Defect Claims in Construction Projects

Defective work is a frequent occurrence in commercial construction projects. Examples of defects may range from minor defects contained in snagging lists at practical completion to more serious defects which may lay undetected for months or even years such as issues with the design of the foundations that may compromise the structural integrity of a building. 

The classic interpretation of a defect is work that has been carried out poorly. However, works may still be defective even if it has been carried out with due skill and care, for example, if the works fail to meet a particular specification. 

Patent and latent defects

It is important to distinguish between patent and latent defects particularly when considering a contractor’s liability to remedy defective works discovered after practical completion i.e. when all of the construction work has been done. 

A patent defect is one that is detectable either at practical completion or during a defects liability period. In other words, a patent defect is one that is apparent on inspection of the works.

In contrast, a latent defect is a concealed defect and may not manifest itself for many years. Latent defects are often uncovered due to defective workmanship or defective materials. In some cases, parties to a construction contract may be able to insure against latent defects although insurance such as this can be difficult to obtain in the UK insurance market. 

One issue that may arise in a construction project is whether a patent defect, rectified prior to practical completion, but reoccurring again later is a latent or patent defect. In these circumstances, whether the defect is latent or patent, will depend on the individual circumstances of the case. 

Defects liability periods

Most standard form construction contracts contain defects liability clauses that ordinarily oblige the contractor to return to the site and remedy any defects that arise within a certain time period after practical completion. The length of the relevant time period depends from sector to sector. For example, substantial civil engineering works may provide for a defects liability period of 24 months as opposed to more simple works which may only provide for a defects liability period of 6-12 months. 

Contractor’s right to return and remedy defects

Contrary to common belief, a contractor does not have the right to return to remedy any defects unless the contract expressly provides for that right. Without an express right to return, an employer is entitled to employ others to rectify any defects that may emerge after practical completion. 

If the relevant contract contains a defects liability provision then the contractor typically does have the right to return and remedy any defects. It is usually in the contractor’s best interests to return and ensure that any defects are remedied once they are given notice of the same. If an employer engages a third party to remedy any defects instead of allowing the original contractor to return, he employer may be criticised for acting unreasonably and failing to mitigate its losses and may mean the employer is prevented from claiming more than what it would have cost the original contractor to remedy the defects in question. 

Giving notice of a defect

If a contractor is given notice of a defect but fails to rectify it, then the employer may recover the cost of having the defect rectified by others.  However, even if the contractor is not given notice of a defect that arose during the relevant defects liability period, it will not normally escape liability together. In this situation, the employer is entitled to engage others to carry out the rectification works, but will only be entitled to recover what it would have cost the original contractor to remedy the defect. 

Maintenance obligations

In some circumstances, the contractor may agree to maintain all or part of the works, as opposed to simply remedying any defects during the defects liability period. Such maintenance obligations should be considered carefully as this normally means the contractor is accepting a wider and more onerous obligation than those imposed by a standard defects liability clause. 

Limiting liability for defects

Most bespoke and standard form construction contracts provide for the contractor remaining liable for defects discovered after the expiry of the defects liability period. However, once the defects liability period has expired, the contractor no longer has the right or the obligation to return and rectify defects and the employer can employ other contractors to rectify any defects that may emerge.

On larger, more complex projects, contractors may want to try and limit their liability for defects after the end of the defects liability period to match any warranty periods provided by any sub-contractors or suppliers of equipment and to avoid being liable for any defects which arise as a result of the acts or omissions of third parties. Furthermore, contractors may want to consider a provision that means its liability for all defects ends once the Final Certificate has been issued. Finally, contractors may also want to exclude any liability for consequential losses arising from any defective works, for example, loss of revenue during an outage period. 

Damages for defective works

Defects ordinarily constitute a breach of contract. In an action for breach of contract, damages are normally awarded on the principle that the claimant should be put in the position it would have been in had the contractual duties been properly carried out. Losses caused by defective works are usually assessed by reference to the cost of putting the work right. However, sometimes the court refuse to award damages for the cost of putting the work right and instead make an award to reflect the loss in value of the property in question. This is often where the cost of putting the work right is disproportionate. 

Here to Help

Our specialist Construction Team routinely advises on a broad range of construction disputes, including claims for defects.  If you would like further information or assistance, our Construction Team would be happy to help.  You can contact us on 0161 941 4000 or via email.