What is construction Defect Liability Period

Under FIDIC conditions, the Defects liability period usually lasts one year but may extend to two years for certain projects. During this period the contractor must not only complete any remaining outstanding items of work as stated in the taking-over certificate but also remedy any defects which may have appeared. The contractor’s obligations in regard to these matters are typically secured by the first half of the retention money and the performance security. The expiration of the Defects liability does not, however, relieve the contractor of further liability for defects, nor does it affect his obligation to rectify them. The contractor remains liable to the employer for any defects that may arise subsequently (commonly referred to as ‘latent defects’) for the entire duration of the applicable statute period. However, an important distinction from the employer’s point of vue is that the contractor’s responsibility to repair latent defects is no longer protected by either the retention money, or the performance security. Consequently, unless the contractor can be persuaded to correct the defect voluntarily, the employer would normally have to pursue him and/or his assets wherever they can be located in order to obtain redress.

In some civil law countries, such as France, local statutes or public policies may impose absolute liability upon the contractor for a specified number of year after substantial completion of the project and the issue of a taking-over certificate. In France, this period lasts 10 years, during which the contractor is required to insure against his liability. The act of public works in state x appears to have contained a comparable warranty or guarantee provision, although only for 5 years. In international construction contracts, there is sometimes confusion about the relationship between the Defects liability periods in a FIDIC contract and the mandatory statutory periods. This may be due either to a failure to distinguish clearly between a contractual and a statutory warranty period, or to an incorrect translation into another language, resulting in a dispute over the time at which the second half of the retainer money should be released, i.e. after the expiration of a one or two year Defects liability period, or after the expiration of a much longer statutory period.

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