Kobus le Roux

Planning and Construction Contract Expert

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You know the drill, you reach practical completion and then await the dreaded “snag list”. A list of defects drawn up by the principal agent that needs to be completed before you can reach final completion.

Or, you finish a section of a roof and a week later, receive an instruction to rectify the defect.  The roof is leaking although you could swear that you followed the design to the tee. Sometimes, the defects list keeps growing as you desperately try to get ahead- a leaking roof, a floor that is flaky, paint that is chalky, plaster that is not “up to standard” or my personal favourite shadow-lines that are not straight or neatly mitered.  For the latter I consider myself somewhat of an expert.  As part of my internship as a young student, I found myself in charge of a 25,000-item snag list for a large construction group.  They hurriedly finished a building for an international client and hence, left about 15,000 poorly mitered or painted shadow-line ceiling frames for me and my crew to rectify. Although defects can be small and numerous at times, we had a number of clients during the past months with construction defects that were quite big and could rack up a couple of million in repairs.  One example is a suspended concrete slab that deflected so severely, the tiles on top cracked and popped. The reason why defects can become so contentious is because the contractual significance of a defect, lies very finely balanced between the contractor’s and employer’s risk.  Shift that balance slightly to one side and a particular party carries the whole, immense risk of repair and additional costs.

 

Let us explore why I say this:

  • in terms of clause 17, the principal agent is permitted to issue Contract Instructions to the contractor for the rectification of defects.
  • Before the issue of the Practical completion certificate or final completion certificate, a list, specifying the defects to be rectified is issued to the contractor to achieve said completion.
  • The contractor is liable to progressively attend to and correct any defects that may become apparent during the defects liability period.
  • In all three instances, the contractor is at risk and must repair the defects at his own cost and would not be entitled to claim for a delay as a result of the defects.
  • However should a circumstance present itself that cannot be defined as a defect, it becomes additional work for which the employer must compensate the contractor and for which the contractor can claim additional time and adjustment to the time-related preliminaries.

Can you see the significant swing in risk presented here? This is based purely on the definition of the word defect.

 

When is a defect your problem and your risk?

At this point we have to accept that there is a stark difference between a defect in lament’s terms and the definition of a defect under the terms of the JBCC agreement signed between the parties and this is where our focus should be. Let’s say you have constructed a roof and there is a leak, would this constitute a defect?  Let’s go one step further and ask: If you constructed a concrete slab and there is such a big deflection that the tiles on top are popping, would that be a defect?

In both instances above, any lay person would certainly agree that those items are defects.  The question we are interested in is: “Are they defects under the definition and terms of the JBCC Agreement”? And here, depending on the merits, the answer can certainly be: NO!

Let’s look at JBCC’s definition of a defect.  In terms of JBCC (6.1), a DEFECT is defined as: “Any aspect of materials and workmanship forming part of the works that does not conform to the contract documents.”

 

“Defects” are not automatically your problem as a contractor.

So, back to our example. A deflecting slab with tiles popping under the feet of the occupants will surely present itself as a defect within the subjective opinion of a lay person. In this instance, that person may be the employee who is too scared to walk to the office fridge on the first floor. As a result of semantics, the gloves are off and the employer and principal agent demand a recovery and repair plan from the contractor. How does the contractor intend to deal with the deflecting slab that is clearly a defect?

The contractor on the other hand submits that he is not at fault. He provided the works in 100% conformance to the contract documents. The form-work and re-bar were signed off by the Engineer on site. The test results required by the documents all passed. He loaded the slab in accordance with the specification. Does the deflecting slab satisfy our contractual definition in this instance?  No, not at all. In other words, there is no defect.  In this instance the contractor must clearly indicate this to the principal agent and request that the defect is pointed out.  Where, or in what way, does the work not conform to the contract documents?  This can’t be woolly.  There must be a clear indication of default. In this particular case, a closer inspection revealed a design error made by the Engineer.  The slab is deflecting as one would expect given the slab thickness and span between columns.  OOPS!  A design mistake almost cost this contractor millions in repairs and additional cost.

Now of course there are very few winners in these circumstances and I feel for the professionals involved, but we cannot assume the contractor is liable without satisfying the definition of a defect in terms of the agreement. Many disputes, failures to issue final completion certificates and extended repair times, hinges on this principle:  what is a true defect for the purposes of the agreement?

Make sure that you are not bullied into submission on this very important topic.  If it is not your fault, you cannot be held liable and incur the cost of a supposed defect.

This post was compiled by  Kobus le Roux for Le Roux Consulting, all rights reserved. Please contact us for your professional project planning, project control, claims or adjudication assistance services in the heavy civil and building industry.

https://www.lerouxconsulting.com/

Kindly note that our posts on social media or our website do not constitute professional advice and the comments, opinions and conclusions drawn from this post must be evaluated and implemented with discretion by our readers at their own risk.

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