The defects liability period defines the contractor's defects liabilities.
Not true: it is irrelevant and merely serves under JCT forms to mark the period for which the final half of retention is held. It gives the contractor the right to remedy the defect, although the employer's duty to mitigate its loss effectively requires this anyway.
The contractor is only liable for the costs of repair of defects during the liability period and afterwards.
Not true: the contractor must come back to remedy defects and if it does not, it is liable for costs incurred by the employer in engaging others to do so. But the contractor is also liable for other damages incurred by the employer as a result of the defect, such as business disruption and costs of alternative accommodation.
The contractor must immediately be given uninterrupted access to remedy defects during the liability period.
Not true: the employer must take reasonable steps to mitigate its loss and that may involve allowing the contractor prompt access to remedy defects. But the contractor must work around the employer’s occupational requirements.
The final certificate under JCT forms marks the end of the contractor’s liability.
No longer true: in Crown Estates vs Mowlem, the Court of Appeal said the wording used in the then JCT form was "conclusive” that all defects had been remedied. The JCT immediately changed the wording and, although the present wording remains untested, it seems unlikely to be conclusive as to the contractor’s defects liability.
The contractor “guarantees” the works for normal limitation periods.
Not true: the contractor is only liable if it is in breach of contract. Limitation periods merely define the period after which claims cannot be brought – six years for most contracts, 12 years for deeds. So, if the normal life of a product is two years before it needs replacement, the contractor is not in breach of contract if it fails after two years.
If a brick wall is executed defectively, with the result that it topples over, no arguments about “temporary disconformity” will save the contractor
The contractor is liable for the costs of opening up and inspecting under JCT forms when work is found to be defective.
True: but only in respect of that work. Suppose, as a result of a defect, the architect orders similar work to be opened up because it fears that the defect will have been repeated, but the further work turns out to be compliant. The contractor is not entitled to be paid for this extra work if the architect’s instructions were “reasonable” in regard to the code of practice included in the conditions. But the contractor is entitled to extensions of time as a result of complying with the instructions.
The employer can pursue claims for products that should last for, say, 35 years, after the expiry of normal limitation periods.
Not clear: after the expiry of limitation periods, the claim is barred. The fact that the product should have lasted 35 years – or even that there is a contractual warranty that it will do so – does not necessarily override the limitation period. It is possible to put the position beyond doubt.
Any defects that arise before practical completion are not considered defects at all.
Not true: if the work is not in accordance with the contract, there is a breach of contract whenever that occurs. Accordingly, if a brick wall is executed defectively, with the result that it topples over, no arguments about “temporary disconformity” will save the contractor.
Professional indemnity insurance holds the key to having a remedy against a contractor.
Not true: many defects will not be covered by professional indemnity insurance at all, particularly if they relate to defective workmanship. PII is not widely held by contractors, particularly at trade level, and if it is available it is usually subject to an annual aggregate limit. In other words, previous claims in the period of insurance may have exhausted the policy. Also, it is annually renewable and the contractor may not have done so.
Bonds provide adequate security.
Not true: on-default bonds, which are the most common, rarely deliver cash except on insolvency. Even then, be prepared for a fight. Now, how many of my misconceptions has this exposed?
Ann Minogue is a partner in solicitor CMS Cameron McKenna.