Defective work can be described as work which fails to comply with the express descriptions or requirements of the contract, including very importantly any drawings or specifications, together with any implied terms as to its quality, workmanship, performance or design. By definition, therefore, defects are breaches of contract by the contractor.

In most standard forms, the liability for defects is dealt with differently for three distinct periods. These three periods are:

(i) the construction period;

(ii) the maintenance or defects correction or defects liability period;

(iii) the post-correction period.

During the construction period the Contractor will have a contractual licence to possession of the site. During this period the contractor will be required to carry out remedial works. The A/E in many standard forms has extensive powers to have defects remedied including removal and substitution of defective materials and removal and re-execution of defective work.

During the defects liability period, which starts on completion of the works, standard forms generally give the Contractor a licence to return to the site for the purpose of remedying defects.

The post correction period starts at the end of the defects liability period. The contractor will no longer have a right of entry nor a right to remedy his own defects, although many standard forms provide a short transition period for the contractor to enter and remedy defects notified up to the end of the defects liability period.

The issues which arise are whether defects which arise during the construction period constitute a breach of contract by the contractor, and whether a failure to give the contractor the opportunity to remedy defects during either the construction period or the defects liability period affects the Employer’s rights to damages. These issues have been addressed in two cases both on the JCT Minor Works form. Clause 2.5 of the form requires the contractor at his own cost to make good defects due to materials and workmanship not in accordance with the contract, which appear within the defects liability period.

In William Tonkinson & Sons Limited -v- the Porochial Church Council of St. Michael and Others (1990), Construction Law Journal Volume 6 No 4 the defects arose in the construction period and the contractor was given notice of them before Practical Completion. The Architect did not however serve on the contractor any notice under Clause 3.5 requiring the contractor to remedy the defects prior to practical completion, but instead the Employer gave instructions to other contractors to remedy the defects, which were completed before Practical Completion.

It was held that the Employer was entitled to recover damages for the defective work as it was still a breach of contract, despite occurring during the construction period. It was considered that if the defects are remedied by the contractor prior to practical completion the contract may be construed impliedly excluding any right to nominal damages in respect of them. Clause 2.5 provides an additional remedy for the Employer ie the right to require the contractor to make good the defects, and not releasing the contractor from his ordinary liability to pay damages for defective work. It was held that workmanship which falls short of the standard required by the Contract and which the Employer remedies prior to practical completion still constitutes a breach of contract. The Employer is entitled to recover damages from the Contractor subject to proof that they were attributable to workmanship or materials which fall below the contractual standard. The amount of damages which the Employer would be entitled to recover however, is not his outlay in remedying the damage, but the cost which the Contractors would have incurred in remedying it if they had been required to do so; the sum is anticipated to be much less than the actual remedial costs.

In Pearce & High Limited v Baxter (1999) Court of Appeal defects had become apparent before the end of the defects liability period, but these were not notified to the contractor. It was accepted that the contractor’s obligation under Clause 2.5 to remedy defects cannot be enforced unless a contractor has notice of the defects. It was held at such notice was a condition precedent to Employer’s right to require compliance with Clause 2.5, but that different considerations might arise if the contractor became aware of the defects from another source. The obligation could not be enforced against the contractor unless he has notice of the defects.

It was held that the absence of notice prevents the Employer enforcing the right to require the contractor to rectify the defect, but subject to the contract terms the defect is still a breach contract with a right to recover damages. Such a right cannot be excluded except by clear, express words or by a clear and strong implication from the express words used.

It was held that the Employer’s failure to comply with Clause 2.5, whether by refusing to allow the contractor to carry out the repairs or by failing to give notice of the defects, limits the amount of damages which he is entitled to recover. As a matter of legal analysis this is either

by permitting the contractor to set-off against the Employer’s damages claim the amount by which he, the contractor, has been disadvantaged by not being able or permitted to carry out the repairs himself; or

by reference to the requirement for the Employer to mitigate the loss for which is entitled to recover damages.

The measure of damages was therefore the cost of repairs by the contractor if he remedied the defects himself on the assumption that this is lower than the cost of repair by a third party.

The Employer will not wish to pay the full contract price first and then counterclaim for damages by way of set-off. Apart from the inconvenience of doing so, the legal fees as well as the cost of the remedial works themselves will create a significant adverse cashflow for the Employer. He will also increase his exposure to the consequences of the Contractor’s possible insolvency, always a serious consideration in the present economic climate. Instead the Employer will wish to deduct the cost of remedial works from the amount due to the Contractor. He has this right at common law to raise a defence of abatement against any action for payment in full by the contractor Slater -v- CA Dumequin Ltd (1992) 29 CON LR 24. This right of abatement only applies to defects which are patent at the time payment is due.

It is suggested that on the basis of Tonkinson above the amount by which the Employer might rightfully reduce the amount due to the Contractor is limited to the cost which the Contractor would have incurred in remedying any defect.

Where the defects are the responsibility of the Contractor and he does not carry out the remedial work within a reasonable time then the Employer is entitled to abate the amount otherwise due to the Contractor, by the amount it would cost the Employer to remedy the defect. This additional liability arises from the Contractor’s further breach of contract in not remedying the defect.

Two questions arise in relation to the Final Certificate. The first is whether the Final Certificate prevents the Employer from recovering for the consequential effect of defects which have been remedied either by the Employer or the Contractor before the Final Certificate. The second is whether the Employer is prevented from recovering damages for any defects which become patent after the issue of the Final Certificate - in the post-correction period.