Usually, yes. A contractor will normally remain liable for defects after the defects liability period has expired. This article addresses a common misconception about the defects liability period under a construction contract.
The name ‘defects liability period’ is misleading, in that it implies that the contractor’s liability for defects will expire when the defects liability period comes to an end. However, for the vast majority of contractors in Australia, that is simply not the case.
The purpose of the defects liability period is threefold. It fixes the period of time when:
However, a contractor’s liability for defects does not automatically end on the expiry of this period.
In some cases, a contractor’s liability may extend many years beyond. The only practical difference is that, after the expiry of the defects liability period, the principal will no longer hold any security.
In most cases, the contractor’s liability in respect of a defect can be characterised as a breach of contract. For example, under AS 4000, the contractor is required to:
If the contractor fails to do either of these things, it will have breached the contract. The principal will have rights in relation to the breach, including a claim for damages.
Under most contracts, the contractor’s liability for a breach of contract does not automatically end when the defects liability expires.
There are also other ways in which a contractor could be held liable for a defect. These include:
A contractor’s liability may not come to an end until years after the work has been completed and the defects liability period has expired.
In some cases, the exact date can be difficult to determine. The date will be determined by applying the relevant statute(s) of limitations, and will be a function of a number of considerations, including:
If court proceedings have not been commenced before the limitation period expires, the contractor responsible for the defect will be exempted from liability.
If you are a principal or head contractor seeking redress for defective work performed by someone else, there are a number of reasons why you should take action earlier rather than later.
For example, usually you will have an obligation to mitigate any losses that arise as a result of the defect. If the passage of time results in additional losses being incurred (for example, because the defect gets worse), you may not be able to recover those losses from those responsible.