Martin Wade explains the ins and outs of the Guarantee of Work Scheme recently introduced by the ECA
On 1 January 2009 the ECA Warranty was discontinued. At the same time the new ECA Guarantee of Work Scheme was introduced. They are different.
The ECA has always been very keen to demonstrate the quality and competence of its members by guaranteeing their work. To that end, in 1947 the association introduced a Guarantee of Work Scheme. This was, as the name suggests, a guarantee by the Association that the work of its members would be to the appropriate standard.
In 1978 the Electrical Contractors’ Insurance Company (ECIC) was formed as a wholly owned subsidiary of the ECA. The guarantee was then replaced by an insurance-backed warranty, which it was thought gave even greater comfort to those using the services of ECA members. In 1997 leading counsel advised that a warranty had to be a contract to be binding and so had to be signed by both the customer and the contractor to be effective. This meant that cover was no longer automatic.
In 2005, following a number of instances of incompetence and mis-selling, new insurance regulations came into effect. The main feature of the regulations was that only organisations and people regulated by the Financial Services Authority (FSA) could advise on and sell insurance products. While ECIC is regulated by the FSA, ECA members generally are not, which created a problem when customers wanted to know more about the warranty cover.
Because of these developments, and because each member had to have an individual contract value to allow setting the limit of their cover, there was widespread misunderstanding of the procedure, and many warranties that members thought were in place actually were not.
There was mounting pressure for change to simplify the process, which is why the Association entered into negotiation with the FSA to find a better solution. While the outcome appears straightforward, the actual process was delicate and complex, requiring the use of specialist lawyers.
In order for the scheme to apply there must be evidence of a contract which ideally should be in writing, although this is not mandatory, and oral contracts are covered
The key features of the new Guarantee of Work Scheme are that it is not an insurance product, it applies automatically, and it is again operated by the ECA, not ECIC. The Guarantee applies automatically for contracts over £250 and up to £50 000 (including VAT) with a limit of £100 000 (including VAT) for the total value of contracts let by a customer in any one calendar year. The scheme complies with Part P and TrustMark and, as there is no individual contract value limit requirement, the paperwork becomes far simpler.
In order for the scheme to apply there must be evidence of a contract which ideally should be in writing, although this is not mandatory, and oral contracts are covered. Terms and conditions apply to electrotechnical installations and materials supplied.
There has been concern about guaranteeing materials, and it should be noted that any materials or equipment supplied or specified by the customer, or his agent, are not usually covered. Materials selected by the installer are covered only to the extent of any manufacturer’s guarantee and appropriate consumer legislation, including the Sale of Goods Act.
In the event of a claim, this should be made to the ECA membership secretary based at ESCA House in London. The Guarantee takes effect from when the works are completed, which is defined as the date when the work could be safely energised. If there is a dispute between the ECA and the customer, it will be referred to arbitration.
There is a brochure setting out the terms and conditions of the scheme as well as a certificate on the ECA website. These are both downloadable and so, while not a requirement of the scheme, either or both can be left with customers if required.
While the Guarantee replaces the ECA Warranty, those contracts entered into before 1 January and where a warranty was used, remain covered by that warranty for the insured period. The ECA Bond is unaffected.
Electrical and Mechanical Contractor
Martin Wade is head of the ECA’s commercial, contracts and legal department