What’s in a name? Defects ­”liability” periods

Australian legal firm Baker & McKenzie has recently released a report regarding defects liability periods under construction contracts. The defects liability period provisions in Australian standard form contracts have some similarities to the provision in NZS 3910:2013. These provisions provide for a specific period of time following practical completion (under NZS 3910:2013 this is 3 months unless some other period is stated) where the contractor must return to the site to repair defects that have appeared in their work. There are several benefits to this including the ability for the owner to require the contractor to remedy defects and the right of the contractor to remedy these defects, both of which are likely to involve much less cost than the owner using another party.

This article raises the very interesting point about how the word ‘liability’ can be misleading. Contractors still have liability to owners after the period in the case of an action for breach of contract or negligence. Because of this many Australian drafters are now labelling these periods ‘defects correction periods’. New Zealand is ahead in this regard and in the updated standards, NZS 3910:2013, this period is renamed the “Defects Notification Period.”

In addition to the designated defects notification period, it is common for an owner to require a warranty in relation to specific work. The length of a warranty may extend the period under which a contractor is required to repair faulty work. In this sense the true ‘defect liability period’ could be a considerable time into the future.

You can view the report here.

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