When Employers take it into their own hands to remedy Contractor defects
What is an “appropriate deduction”?
It is well known that a Contractor has the right, as well as the obligation, to remedy defects in its own work that appear
during the Rectification Period (defects liability period). But the JCT contracts also allow the Contract Administrator to
instruct otherwise. There could be a variety of reasons for this, the most usual being that the Contractor has had
numerous opportunities to make good, which it has failed to exercise.
If such an instruction is given, the Employer may make an “appropriate deduction” from the Contract Sum. How is that
deduction valued? Is it:
(a)
Contract rates or prices?
(b)
Cost that the Contractor would have incurred if it had made good itself?
(c)
Cost to the Employer of making good?
In Oksana Mul v Hutton Construction Limited the Technology and Construction Court had to answer this question.
In previous cases it has been held that where the Contractor is wrongly deprived of a right to remedy defects - e.g.
because the Employer has not given him a reasonable opportunity - then the Employer’s damages, if any, were limited to
what it would have cost the Contractor to put things right. This makes sense. If the Employer has acted incorrectly
somehow, why should he be able to contra-charge the Contractor for his costs?
However, none of these cases dealt with the phrase “appropriate deduction”.
The judge said that “appropriate deduction” meant “a deduction which is appropriate in all the circumstances”. This may
seem very unhelpful at first, but the judge was making a point that there are usually a number of possible permutations
that can arise in these matters. For example, one may have a cooperative or uncooperative contractor; an employer who is
willing to allow a contractor an opportunity to put things right as against one who loses trust in the contractor very
quickly; or an employer who wants all defects remedied down to the last lick of paint as against one who is willing to take
a broader view.
The judge was therefore not willing to spell out any one test. One can probably conclude that where the Contractor is at
fault, the appropriate deduction will often be (c) above, but where the Employer is at fault in some way, the deduction, if
any, is likely to be (a) or (b).
For more information about this Update, please contact Michael Bennett, Construction and Engineering Team on
Michael.Bennett@weightmans.com or Ian Yule on Ian.Yule@weightmans.com.
This update does not attempt to provide a full analysis of those matters with which it deals and is provided for general information purposes only
and is not intended to constitute legal advice and should not be treated as a substitute for legal advice. Weightmans accepts no responsibility for
any loss that may arise from reliance on the information in this update. The copyright in this update is owned by Weightmans LLP 2014.