Professional Documents
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BACK JOB Defective Work in Construction
BACK JOB Defective Work in Construction
In construction and engineering projects the nature and type of defects can vary
dramatically, as can the point at which they become apparent. At one end of the
scale minor defects can easily be corrected before the building or plant is handed
over to the employer, while at the other extreme significant defects may occur
long after the original work has been completed and require extensive remedial
works to fix.
Defects can arise because the work was not carried out in a 'good and
workmanlike manner' in accordance with good practice or a particular design, or
because the wrong materials have been used – matters which would usually be
the responsibility of the building contractor and its supply chain. Alternatively the
designer could be at fault, because a particular design is not working in the
manner that it should. In the frequently used design and build scenario, the
contractor would normally have primary liability for both types of failure –
although it may have consequential claims against its designers and supply chain.
On one view identifying a defect should be easy: something has usually not been
provided in the manner that it should have been, the foundations of a building
could crack and subside, the air-conditioning units fail or the roof leak. However,
in considering 'defects' as a matter of principle, work may be defective even if it
has been carried out with all due skill and care but it fails to meet a particular
specification. For example, brickwork may be erected correctly but the wrong type
or colour of brick could have been used in breach of planning permission.
Potentially difficult arguments can arise where work has been carried out
incorrectly by the contractor but the architect or engineer's design is also at fault.
In these situations, the contractor may deny liability on the basis that even though
the work was carried out defectively, it did not cause the damage complained of.
An employer will not be as concerned as the contractor and architect to get to the
bottom of exactly who is at fault for that as long as it can claim against one or both
of the parties and both still exist.
The standard form construction contracts contain provisions dealing with the
treatment of defective work during the course of construction, at completion and
during the defects liability or rectification period. By way of illustration, the JCT
form provides that the employer may issue instructions requiring the opening up
for inspection of any work covered up or tests of materials or goods or executed
work. The cost of opening up or testing is added to the contract sum, unless the
inspection shows that the materials, goods, or work are not in accordance with
the contract - the contractor then bears those costs.
The question of defects often arises in the context of practical completion (PC),
and whether or not completion can be said to have occurred even though minor
defects exist. In the absence of any definition, guidelines have been developed
from case law which broadly state that:
at the date of practical completion the work should be complete and free
from patent defects;
PC will be achieved notwithstanding the presence of latent defects,
because such defects are by definition not apparent;
any defects which are not apparent at PC which do become evident during
the defects liability period may be addressed in that period;
discretion usually exists to certify PC when minor work remains to be
carried out, although it is possible to insist on completion of all snagging
items before PC.
An issue which often arises in the context of construction projects is whether the
contractor has a 'right to return' to the site to remedy defects. However, there is
no such right unless one is specifically conferred upon the contractor by the
defects liability provisions or otherwise in the contract. Where there is no express
right for the contractor to return to the site to attend to remedial works, or the
relevant period has passed, an employer is entitled to employ others to rectify
defects. However, where a third party is appointed and that is thought to be
unreasonable in the circumstances of the case then the employer may be
criticised for failing to mitigate its loss.
The standard forms use different terminology for the defects rectification period,
including 'rectification period', 'maintenance period' and 'defects correction
period'. The nature and scope of such periods depend on the mechanism adopted
in the particular contract, and they are typically seen as applying to the whole of
the works, the relevant part or section. The length of the period will be negotiated
by the parties and the nature of the works to be undertaken.
In circumstances where defective work is present, several legal remedies may
exist. Starting with remedies in contract, where defective work is present as a
consequence of a breach of contract then a claiming party is entitled to be put
into the position it would have been if the work had been correctly carried out.
This is achieved by a monetary award. The claiming party's losses may be assessed
on the basis of:
Limited exceptions may apply if the new owner is able to show that the contractor
had assumed responsibility for that loss through the provision of skilled advice or
services or at least some design responsibility, and that the owner had relied on
that advice or services or design. Such situations have been held to arise, for
example, where a specialist subcontractor provides services to the contractor who
employed it and where a civil engineer provided design services. However, such
situations are complicated and the preferable route would always be to ensure
that any new owner had the appropriate contractual protection to try and guard
against its losses.
Defective work also raises issues relating to certain 'self help' remedies, including
common law set off or abatement and equitable set off.
Common law set off or abatement: A summary of the legal principles here was
set out by Mr Justice Jackson in 2006:
The issues surrounding set off and abatement lead us to the restrictions on those
rights under the Housing Grants, Construction and Regeneration Act. The Act
provides that a party to a construction contract may not withhold payment after
the final due date unless it gives an effective notice of its intention to withhold
payment including its grounds for doing so to the other party. This is to stop
contractors abusing their position to wrongfully withhold sums due to
subcontractors who typically have no quick or cheap means to challenge the
withholding.
Practical issues
As a starting point, it is worth thinking about how defects and completion issues
should be addressed at procurement stage. Whether something is defective will
often depend not so much on whether it is completed competently from a
workmanship perspective but on the precise standard and specification to be met.
Similarly, if specific tests are to be passed these will need to be provided for
contractually, and consideration given to whether general or liquidated damages
should apply in the event of failure. The precise standard and level of completion
required for PC is something which can often cause arguments, so careful
consideration should be given to whether the completion requirements are clear
and what risks they may hold.
It goes without saying that those passing their obligations down a supply chain
should seek the same assumption of responsibility in relation to defects.
Turning to the execution phase of the contract, the practical issues tend to focus
around evidence and notices. Defects are most likely to be picked up on site if
there is regular monitoring and testing. It will be a commercial judgement for
employers and contractors as to how much they wish to spend monitoring and
testing the works, but what is crucially important is that if defects are identified
that are likely to have implications for the project then comprehensive records will
need to be taken. Similarly, if it is intended to reduce a payment or advance a
claim as a result of a defect, then consideration should very rapidly be given to the
basis of the claim. It is also not uncommon for issues to arise as to whether an
employer waived or agreed to allow a defect to remain. Again, evidence of
agreement or waiver should be obtained.
If you are an end user who did not employ the contractor or design team then you
will want to consider whether you have the benefit of any assignment of the
relevant building contract or professional appointments, or alternatively whether
you have collateral warranties or third party rights.