Defects in construction contracts

Construction solicitor, Abbie Chisnall, looks at defects in construction contracts and how to deal with disputes in relation to defects. 

One of the major causes of disputes in construction contracts is defects. Many disputes can arise in relation to whether there are defects, who is responsible for any defects, how to remedy defects and so on. Contractors need to be prepared to deal with defects as and when they arise to ensure that claims are not made against them. Employers/Main Contractors using Contractors need to ensure that they monitor defects correctly so that they are in a position to get defects rectified or pursue a claim for defects as necessary.

What are defects?

Defects are sometimes defined by the specific construction contract between the parties. However, essentially defects mean any works which are not in accordance with the contract and leaves the works unfit for the use which it is intended for when used in a reasonable way. There are two types of defects, patent and latent.

Patent defects are those which are apparent or can be discovered by reasonable inspection. Latent defects are those which cannot be discovered by reasonable inspection. Patent defects are ones that are identified during the construction works or during the defect liability period. Latent defects are not identified until after and therefore there is no contractual obligation for the Contractor to rectify the defects.

Defect Liability Period

Such periods usually run for 6 or 12 months from practical completion.  The Contractor will be obliged, or at least have the right, to return to rectify any defects that arise during that period.  The Employer will usually retain a small percentage of the contract sum which will be paid to the Contractor at the end of the period, provided that any defects that arise during the period have been rectified.

Defects claims

In construction law, one mistake that contractors often make is the length of time for which they believe they might be liable to answer claims brought against them by their employer in relation to defects. This misunderstanding arises from the common inclusion in construction contracts of a defects liability period, as explained above.

Contractors often assume this means that, provided they have rectified any defects which arise during the defect liability period, there can be no further claims brought against them in respect of the works carried out.  This is not the case.

After the end of the defects liability period, the employer will still have a right to bring a claim against the contractor in respect of any defects which arise within the relevant statutory limitation periods (as set out in the Limitation Act 1980).  For a claim arising out of a contractor’s negligence, this can be as much as 15 years from the date of the negligent act or omission. 

Where a defect amounts to a breach of contract, which will usually be the case, the default limitation period for bringing a claim against the contractor is 6 years from the date of practical completion.  However, if the contract is executed as a deed, that period is extended to 12 years.  Main Contractors should obviously have regard to this situation and seek to ensure that the liability of their subcontractors runs for an equal length of time.  Failing to do so could leave a main contractor liable to its employer for defective works carried out by its subcontractor, with no ability to seek remedy from the subcontractor.

Practical tips

During the works:

• It is important to ensure that records are kept up to date at all times.  If you are the Contractor and it is being alleged that you have not carried out work properly, you need records to show that you have carried out the works correctly.
• Ensure that you follow the notification procedures under the contract. If you are the Employer/Main Contractor, you may need to notify contractors/sub-contractors of defects in a certain way.
• If you are a Contractor that has been alleged of carrying out defective works, follow the contract for either disputing this or carrying out rectification works in the correct timescales under the contract.
• If you are a Main Contractor, ensure that the liability of your subcontractors runs for an equal length of time as under the Main Contract.
• Ensure that all your records are kept for as long as the Contract runs. If you are a contractor and latent defects arise, you need to ensure that you have evidence to be able to defend your case.

Please contact the Construction Division if you would like to discuss anything in this article further or have any construction law queries that you would like to discuss.