Managing a construction contract: the defects liability period

This is the fourth article in a series of articles providing a brief overview of Managing a Construction Contract.

The defects liability period is usually stipulated in the signed contract and if using the JBCC agreement as a yardstick, the defects liability period commences after the certificate of practical completion has been issued.  Standard form contracts such as the JBCC agreement usually stipulate the standard duration of the defects liability period, however, contractors are also advised to check their contracts in their entirety to ensure that there are no amendments to this period.

There are two concepts when dealing with the aspect of defects liability. The Contractor bears the burden of both patent defects and latent defects. The patent defects are those defects which are discoverable through a reasonable inspection and usually apply during the defects liability period of 90 days from practical completion and ends on issue of the final completion certificate, in terms of the standard terms of the JBCC agreement. The second defects period relates to the latent defects liability period which is usually applicable for a period of 5 years in terms of the standard JBCC agreement.

During the first defects period, classified as the defects liability period in the JBCC agreement, the Contractor is expected to obey written instructions from the Principal Agent to carry out repairs and fix any defect that appears on the works to bring the works in line with the condition required by the contract scope of work.

Latent defects are those defects which arise later and are hidden. A reasonable or proper inspection does not reveal these defects.

The JBCC advisory note on the JBCC 6.2 cites two useful court decisions in defining latent defects. In the first decision, in the case of Holmdene Brickworks (Pty) Ltd v Roberts Construction Ltd 1977 (3) SA 670 (A), the Supreme Court of Appeal defined a latent defect as “an abnormal quality or attribute which destroys or substantially impairs the utility or effectiveness of the res vendita for the purpose for which it has been sold or for which it is commonly used. Such defect is latent when it is one which is not visible or discoverable upon an inspection of the res vendita”.

In the second decision, in the case of Odendaal v Ferraris 2009 (4) SA 313 (SCA), the Supreme Court of Appeal extended this definition to include “in a broad sense, any material imperfection preventing or hindering the ordinary or common use of the res vendita”, thereby including not only physical defects but also non-physical defects such as building plans. The court did, however, stress that each case must be decided on its own merits.

Some examples of the common latent defects are:

• Incorrect or insufficient foundations or footings which cause a building or part thereof to sink.
• Incorrect or inadequate materials used, the incorrect placement of materials, poor construction.
• Errors in key structural areas.
• Defective waterproofing.

The area of law applicable to latent defects requires a case-by-case analysis, therefore if there is a dispute around latent defects, the affected parties should seek legal advice.

Bilaal Dawood

Head: Membership Services