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Defects liability

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Defects liability

  1. 1. Defects Liability Lecture Week 5
  2. 2. Contractor’s Obligation CL 15.3 of PAM 2006 - states the obligation of contractors to remedy defects - States the rights of employers in circumstances where contractors failed to remedy the defects.
  3. 3. Defects Liability P&M Kaye Ltd v Hosier & Dickinson Ltd Per Lord Diplock: “ Condition 15 imposes upon the contractor a liability to mitigate the damage caused by his breach by making good defects of construction at his own expense. It confers upon him the corresponding right to do so. It is a necessary implication from this that the employer cannot as he otherwise could, recover as damages from the contractor the difference between the value of works if they had been constructed in conformity with the contract and their value in their defective condition, without first giving to the contractor the opportunity of making good of the defects”.
  4. 4. Practical completion(PC) Clause 15.1 What is practical completion (compare with cl 15.1 of PAM 98)
  5. 5. 1st approach P& M Kaye Ltd v Hosier & Dickinson Ltd Held: Practical completion means completion except for trifling defects. As long as the work is ready for use or occupation, the works are practically complete.
  6. 6. 2nd approach Westminster City Council v Jarvis & Sons Ltd. Held: Practical completion means completion for all practical purposes except for very minor de minimus work and there are no patent defects in the works.
  7. 7. Per Viscount Dilhorne: “ …defects liability period is provided in order to enable defects not apparent at the date of practical completion to be remedied. If they had been apparent, no such certificate would have been issued.”
  8. 8. 3rd approach Morgan v S & S Construction Ltd Held: There is no completion until work to be done by the contractor has been carried out in accordance with the contract, except for departures from it which are either latent or undiscovered or merely trivial.
  9. 9. Practical Completion v Substantial Performance SP-Building Law Reports: ‘…the doctrine of substantial performance… tempers the circumstances in which payment of the amount due under an entire contract …; if achieved , then payment is to be made but with a deduction for completion of defective works.’ Practical Completion: balance of the contract sum minus the retention fund
  10. 10. The effect of PC 1. The date stated in CPC marks the end of contractor’s liabilities of his contractual obligation except for the obligation to remedy defects which occur within the DLP. 2. One moiety (a certain portion ) of the retention fund has to be released to the contractor-cl 30.6 (c)
  11. 11. 3. The date of CPC marks the starting date of DLP.-cl 15.2(b)(i) 4. The period of final measurement and valuation starts- cl 30.10 5. Contractor’s liability to insure ends.- cl 20A, B and C 6. The contractor license to occupy site ends-cl 15.2
  12. 12. 7. Liability of contractor's to liquidated damages ends. 8. Starts to right to arbitration (end of restrictions) – cl. 34.1 9. Contractors need to submit all necessary documents to the architect for adjustment of the contract sum- cl.30.10
  13. 13. Defect Liability Period (DLP) Generally, it refers to a period stated in the certificate of practical completion-cl15.3; unless some other period - specified in the Appendix. (The common practice is 12 – 18 months.)
  14. 14. Types of defects  Clause 15.2 PAM 1998- Defects: - including shrinkages or other faults which appeared during DLP. -must be due to materials or workmanship not in accordance with the contract Note: PAM 2006 does not have provision on type of defects- just mention about defects as mentioned in the schedule of defects-cl15.4
  15. 15. Schedule of defects Refer to cl.15.4 PAM 2006
  16. 16. Certificate of Making good of defects Cl.15.6 (Refer to PAM 2006) • A procedure which is required for the second half of the retention money to be payable to contractor. • A process which must be finalized before the period to issue Final Completion Certificate begins.

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