Defects occur on virtually all projects. Some are serious, but most of the time they are normal run of the mill defects that are easily rectified with no problems. But sometimes we come across situations where a client has unilaterally decided to engage a third party to rectify the contractors’ own defects without his agreement. In these circumstances what should the contractor do?
Most standard forms of contract provide that a contractor should rectify its own defects and typically they do so with no fuss or problem. In addition to this, most contracts include a procedure for identifying and managing the rectification of the defects and set out a procedure should the defects not be carried out by the contractor. Typically, this involves the client notifying the contractor of the defect, instructing him to rectify it and finally issuing a clear and concise notice stating that should he again fail to rectify the problems, the client will engage others and seek reimbursement from the contractor.
If the requisite procedure has been followed and the contractor has not rectified the defects, then he is open to a monetary claim from the client. The value of which should be determined by the contract, but would typically be the actual cost he has incurred in completing the work.
But, if the client has not followed the correct procedure or the contract does not set out a procedure like the one set out above, then if the client decided unilaterally (i.e. without your agreement) to put your work right, then his monetary claim against the contractor may well be reduced.
Sometimes it is argued that you have a contractual right to remedy the defects and have been denied this opportunity – so why should you pay anything?
But let’s be clear, if the work that you have completed falls below the standard set out in or required by the contract, then you are liable for breach of contract. Just because your client decides not to engage you to sort your problems out, it does not absolutely resolve you of any liability for the problem. The difference is the amount of damages that you may be liable for.
Put simply, if your client does not have the right to rectify your defective work then his claim against you may, be limited to the amount it would have cost you to complete the work. Calculating how much this amounts to is where the fun begins….