By VOLOCO LLP, Jan 31 2019 07:09AM
Defects are one of the most common causes of disagreement in construction that often lead to expensive and lengthy disputes. Understanding what a defect is and your obligations as the contractor is critical for your business. This article sets out the basics.
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WHAT IS A DEFECT?
The simple definition of a defect is when an element of the work is not in accordance with the contract. It could be a defect in the design, workmanship and/or the materials or systems that have been used. They will often become apparent when there is a failure of a part of the building causing damage to a person or properly and usually resulting in financial harm to the owner.
CATEGORIES OF DEFECTS
They can broadly be categorised into
• “Patent defects”: those that are known or readily obvious upon inspection
• “Latent defects”: concealed and often not readily observable
RECTIFICATION / DEFECTS PERIOD
Most contracts will set out that there will be a period after “Completion” or “Practical Completion” known variously as “rectification period”, “defects liability period”, “defects period” etc. This will be a period agreed in the Building Contract during which the contractor will be responsible for rectifying the defect when notified and these are “patent defects”.
This period may range from 6-24 months, but is typically 12 months for a significant proportion of buildings contracts
RETENTION RELEASE AND DEFECTS
Release of the balance of any retention held will most likely be linked to the correction of any patent defects notified during the “rectification period”, which will be prompted by the “Notice of Completion of Making Good”, or “Final Certificate” etc depending on the form of contract. There is also likely to be a mechanism within the contract giving the employer the power to engage others to remedy any defects notified correctly, but not corrected by the contractor.
DEFECT VS WEAR AND TEAR
It is important to distinguish between a defect and lack of maintenance that might result in an issue occurring. If you are notified of a defect, check that the Operation & Maintenance instructions / guidance have been adhered to.
DESIGN / WORKMANSHIP / MATERIALS
As mentioned earlier, any defect arising may be as a result of a failure in design, workmanship or materials. Depending on the contractual arrangement, the contractor may be responsible for one, all or any combination of those, so understanding the cause of the defect is critical.
Design: Design defects will usually result from an error or omission or both. An error being when an element of the design needs correcting (including lack of coordination between design documents) or an omission when an element of the design is missed.
Workmanship: When the design documents, are not followed or a lack of care is taken in the construction process that was. It can include failure to adhere to any codes of practice that are a statutory obligation and/or form part of the contract.
Materials: When the wrong or damaged materials are used in the construction process. Even with materials supplied by an employer, the contract may have been amended passing responsibility and liability for quality standards to the contractor. Make sure you check this.
RIGHTS & REMEDIES
Generally, there is no “right to return” for the contractor to rectify defects unless it is specifically detailed within the contract. So, if there is no actual “right to return” within the contract and any relevant period has expired, the employer can engage others to rectify them. However, the employer is duty bound to act reasonably and not spend excessively in doing so.
How long does the liability last?
• "Patent defects": Length of Rectification Period
• "Latent defects": 6 years for simple contracts and 12 years where executed as a deed
How is the cost assessed?
This can be a complicated procedure based on actual cost, loss of amenity etc and is not being fully dealt with in this article
• Understand what actually qualifies as a defect
• Understand what the cause is (design/workmanship/materials)
• Be clear on the timings involved
• Understand what you have signed up to in the contract
If you think your business would benefit from some support in understanding and dealing with defects, VOLOCO can help, so please feel free to get in touch. We have extensive experience in identifying the cause of defects and substantially minimizing any financial implications for our clients.