King & Wood Mallesons

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Case update: EPCM contractors and agency law — a cautionary tale

In the construction industry, and particularly the oil and gas, energy and mining sectors, it is common for principals to appoint a third-party EPCM contractor to carry out engineering and procurement and to manage construction of major projects.

EPCM contractors represent the principal in most aspects of the project. This commonly includes undertaking engineering for the project, negotiating the relevant contract packages with third-party contractors and performing the day-to-day management and contract administration functions for these contracts. These EPCM contractors are agents in their truest sense.

The recent Federal Court Decision of Consolo v Bennett [2012] FCAFC 120 provides an overview on the laws of agency and highlights the circumstances in which an agent’s actions can bind the principal. While not a construction-related case, it discusses the liability of a principal to third parties arising from the misleading conduct of its agents…

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