A defects liability period is a set period of time after a construction project has been completed during which a contractor has the right to return to the site to remedy defects. A typical defects liability period lasts for 12 months.
What is the purpose of a defects liability period?
Defects liability periods - also known as rectification provisions - can be of benefit to both parties.
For the contractor, it is likely to be more economical and efficient for it to carry out remedial works itself than to pay the costs of another contractor hired by the employer. From the employer's perspective, it will not need to hire an alternative contractor to carry out the work, or to carry out the work itself and reclaim the cost. The employer will also not run the risk that any warranties provided by the original contractor may be affected by a third party carrying out works on the site.
If there is a contractual right for the contractor to rectify defects, and the employer either does not notify the contractor that rectification is needed or refuses access to the site, then the employer may be in breach of contract. Case law illustrates, however, that the contractor will not normally be 'let off the hook' if this happens. The employer will still have a claim for the cost of rectifying the defects, but the claim is likely to be limited to the amount it would have cost the original contractor to carry out the works. It will not be able to claim for remedial works or working methods found not to be strictly necessary.
Employers should therefore give careful consideration to the provisions in the contract before hiring a new contractor to carry out remedial works. This is especially important if the contract stipulates that the employer must notify the original contractor that remedial works are needed before it can make a claim for recovery of any costs of rectification.
What if there is no contractual provision for defects rectification?
If there is no contractual provision, the contractor does not have the right to return to the site to rectify defects. However, the employer's general duty to mitigate its losses before making a claim by taking reasonable steps to avoid or reduce them means that its damages may be limited if it refuses to allow the contractor to rectify defects – especially where the defects are relatively minor. The relevant test is whether the employer has failed to act reasonably. If the contractor's original work was of a low standard then the employer can argue that it was reasonable to refuse to let the same contractor return to the site. In deciding whether it is reasonable to refuse to let the contractor return to the site the court can take into account a breakdown in the relationship between the two parties.
Are defects liability provisions exclusive?
Defects liability provisions are not an exclusive remedy, unless the contract clearly states that there are no other remedies available under the contract. The contractor will remain liable for breach of contract.
Defects liability periods will only arise if they are included in the contract. Contractors therefore need to be aware that they do not have the automatic right to return to the site to fix any defects. Employers should give careful consideration to the wording and requirements of defects rectification provisions where they are considering hiring another contractor to fix the original contractor's mistakes.