Considerations when Defects are Rectified by the Owner

Dear All,

I have received an enquiry as to what matters to consider when defects are rectified by the owner as opposed to enforcing the construction contract.

I provide some of those observations below.

As many of you know, construction contracts often provide the owner with the power to require the contractor to rectify defects. The construction contract connects this power to defects liability period requirements (see my previous post on this topic). In the event that the owner takes it upon himself/herself to arrange a third party (who is not the contractor) to rectify the defects, and those defects actually exist, there is an issue as to whether the owner is entitled to recover the costs of rectification as damages from the contractor under the construction contract.

Although the position is not settled in Australia, the favoured approach suggests that the owner is not entitled to recover any of its costs paid to third parties, if he/she departs from the contractual obligations and failed to notify the contractor of the defects and give it the opportunity to rectify the defects. In circumstances where a Court has allowed the owner to recover damages against the contractor, its approach has been to limit the quantum of the owner's recovery by reference to the cost, if any, to the contractor of rectifying the defect.

An alternative approach, which appears to be less followed in Australia, is that taken in the United Kingdom which has recognised that the owner will have the common law right to damages where there is a breach of contract by the contractor resulting in defects, unless such a right is expressly, or by strong implication from the express words used, excluded from the contract.

Please let me know whether you would like any further information.

André Adams | Partner


This is general information only and not to be construed in any way as professional or legal advice. You will need to obtain your legal and professional advice on your specific individual circumstances.

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