Dealing with defective work

© University College of Estate Management 2018

Introduction
• There are two competing legal arguments with regard to defects in the works due to poor
workmanship before practical completion is reached.
• The first is that all defects are breaches of contract and that a contractor will be in immediate breach
whenever its work fails to comply with the contract specification.
• The second is what is known as the temporary disconformity argument. This concept takes its name
from remarks made by Lord Diplock in P & M Kaye Ltd v. Hosier & Dickinson Ltd [1972] 1 WLR 146
where he said:
• ‘Provided that the contractor puts it right timeously I do not think that the parties intended that
any temporary disconformity should of itself amount to a breach of contract by the contractor.’
• This, it is argued, avoids the problem inherent in the first argument that every minor defect constitutes
a breach of contract, and arguably better reflects the reality of construction work on site.
Introduction
• However, the concept does give rise to a difficulty from the perspective of the employer because at
what point might he be able intervene to seek to address poor performance on the part of the
contractor?
• Proponents of the concept deal with this by suggesting that in cases where the defects could or would
be remedied by the contractor before completion they in principle fall to be regarded as temporary
disconformities rather than breaches of contract. It is only defects that cannot be rectified in time that
are breaches of contract.
• The difficulty with this argument is that it leaves the employer with no effective remedy until it is too
late from his perspective. He is in effect like a driving instructor in a dual-control car who is not
permitted to take action until it is too late to prevent a crash.
Introduction
• The temporary disconformity theory has not found support in English law.
• In Lintest Builders Ltd v. Roberts [1980] 13 BLR 38, Lord Justice Roskill emphasised that Lord
Diplock’s statement came from a dissenting speech and doubted ‘whether his Lordship on any view
intended it to be of universal application.’
• Also, the concept of temporary disconformity is inconsistent with the usual obligations on a contractor
found in standard form contracts which is to carry out and complete the work.
• In Nene Housing Society v. National Westminster Bank [1980] 16 BLR 22, the court held that an
obligation to ‘carry out and complete the work’ contains two separate sub-obligations: the first ‘to carry
out’ and the second ‘to complete’ the work, sometimes referred to as the ‘dual obligation’.
• Defects are a breach of the sub-obligation to carry out the work.
Introduction
• In Tameside Metropolitan Borough Council v. Barlow Securities Group Services Ltd (1999) 75 ConLR
112, the court considered a JCT standard form of building contract under which the contractor’s
obligation was to ‘carry out and complete the Works…in compliance [with the Contract Documents]
using materials and workmanship of the quality and standards therein specified...’
• At first instance His Honour Judge Gilliland QC, said at pages 154–5:
• ‘The question in the present case is … whether the same defects can constitute a breach of two
different contractual provisions and if so whether a separate cause of action will arise on the
breach of the later obligation. In my judgment authorities such as Proudfoot v Hart (1890) 25
QBD 42… on repairing covenants in leases show that the same disrepair can be a breach of
both the covenant to keep the premises in repair and also at the end of the term of the covenant
to deliver up premises in repair. The position in relation to dual obligations to carry out the Works
in accordance with the contract documents and complete the Works in accordance with the
contract…is not in my judgement different in principle. There is no reason in law why the parties
cannot enter into an agreement whereby the same acts or omissions may not give rise to
breaches at different points in time of two distinct obligations and if they do so, then in principle
there will be two different causes of action …’
• The Court of Appeal agreed ([2001] EWCA Civ 1).
Introduction
• What this issue highlights is the importance of ensuring that contracts contain express powers giving
the employer a remedy to deal with defective work during the course of their execution so as to avoid
becoming embroiled in argument with the contractor over whether or not defects are breaches of
contract.
• We now consider how a number of standard form contracts attempt to achieve this.
JCT 2016
• Clause 2.1 obliges the contractor to ‘carry out and complete the works...and in compliance with the Contract
Documents, the Construction Phase Plan... and Statutory Requirements’. This imposes the dual obligation
noted earlier, a further obligation to comply with statutory obligations such as the Building Regulations and
the provision of information required under the CDM regulations, and shall give all notices required by the
Statutory Requirements.
• Clause 3.17 gives the architect/contract administrator power to open up for inspection any work covered up or
to test materials or goods ‘whether or not already incorporated in the Works’. The cost of such inspections or
tests falls on the employer unless the work is found not to be in accordance with the contract. The cost of that
opening up or testing (including the cost of making good) shall be added to the Contract Sum unless provided
for in the Contract Bills or unless the inspection or test shows that the materials, goods or work are not in
accordance with the Contract.
• Clause 3.18 provides that
.1 work, goods or materials which are not in accordance with the contract can be instructed to be removed
from site;
.2 if the defective works are allowed to remain a deduction is to be made from the contract sum;
.3 an instruction for a variation may be issued if reasonably necessary in consequence of .1 or .2 without
entitlement to time and money; or
.4 instructions may be issued to open up the works for inspections or tests to identify ‘to the reasonable
satisfaction of the Architect/Contract Administrator the likelihood or extent... of any further similar non-
compliance’. The costs of these are borne by the contractor unless the work is shown to have been in
accordance with the contract, in which case the cost falls on the employer and the contractor may be
entitled to an extension of time and any direct loss and/or expense.
Any such opening up must be in accordance with the Code of Practice in Schedule 4, which provides a list
of criteria that the architect/contract administrator must consider when instructing opening up and is
intended to govern the ‘fair and reasonable operation’ of the power to issue instructions under clause
3.18.4.
JCT 2016
• Failure on the part of the contractor to comply with a notice requiring compliance with a clause 3.18.1
instruction to remove work, materials or good from the site permits the employer to employ and pay
others to carry out the work to the extent necessary to give effect to the instruction (clause 3.11).
• Refusal to remove defective work is also a ground for termination under clause 8.4.1.3, provided there
has been a written notice or instruction and the refusal materially affects the work.
• Clause 3.19 provides a longstop for the employer if the contractor fails to comply with its obligation
under clause 2.1.
• Under this clause, the architect/contract administrator may, after consultation with the contractor, issue
whatever instructions may be reasonably necessary, including the instructing of a variation, in
consequence of the failure.
• Providing, and to the extent that they are necessary instructions to address poor workmanship, the
contractor meets the cost of the works required by the instruction and is not entitled to any extension
of time.
• This clause is intended to cover those circumstances where a failure to carry out work in a
workmanlike manner threatens the proper carrying out of other parts of the Works or poses a danger
and its use is potentially risky because it could involve the architect/contract administrator intervening
in the contractor’s methods of working.
NEC4
• Clause 20.1 requires the contractor to provide the works in accordance with the scope. ‘Provide the
works’ means to do the work necessary to complete the works in accordance with the contract and all
incidental work, services and actions which the contract requires. The term ‘scope’ is used as the
name of the document that describes the work being provided. It replaces ‘works information’ in NEC4
EEC (or ‘service information’ and ‘goods information’ in the other NEC4 forms).
• NEC4 also omits the contractual obligation that is commonly seen in other standard forms to comply
with applicable statutory requirements, unless this is stipulated in the works ‘scope’.
• The role of quality control under NEC4 is given to a person known as a ‘supervisor’ rather than the
project manager.
• Clause 43.2 puts an obligation on both the supervisor and contractor to inform the other of defects as
soon as they are found.
NEC4
• Clause 44.1 obliges the contractor to correct a defect whether or not they have been notified of it.
• The supervisor may also instruct the contractor to search for a defect, but must give their reason for
the search in the relevant instruction.
• Clause 45.1 enables acceptance of a defect by way of an amendment to the scope to reflect the
defect. Such acceptance requires the contractor to submit a quotation for reduced prices, an earlier
completion date or both.
• Where the project manager accepts the quotation for the amendment, an instruction is given to
change the scope, the prices or the completion date. Without that acceptance the defect remains to be
rectified.
• Clause 91.2 enables the employer to terminate the contract if, subject to a four week notice period, the
contractor has ‘substantially failed to comply with his obligations’. This could extend to a persistent
failure by the contractor to address quality control issues or to rectify defects.
FIDIC
• Subclause 4.1: The contractor shall execute the works in accordance with the contract. The contractor
undertakes that the execution of the works and the completed works will be in accordance with the
documents forming the contract, as altered or modified by variations.
o Note: Contractor design (if required by the contract) is treated separately in subsections 4.1 a) to
h).
• Subclause 4.9 requires the contractor to prepare and implement a quality management (QM) system
(in accordance with the details stated in the specification) to demonstrate compliance with the
requirements of the contract.
• Subclause 7.1 obliges the contractor to carry out the works:
a) in the manner (if any) specified in the contract;
b) in a ‘proper workmanlike and careful manner ... with recognised good practice’;
c) with properly equipped facilities and non-hazardous materials except as otherwise specified in
the contract.
• Subclause 7.2 places an obligation on the contractor to submit samples of materials and relevant
information.
• Subclause 7.3 allows the employer personnel access to all parts of the site and to all places at which
natural materials are being prepared so the employer can inspect or carry out tests.
• Subclause 7.5 entitles the engineer to reject plant, materials or workmanship where it is found to be
defective or not in accordance with the contract. This subclause then obliges the contractor to
promptly make good the defect and to ensure that the rejected item complies with the contract. Any
retesting is also at the contractor’s cost.
FIDIC
• Subclause 7.6 gives the engineer power, notwithstanding any previous test or certification, to instruct
the contractor to:
• ‘(a) repair or remedy or remove from the Site and replace any Plant or Materials which is not in
accordance with the Contract,
• (b) remove and re-execute any other work which is not in accordance with the Contract, and
• (c) execute any work which is urgently required for the safety of the Works, whether because of
an accident, unforeseeable event or otherwise.’
• The contractor is obliged to comply with the instruction within a reasonable time, ‘which shall be the
time (if any) specified in the instruction, or immediately if urgency is specified under sub-paragraph
(c)’.
• If the contractor fails to comply with the instruction, the employer is entitled to employ and pay other
persons to carry out the work, and except to the extent that the contractor would have been entitled to
payment for the work, the contractor has to pay to the employer all costs arising from this failure.
• Subclause 15.2 provides the employer with the ability to terminate the contract if without reasonable
excuse the contractor fails ‘to comply with a notice issued under Sub-Clause 7.5 [Rejection] or Sub-
Clause 7.6 [Remedial Work], within 28 days after receiving it’.
Cases
Lintest Builders Ltd. v. Roberts [1980] 13 BLR 38.
Nene Housing Society v. National Westminster Bank [1980] 16 BLR 22.
P & M Kaye Ltd v. Hosier & Dickinson Ltd [1972] 1 WLR 146.
Proudfoot v. Hart (1890) 25 QBD 42.
Tameside Metropolitan Borough Council v Barlow Securities Group Services Ltd (1999) 75 ConLR 112.