration of how these questions can arise in practice.
The dispute concerned a contract under which Fabrication Systems Uganda Limited was engaged to construct six prefabricated structures for Zeus Agro Limited at Bunambutye, Bulambuli District. The contract was valued at US$118,000, of which US$93,000 had been paid. The contractor subsequently pursued the outstanding US$25,000.
Zeus Agro, however, disputed the contractor’s entitlement to the balance and raised a counterclaim relating to alleged defects and incomplete works.
What followed was not merely a dispute over an unpaid balance. The case required the Court to consider questions of design responsibility, workmanship, defects, completion, taking over, expert evidence and the conduct of the employer and contractor.
Where Design-and-Build Liability Begins
One of the most important features of a design-and-build contract is that the contractor may assume responsibility for both sides of the equation: design and construction.
This means that the contractor’s obligations may not end with constructing the works.
Where the contractor has undertaken the design, the adequacy of that design may itself become part of the contractor’s contractual responsibility.
In Fabrication Systems Uganda Limited v Zeus Agro Limited, the Court considered issues relating to the design and structural adequacy of the prefabricated structures, including environmental considerations such as wind loads.
The lesson for contractors is straightforward: accepting design responsibility means accepting responsibility for the consequences of that design, subject to the precise terms of the contract.
A contractor should therefore be particularly careful when entering into a design-and-build arrangement. The contract should clearly establish:
- who is responsible for the design;
- the design standards to be applied;
- who approves the design;
- whether employer approval transfers or limits responsibility;
- responsibility for site conditions and information supplied by the employer; and
- the extent of the contractor’s fitness-for-purpose obligations.
Employer Approval Does Not Necessarily End the Inquiry
Design-and-build projects often involve several layers of review and approval.
Drawings may be submitted by the contractor, reviewed by consultants, approved by the employer and then implemented on site.
But approval does not necessarily answer the question of contractual responsibility.
The critical question remains: what did the contractor undertake under the contract?
If the contractor expressly assumed responsibility for design, an argument that the employer or consultant saw and approved the drawings may not, by itself, eliminate the contractor’s contractual obligations.
This is why the wording of the contract matters so much.
Construction Defects and Design Defects Are Not the Same Thing
A construction project can fail because something was designed incorrectly, because something was constructed incorrectly, or because the materials or workmanship did not meet the required standard.
These distinctions matter when determining liability.
A contractor responsible for design and construction may potentially find itself responsible for both categories.
For claims professionals, this makes the investigation of a defect particularly important.
It is not enough to identify a crack, failed connection, leaking roof or damaged structure. The investigation should establish what caused the defect and whether that cause falls within the contractor’s contractual responsibility.
That requires the claim to move from allegation to evidence.
Taking Over Can Become a Significant Issue
Another important aspect of the case was the conduct of the employer in taking possession of and using the structures before all aspects of the works had been formally completed.
Construction contracts usually establish procedures for completion and taking over. But in practice, parties do not always follow those procedures perfectly.
An employer may begin occupying or using a building while minor works remain outstanding. That conduct can subsequently become relevant when determining when the works were effectively taken over.
This has potential consequences for matters such as:
completion, the defects liability period, retention, outstanding works and responsibility for subsequent defects.
The lesson is particularly important for employers: if the works are being used before formal completion, the parties should clearly document the status of the works and the basis upon which possession is being given.
Expert Evidence Can Make or Break a Defect Claim
Construction disputes are inherently technical.
Whether a structure is defective, whether a particular defect resulted from poor design or workmanship, and what it would cost to rectify the problem are matters that frequently require expert evidence.
In this case, the Court considered expert evidence in determining the issues before it.
The practical lesson is important for both sides of a construction dispute.
If a party intends to challenge an expert’s conclusions, the challenge needs to be properly supported. It may require cross-examination, a competing expert opinion, an examination of the methodology used, or evidence demonstrating that the expert’s assumptions are incorrect.
A construction claim should therefore be built on more than photographs and complaints. Technical allegations require technical evidence.
The Employer’s Conduct Also Matters
Design-and-build liability does not mean that every problem automatically becomes the contractor’s responsibility.
The conduct of the employer can also be relevant.
Where an employer interferes with the contractor’s ability to complete the works, takes possession prematurely, changes requirements or otherwise contributes to the circumstances giving rise to a dispute, those matters may affect the assessment of liability and damages.
Construction contracts are reciprocal arrangements. Both parties have obligations, and both parties’ conduct can matter when the Court determines the consequences of a breach.
The Final Account Is Not Always What It First Appears
The Court ultimately did not simply award the contractor the full US$25,000 claimed.
It considered the proven defects and remedial costs and allowed a set-off of US$20,770.46 against the outstanding contract balance.
The result was a net award of US$4,229.54 to Fabrication Systems Uganda Limited, together with interest at 6% per annum from 31 May 2019 until payment.
The outcome demonstrates an important feature of construction disputes: the final financial position between the parties may only become clear after the competing claims and counterclaims have been properly assessed.
So, Where Does Contractor Liability End?
There is no single answer.
In a design-and-build contract, the starting point is the contract itself.
The contractor’s liability will depend on what it agreed to design, what it agreed to construct, the standards it agreed to meet, the information supplied by the employer, the causes of any defects and the conduct of both parties during execution.
The Fabrication Systems Uganda Limited v Zeus Agro Limited decision therefore offers a useful reminder to contractors, employers and construction professionals:
Do not look at a defect in isolation. Look at the contract, the design, the construction, the evidence and the conduct of the parties as a whole.
For contractors undertaking design-and-build projects, the message is particularly important: design responsibility is not merely an additional service. It can fundamentally change the risk profile of the contract.
And for employers, clearly defining that responsibility at the outset may be one of the most important steps in protecting the project from future disputes.
