Liability for Construction Defects – Practical Considerations.
Construction Defects

Liability for Construction Defects – Practical Considerations

05-04-2024

Defects in construction works amount to a breach of contract entitling the employer to damages. HW Nevill (Sunblest) v William Press and Son (1981).  In the absence of defects clause the Employer is entitled to damages, period, for any unremedied defects.

A defects clause in a contract will set out the rights of the contractor in relation to defects normally giving the right to remedy them himself at his own cost. What contractors do not generally appreciate is that a defects clause is a benefit to the contractor where such a right is included in the contract.

Some defects clauses make it optional for the employer to employ others and set off sums. The contractor might prudently seek to amend such a clause to one that allows the right to remedy his own defects. It is advisable if such a clause exists to make sure the project is delivered defect free at Practical Completion of the works!

Some defects clauses (e.g. JCT contracts) most will be familiar with set a time for drawing up defects after the rectification period has ended. For example, within 14 days of the rectification period end date. The world being what it is, invites arguments from the contractor reticent to address defects, where such a clause exists when the list is not done or issued after the 14 days. The argument being no liability as there is no list or the list is out of time.  Remember always, the Employer is entitled to damages for defects, period. The contractor will harm himself by ignoring any issues or defects list however late or early as the Employer is entitled to damages for breach of contract for the defects. Pearce and High Ltd v Baxter (1999). The time periods thus simply attempt to manage the process.

So, what damages can be claimed by the Employer? Damages for the work where others are employed are limited to what it would have cost the liable contractor to remedy the defects. Not what you might logically think being the actual cost of engaging others. William Tomkinson & Son Ltd v Parochial Church  Council of St Michael and Others (1990). The proof and agreement of damages due are thus presented with some difficulty. As well as the works there may be consequential losses to consider, such as loss of profit, loss of opportunity, expert costs or legal costs associated with remedying the defects each case will be on its merits.

Another consideration is how long after the work has been completed can a defects damages claim be brought? The Limitation Act 1980 prevents stale claims for defects being brought six years or twelve years in the case for contracts signed under deed, after the date of Practical Completion. Sections 7 and 8 refer and Thameside Metropolitan BC v Barlow Securities Group (2001) set these parameters. There are also other statutes to consider as applicable such as the Latent Damage Act 1986 and the Building Safety Act 2022, which dictate different limitation periods, the latter of which in certain instances (high rise buildings) provides a limitation period going back 30 years.

Generally, actions in respect of patent defects (known defects) will be time barred six or twelve years after Practical Completion. More time can be added where latent defects are discovered (e.g. non-compliant flammable cladding) as noted above.  

In summary, contractors should keep in mind that defects are breaches of contract and they will be liable for damages in any event should such not be remedied.

The question that then arises is what is a defect? Has delivery been done as contracted and is the problem simply the  Employer does not like it? Is the remedial work demanded actually a variation? We will look at this topic next time!


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