Building Defects: A legal perspective

Guest Blog Introduction and Biography

In March of this year both myself and Sarah Fox attended the RICS East Midlands CPD conference as guest speakers. I’d not met Sarah at this point and was lucky enough to attend her talk on letters of intent. Quite simply it was possibly the best talk on contract law that I’d ever attended and I was so impressed with Sarah’s knowledge of contract law that I asked if she’d write a guest blog.

Sarah Fox is a construction contracts strategist and author of a series of 500-word construction contracts. She wants the industry to adopt contracts that they can read, understand and use. She uses coaching, talks and workshops to help professionals to write simple contracts and understand complex ones. Her keynote is “Never sign on the dotted line” and you can find out more at http://www.500words.co.uk

Patent and Latent Defects

“Defects will occur in buildings. It is one of the great certainties in construction, the equivalent of death and taxes in life more generally” [1]

Borescope used to locate a latent defect.

Borescope used to locate a latent defect.

Generally a defect is “anything which renders the [works] unfit for the use for which it is intended, when used in a reasonable way and with reasonable care.” [2]

There are two types of defect: patent and latent. Patent defects are defects that are visible or capable of being discovered (observed and observable). Latent defects are not reasonably discoverable and often come to come to light after completion and even after the defects period.

Any client needs to ensure that the works meet the required contractual standards for goods, design and workmanship. This can be done in a number of phases:

During Construction

The contract administrator must identify visible defects and exercise her powers before completion and ensures that issues relating to quality and defects do not wait until the defects period. Depending on the terms of the building contract, the contract administrator may have:

  • the power to issue instructions to require the removal from site of work or materials not in accordance with the contract (JCT 2011 DB clause 3.13.1)[3] or other instructions as appropriate (JCT clause 3.14);
  • the power to require the contractor to open up or test various elements of the works (JCT clause 3.12);
  • a duty not to include in interim certificates the value of works not in accordance with the contract (JCT clause 4.14.1.1);
  • a right for the employer to terminate the contractor’s employment for failure to rectify defects as instructed, provided the works are materially affected (JCT clause 8.4.3);
  • the duty to confirm whether the works are completed to her satisfaction (MF/1 rev 5 clause 13.2);
  • the ability to confirm the performance of the works through testing before and after completion (MF/1 clauses 23, 28 and 35).

Obvious or ‘patent’ defects should prevent the issue of the certificate of completion. Accordingly, the date of completion, all work should conform to the requirements of the contract.

During Defects Period

Patent defect found on new development site.

Patent defect found on new development site.

Building contracts ‘encourage’ the contractor to return to the project and make defects right by allowing the employer to withhold some of the money due to the contractor until the end of the defects period, either a stage payment or retention. In Pearce & High v Baxter, the court said (with some reservations) that the JCT Minor Works wording “can be regarded as giving the contractor a right to make good defects at his own expense, and a licence to enter the property for that purpose.” [4]

After Defects Period

Once the defects period has come to an end, the client can bring a claim for breach of contract for any defects which become patent during the limitation period. The client’s claim is for damages to put it in the position it would have been in if the contractor had carried out the contract properly.

The difficulty is measuring what is an appropriate amount of damages.

 

Referencing

[1]           Article by Harrison Consult quoting Professor Anthony Lavers.

[2]                 Yarmouth v France (1887) 19 QBD 647. See also Tate v Latham [1987] 1 QB 502 where a defect meant the absence of an item essential to complete the works – even if the works were operable without the item.

[3]           There is no power for the contract administrator to instruct when these defects must be rectified as it is for the contractor to plan and perform the works however it chooses. All references in this blog are to JCT 2011 DB unless otherwise noted.

[4]                 [1999] CLC 749 at 751.

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