Construction Engineering 380
Defects in Construction
Defects in Construction
• Defects not caused by design flaws or
contract ambiguity result in claims against
the builder
• Responsibility for defects varies based on
type of delivery system used
• Construction defects are a “messy”
problem involving design, material,
installation, site conditions, etc.
Defects in Construction
• Legal principle is that responsibility and
authority (control) are linked
• Whoever controlled the decision is
responsible for the performance
• Contract clauses seeking to “displace”
responsibility are open to scrutiny because
of unconscionability concerns by the court
Defects in Construction
• Substitution requests, field conditions,
warranty assignment, and waiver of defect
language can all influence the decision, but
the courts are reluctant to violate the basic
principle of responsibility
• Good faith and fair dealing doctrine is used
more frequently than in the past to hold
contractors accountable for pointing out
design flaws and potential defects. Courts
must interpret intent
Defects in Construction
• Owner can relinquish a right a file a claim for
defect by accepting the work
• making final payment, releasing retainage, and
moving in/occupancy are frequently interpreted
by the courts as acceptance barring any written
evidence to the contrary. There are frequently
contract clauses (universal warranty) and
addenda that make it clear what has been
accepted and what hasn’t
Defects in Construction
• Multiple causation can only be invoked if
the other parties played a “substantial role”
in the formation of the defect
• Can portion damage on a comparative
fault basis (similar to how tort liabilities are
assigned), but most courts unwilling to do
this because it blurs the distinction
between tort and contract liabilities
• Usually the contractor is repsonsible
Defects in Construction
• Third party claims must be brought as a
tort, can be very complex. Moldy furniture
or ruined books- is it caused by design
defect (lack of air movement) or faulty
construction method? (built when it was
too wet).
• Very few jurisdictions allow insurance
claims for defective work, not considered a
loss under CGL
Defects in Construction
• Warranty clauses can be used for a variety
of purposes, but they usually try to protect
the owner from defects in critical systems
• Standard contractor’s warranty is for one
year, based on high quality, new material
and equipment, free from defects of
workmanship, conforming to the contract
documents
Defects in Construction
• Special systems can have special
warranties (roof, window system, elevator)
• Implied warranties (especially warrant or
habitability) protects owner that purchase
already designed and built projects from
developers
• Details of implied warranty enforcement
are still being interpreted by courts
Defects in Construction
• Insurance, class action, and deceptive
practice statutes are all intended to protect
buyers, but may offer little protection
against contractors intent on deceit. Have
to catch them before they take the money
and go out of business