Liability after take-over: the English position
November 2009
1. Describe the system of
liability after take-over
according to the rules used
most often
Under English law, upon take-over of a
project, the relevant statutory provisions
governing liability of a contractor, sub-
contractor or consultant are found primarily
in the Limitation Act 1980 (the ‘Act’).
There is no statutory defects liability
period whereby the contractor has a
positive obligation to rectify defects.
Rather, it is usual practice for the parties
to agree a defects liability period as a
matter of contract. The period is typically
12 to 24 months for general construction
contracts. In the absence of an agreed
defects liability period, or if the contractor
refuses to rectify a defect notwithstanding
an agreed defects liability period, the
aggrieved party will have to commence
legal proceedings in order to recover
any damages or losses occurring after
take-over. There is no guarantee that the
aggrieved party will succeed, as it will need
to prove that the other party was at fault
and that it suffered damage or loss as a
result. The time for the aggrieved party to
commence legal proceedings is limited
by the Act so that if the time has expired,
the aggrieved party is ‘time-barred’ from
pursuing its claim.
1 Senior Associate at the London office of White & Case LLP and a member of the UK Society of Construction Law.
2 Section 5 of the Act.
3 See New Islington & Hackney Housing Association v Pollard Thomas & Edwards [2001] BLR 74.
4 Section 2 of the Act.
5 Section 8 of the Act.
6 See for example Oxford Architects Partnership v Cheltenham Ladies College [2006] EWHC 3156.
The limitation time periods most relevant to
construction projects are:
a. Contract claims - 6 years from the
date the cause of action accrued,2
which is the date of the breach of
contract complained of. In construction Christopher Wong1
contracts, if the contractor is White & Case
responsible for completing the works
under an entire contract, the limitation
period for defective work generally
runs from the date of completion. As to
liability for defective design, the English
courts have held that while the cause A version of this article was first published
of action accrues generally on practical by Instituut voor Bouwrecht (Institute
completion (at the latest), the designer of Construction Law - Netherlands)
may have a duty to reconsider the in Tijdschrift voor Bouwrecht,
design as a result of defects arising after nr. 9 - September 2009
completion. Such duty could arise either
under the existing contract or the terms
of a new retainer; 3
b. Tort actions - 6 years from the date the
cause of action accrued,4 which is the
date the physical damage occurs; and
c. Deed claims - 12 years from the date
the cause of action accrued,5 which is
the date of the breach of the obligation
in the deed.
It is possible for the parties to reduce or
increase the limitation periods prescribed
by the Act in their contracts.6 Generally, the
courts will not interfere with the parties’
contractual agreement, especially if the
parties are experienced commercial entities
Liability after take-over: the English position
with equal bargaining power. However, the modified limitation
period may be deemed unreasonable under the Unfair Contract
Terms Act 1977 if the period appears unfair, the contract parties
are of unequal bargaining power and the dominant party insisted
on the unreasonable period.
Where a limitation period is about to expire, a party may:
i. commence legal proceedings straightaway, even if it does not
have the full facts to support its case. As a minimum, the party
must be able to formulate its claim properly according to the
procedural rules of the English courts. If the party wishes to add
a new claim to its pleading subsequently (even after expiry of
the limitation period), it will generally have to show that the new
claim arises out of the same facts or substantially the same
facts as the existing claim; 7 or
ii. enter into a ‘standstill agreement’ to temporarily suspend the
running of the limitation period. The agreement of the other
party is required in this case.
In relation to residential property, the Defective Premises Act 1972
provides that a developer or contractor doing work in connection
with the provision of a dwelling owes a duty of care to any person
acquiring an interest in the dwelling to ensure the work is done
in a workmanlike or professional manner with proper materials so
that the dwelling will be fit for habitation.8 A claimant has 6 years
from the time the dwelling was completed to bring an action
for a breach of the duty. If further work to rectify the completed
dwelling was done, the 6 years shall run from the time the further
work was finished.9
2. How are hidden or latent defects
dealt with?
A party may bring an action in tort for negligence in relation to
latent defects on the later of:
a. 6 years from the date the cause of action accrued, which is
the date the damage or loss is suffered; or
b. 3 years from the date the party knows or ought to
have known:
i. the material facts about the damage or loss suffered;
7 Section 35(5) of the Act and Civil Procedure Rules 17.4(2).
8 Section 1(1) Defective Premises Act 1972.
9 Section 1(5) Defective Premises Act 1972.
10 Section 14A of the Act, which was introduced into the Act by the enactment of the Latent Damage Act 1986. This was prompted by the House of Lords’ decision in
Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1 which held that the claimant was time barred from bringing a claim against its architect for damage to
its chimney, which first occurred in 1970, even though the claimant only found out about the damage in 1977. More than 6 years had passed from the date the cause of action
arose in 1970 when the claimant commenced proceedings in 1978.
11 Section 14B of the Act, which was also introduced into the Act by the enactment of the Latent Damage Act 1986 following the Pirelli case.
ii. that the damage was attributable to the act or omission
which is alleged to constitute negligence; and
iii. the identity of the defendant,10
subject to an overall long-stop period of 15 years from the date
of the defendant’s negligent act or omission to which the damage
is attributable.11
The issue of the defendant’s knowledge in (b) above has been the
subject of various case law and the English courts have held that
constructive knowledge as well as actual knowledge is relevant.
In Haward v Fawcetts (a firm) [2006] UKHL 9, the House of Lords
(England’s highest court) held that the 3 year period starts to run
from the time the claimant had knowledge of the ‘factual essence’
of the alleged negligent acts or omissions, namely the material
facts supporting the substance of the claimant’s case and that
there was a real possibility that the damage was caused by such
acts or omissions. The claimant did not need to be certain or show
conclusively that the defendant’s acts or omissions had caused
the losses alleged. Haward involved a case on negligent financial
advice and a recent construction case is Harris Springs Ltd v
Howes [2007] EWHC 327, which applied Haward and found that
the owner was not time barred from making a claim for latent
defects against its engineers.
It is important to note that the limitation periods for latent defects
as above apply only to actions for negligence in tort, and not to
contractual claims. In practice, parties often attempt to negotiate
liability for latent defects in their contracts.
2.1. Does it make a difference if prior to take-over
or during take-over, the employer was assisted by
professionals (like an architect or civil engineer)?
If the contract is a ‘construct-only’ contract, the contractor will
generally not be liable for a defect in design, whether before,
during or after take-over. As between the employer and the
contractor, the responsibility for a design defect lies with
the employer. As between the employer and its professional
consultants (eg. architect or civil engineer), the responsibility
lies with the consultant who bears the risk of the design. The
employer will look to the relevant consultant for relief and the
considerations mentioned in paragraph 1 above apply.
White & Case 2
Liability after take-over: the English position
If the contract is a design and build contract, the contractor will
generally be responsible for a defect in design and construction.
In principle, there should be no difference to a contractor’s liability
for any defects in the works prior to, during or after take-over
even if the employer was assisted by professional consultants
(eg. architect or civil engineer) who carry out inspection of the
works prior to issue of the take-over certificate.
A defendant who wishes to seek a contribution from anyone
else who is liable to the claimant for the same damage (such as
a sub-contractor), must bring the contribution claim within 2 years
from the date the defendant is held liable under a judgment, or
the date on which the amount of damages payable to the claimant
is agreed.12
2.2. Does it make a difference if the employer himself is
considered to be a professional?
In principle, it should not make a difference if the employer is
considered to be a professional if it is clear between the parties
as to who is responsible for the design and construction aspects
of the project. However, the English courts may treat an employer
who is a qualified building professional differently from a lay
person in relation to the knowledge required for a limitation period
to run. For example, an employer who is an experienced architect
could be more readily said to know, or ought to have known, of
the material facts about the loss or damage suffered arising from a
latent design defect compared to an ordinary lay person. Similarly,
an employer who is an experienced engineer and who chooses an
inferior material being fully aware of the risks involved is unlikely
to get much sympathy from the court if the material subsequently
fails to a greater extent than if better material were used.
3. Does it make a difference to the liability of
the design and build contractor if a defect
was or could have been discovered (a) prior
to, or (b) at the time of take-over; or (c) after
take-over? If so, describe the difference.
Generally, there is no difference to the liability of the design and
build contractor as stated in paragraphs 1 and 2 if the defect was
discovered prior to or at the time of takeover, or after take-over.
A defect discovered prior to or at the time of take-over will
be a patent defect. It may be a patent defect after take-over
if it falls outside the latent defect provisions discussed in
paragraph 2.1(b). In any of these cases, the limitation periods set
out in paragraph 1 apply.
12 Section 10(4) Civil Liability (Contribution) Act 1978
If the defect is a latent defect discovered after take-over, the
position as discussed in paragraph 2.1(b) applies.
4. How long can the employer take action
against the contractor after take-over?
This question has been addressed in paragraphs 1 and 2.1 above.
5. Is the liability limited to a certain amount?
If so, describe how.
There is no statutory limitation of a party’s liability under
English law. A party claiming damages still needs to prove the
quantum of its loss. Contracting parties frequently impose a
limitation of the contractor’s liability in construction contracts,
including caps for liquidated damages. If the liquidated damages
provision in a contract is unenforceable (for example, because it
is considered a penalty), the courts in England have found that
the contractor’s liability for general damages may be limited to
the cap on the liquidated damages payable agreed by the parties
in their contract.
6. How do you compare the Dutch position?
There are clear differences in the English position and the
Dutch position as regards liability after take-over, the main ones
being that:
a. unlike Dutch law, there is no statutory provision in England
equivalent to the Dutch Uniform Administrative Conditions of
1989 or the Uniform Administrative Conditions for Integrated
Contracts 2005 whereby the contractor ceases to be liable for
defective work on take-over, save for specified exceptions;
b. English law does not contain an express limitation of the
contractor’s maximum liability (10% of the contract price for
design and construction work under Dutch law); and
c. the limitation periods for claims against the contractor under
English law are different from the Dutch position.
There is benefit in regulating liability after take-over as in the Dutch
position. This must be balanced against the right of the parties to
enter into their own bargain as appropriate (such as limitations
of liability). Statutory requirements prescribe a ‘one size fits all’
regime which may not always work. A halfway house between
the Dutch and English positions may be to make statutory
requirements the default position where the parties do not
expressly provide for liability after take-over in their contracts.
White & Case 3
 36 Offices. 25 Countries.

7. Which specific legal problems play a role in

your system concerning liability after take-
over when the contractor is responsible for
the designing and building?
This is merely an observation and not a ‘problem’ as such but
the obvious comment is that unlike other jurisdictions, there is
no statutory obligation on a contractor (whether responsible for
design and build, or just construction) to positively rectify defects
after take-over, and it is up to the claimant to ensure that this is
covered in the construction contract or pursue legal proceedings
for breach of contract or negligence.

The knowledge required of the ‘factual essence’ of negligence in

the case of latent defects can be problematic, and indeed, in the
Haward case itself, the judges differed on whether the essence
was the giving of deficient advice, or the giving of advice per se.
In the first, the claimant is said to know that something had gone
wrong so that he had a justifiable complaint against his advisers,
while in the second, he need only know that he had invested
money in reliance on the advice and had made losses. Whether
a claimant is successful ultimately depends on the court’s
interpretation of the rules against the facts in question.

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