A defects liability period is a period of time following practical completion during which a contractor remains liable under the building contract for dealing with any defects which become apparent. Depending on the form of contract you are reading, it may also be referred to as a rectification period or defects correction period.
A defects liability period is usually a period of around six or 12 months but it can vary depending on the contract used. Any defects or faults which arise during this period (for example – due to defective materials or workmanship) must be put right by the contractor at its own expense.
For example, under a JCT traditional building defects are notified to a contractor by the Contract Administrator, not later than 14 days after the end of the defects liability period. A contractor is then provided a reasonable amount of time to correct those notified defects. Provided that it does so, the Contract Administrator will then issue a ‘Certificate of Making Good’ which triggers a contractor’s entitlement to the remainder of any retention money which has been withheld by the employer. The situation is similar in other standard forms of contract, although the terminology may differ and the time periods can vary (especially the NEC ECC).
The inclusion of a defects liability period in a contract arguably benefits both the contractor and the employer. For the employer, it provides an opportunity to request that the contractor return to site and remedy a defect, while for the contractor it is usually cheaper to return and remedy a defect itself than to be asked to pay for the employer’s losses in arranging for someone else to remedy that defect. Having a practical contractual remedy can therefore save the parties’ time and cost compared to adjudication or litigation.
It should be noted, however, that defects liability periods will only arise if they are included in the contract. Contractors therefore need to be aware that they do not have an automatic right to return to site to rectify a defect. Employers, on the other hand, need to carefully consider the wording and requirements of defects rectification provisions if they are considering hiring another contractor to fix the original contractor’s mistakes, or else they risk being found to have failed in their duty to mitigate their losses.
It is also worth noting that a defect which is not discovered until after the defects liability period has expired is still a breach of contract for which the contractor is liable (subject to limitation arguments). In this circumstance, the contractor has no right to return to the site to repair the defect but is liable to the employer for damages.