1.0 Introduction
Defect Liability Period (DLP) is a common feature in all the standard form of construction contract in Malaysia. During the DLP, the Contractor is obliged and liable to rectify defects that appear between the period the Certificate of Practical Completion (CPC) is issued and the expiry of the DLP. Before answering this question, let’s define defects or defective works. In general terms defects or defective works is where the standard and quality of workmanship and materials as specified in the contract is deficient. The Flow Chat 1 shows that the Practical Completion & Defects Liability in the construction.
2.0 3.0 4.0 5.0 6.0 7.0 8.0
The Case study for our assignment is the Hairline cracks were discovered by the Architect in the joint between the roof beams and walls. The Architect issue a notice to the Contractor to rectify the cracks. But the Contractor contended that the hairline cracks are due to the design problems and not the failure of the workmanship or materials, and the rectification works should be treated as a variations in the contract. The Engineer who carried the investigations and found that the hairline cracks were not due to the design problems, but were due to the absence of the proper exmet reinforcement. The Contractor disagreed with the Engineer’s finding, and Contractor shall not be responsible for any recurrence of the defects at the same location in the future. One month after the Contractor completed the rectification of the works, the Defect Liability Period was expired. Thereafter the Contractor requested the Final Schedule of Defects from the Architect. But one week later, there is 1
the hairline cracks reappeared at the same area. The Architect rejected to issue the Final Schedule of Defects to the Contractor. The Architect replied with a written notice that the Contractor has to responsible and liable for the defects and failure of the works.
But the contractor refused the Architect instruction to rectify the defects on the grounds that “Accordance to the Clause 15.3 of the Conditions of Contract, as the 14 days deadlines for delivery of the Final Schedule has now expired, no further instruction to rectify defects for the Works shall be issued by the Architect”. As the cost and contract consultant for the project, we have to using the appropriate provisions of the contract based on the Agreement and Conditions, PAM FORM Contract 2006 and liable to prepare a report for defining the failure of the parties in the Contract.
2.0 (a) Are the hairline cracks defined as “defects” under the contract? The term “defect” is generally defined as a defect in the design, the construction, and/or in the materials or workmanship used on a project that 2
may not be readily observable and results in a building. Defect includes both design caused by engineer and construction defects caused by contractor that will result in financial harm to the owner. Defects can also be Patent defects and Latent defects apart from the usual defective construction defects happening at the site. Patent defect is known as testing and inspection. Latent defect is known after a period of time or hidden defect that exist at the time of sale. Yes. The hairline cracks can define as “defects” under the contract. This is because in the opinion of the Structural Engineer, the hairline cracks were not due to design problems but were shrinkage cracks due to the absence of proper exmet reinforcement by the contractor. So, they define as defects, which is poor workmanship by the contractor, according to Clause 6.5, the contractor is not work in accordance with the contract. In the construction industry, construction defects and failures can occur during the design and construction phases of a project, or after a structure is substantially completed. A contractor’s misunderstanding of the design, poor workmanship, the use of non-conforming materials, and failure to perform the work in accordance to the contract cause the defects. No. The hairline cracks are not defined as “defects” under the contract. This is because the contractor contended that since the cracks are due to design problem and not due to faulty workmanship or materials by him. So, the rectification works shall be treated as variations that caused by design. The occurrence of this defect also may result from the design professional’s failure to produce an accurate and well-coordinated design that provides sufficient information to the contractor to construct the building.
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3.0 (b) Under which clause of the contract should the architect instruct the contractor to rectify the cracks/defects? The contractor should base on clause 1.1 completion of works in accordance with contract documents to those conditions carry out and complete the work alignment with the contract document and in compliance with provide materials, goods and standards of workmanship and the quality are described in the contract document and require by the Architect. All the works, materials, goods and workmanship should align with the contract document describe based on clause 6.1. Quality measure is based on clause 6.3 inspections and testing, the contractor shall provide sample of materials and goods for testing before into the works. The Architect may issue Architect Instruction (AI) to contractor request for open up testing. If the test result shows that the quality is qualify, the contractor may request the Extension of time, Clause 23.0 and Loss and expenses, Clause 24.0. If the Architect finds any work, materials, goods or workmanship which is not accordance with the contract, the architect will according clause 6.5 to give instruction such as remove material from site, demolish and reconstruct and so on. Because the contractor results after inspection is show that the work are not accordance with the contract so that the contractor have no right to apply Extension of time and loss and expense based on clause 6.6 no compensation for time and cost. The contractor may refuse or fails to comply the with the written instruction of the AI under clause 6.5. Employer has right to set off contractor and hire other contractor to carry out the work based on clause 30.4. The architect can based on Clause 2.2: Architect Instruction (AI) to instruct the contractor to rectify the defects. Clause 2.2 AI is the only valid instruction issue by Architect through the written notice. Other then written instruction such as verbal instruction, instruction given by site agent all of these instruction is not effective. Based on 4
Clause 15.4: schedule of defects any defects that appear within the Defect Liability Period (DLP) shall be specified by the Architect in the schedule of defects. The Architect issue schedule of defects to the contractor not later 14 days after the expiration of Defect Liability Period (DLP). The contractor has to make good all defects within 28days after receive the schedule of defects. Also based on Clause 15.5: instruction of make good defects, the architect can issue AI during DPL of the urgent rectification to be made good within a reasonable time specified by the architect at the contractor’s cost. If the contractor fails to fix the defect the employer can set-off contractor and deduct the cost from contract sum based on clause 30.4: Set off by Employer, and pay other contractor to rectify defects.
4.0 (c) Can the architect issue instruction after the date of Certificate of Practical Completion (CPC)? According to PAM Contract 2006, Clause 15.1 Practical Completion, from the opinion of the Architect, the Works is already finished and the building can be fully use by employer for their intended purpose but the building still have some minor defect such as crack, leaking and the contractor has responsible to make all minor defect good. Under clause 15.2(a), within 14days after receive the written notice given by contractor. Architect will do inspection. If the architect opinions the Works are not practically completed, then Architect will not issue Certificate of Practical Completion. If in Architect opinion, the Works are Practically Completed, then Architect will issue Certificate of Practical Completion ， which based on clause 15.2(b). The Certificate of Practical Completion will be issue by the Architect to the Contractor when the contractor has achieved practical completion of the Works including all authorized variation and the Works have passed any tests of inspection as required.
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The criteria for practical completion: a) This employer can have full and beneficial use of the works for their intended purposes b) The contractor has given undertaking to makes the defect good and complete the works c) Other requirements stated in the contract document have been completed with the contractor If YES, the contractor has the responsibility to make the entire minor defect good. According to clause 15.4, Schedule of Defects. Any defects in the Works, which appear within the defects liability period, shall be specified by the Architect in a schedule of defects, which he shall deliver to the Contractor not later than 14 days after the expiration of the defects liability period. The contractor must make good the defects specified by architect within 28 days after receipt the schedule of defects at the contractor cost. If the contractor fails to repair the defects, client has the right to employ other contractor to repair the defects. If NO, according to clauses 11.3, Issue of Variations after Practical Completion. The architect may issue instructions in writing requiring a Variation at any time before the issuance of the Certificate of Practical Completion. Thereafter, any AI requiring a Variation must be necessitated by obligations or compliance with the requirement of any appropriate authority and service provider issued before Certificate of Practical Completion, but if requirement by appropriate after certificate of practical completion, still can claim extension of time and loss expenses.
5.0 (d) Were the hairline cracks due to design problem and not due to the contractor’s workmanship or materials; hence, the rectification works shall be treated as variations to the contract? Yes. At the contractor’s side, the hairline cracks due to design problem and not due to the contractor’s workmanship or materials; hence, the rectification works shall be treated as variations to the contract. According to the contract, there was no thermal insulation designed for the 6
roof slab to minimize such hairline cracks from occurring. So, this is the faulty of design caused by the structural engineer. Variations mean any changes made, alteration or modification of the design, quality or quantity of works. According to Clause 11.1(b): the alteration of the kind or standard of any materials and goods to be used in the Works. The engineer wants the contractor to rectify the works by his findings and method of rectification. Besides, may alter the kind of the rectifications or change the design of the building or change the standard of the materials. In addition, subject to Clause 11.6(c), where work is not executed under similar character as set out in the contract documents. Engineer wants contractor to rectify the work as add the design of the thermal insulation for the roof slab, which is the work, not stated down in the contract. Thus, the variation caused by the engineer incurs additional expenses to the contractor according to Clause 11.7: Additional expense caused by Variation. The reason is, that is not default by the contractor and he is not entitled to pay the additional or extra expense that caused by the engineer. Furthermore, the contractor shall give written notice to the Architect that he wants to claim for such additional expenses together with an initial estimate of his claim subject to Clause 11.7(a). In addition, according to Clause 11.9: Variations and additional expenses added to contract sum, then the amount of additional expenses claimed by the contractor refer to clause 11.7, this amount should added to the contract sum. Due to the variation and rectification by the engineer, this variation may affect the flow of the whole construction of the building seriously. Therefore, the contractor may claim for Extension of Time (EOT) subject to Clause 23.0 because this is not due to his default but is due to the client’s representative fault. Thus, the contractor should give written notice to the architect with some supported with all particulars of the cause of delay, which is the delay caused by the variation of works. In this case, the contractor may claim for Loss And/or Expense (L&E) according to Clause 24.0. The EOT is the condition precedent, so L&E is entitled for contractor. L&E will not start unless EOT is started to claim. L&E is 7
to reimburse the contractor for L&E, which he has suffered or incurred as the direct result of certain specified event. Beside, the regular progress of the Works is likely to be materially affected by the variation, so contractor is likely to incur L&E and he may claim for such loss and/or expense too. No. In engineer’s opinion, contractor should rectify the defects because it is due to the poor workmanship or materials of the works. Thus, the rectification works shall not be treated as variations to contract. According to Clause 6.1: Standards of works, materials, goods and workmanship. All the works must be follow the standard stated in the contract and make sure that the quality is there otherwise the architect has the right to open up and inspection for contractor’s work subject to Clause 6.3: Inspection and testing. If the engineer found that there is defects and he may consider that is of contractor fault that he did not work in accordance to the contract, then ask for inspection or rectify the work. However, this is the contractor’s liability to execute the work and supply materials and goods and maintain the quality workmanship in accordance with the contract, as the clause stated at Clause 6.4: Contractor’s obligation and relieved. Consequently, the contractor may pay Liquidated Ascertained Damages (LAD) to the client. This is because is his fault caused the delay of the work, which he did not work in accordance with the contract, and engineer asked for rectify the defects or remove the work.
6.0 (e) By adhering to the architect’s methods of rectification of exmet instead of P.U. Sealant, will the contractor be liable if the cracks have reoccurred? The contractor is not liable if the crack have re-occurred. According to Clause 15.3 of the Conditions of Contract (as the 14-day deadline for delivery of the Final Schedule has now expired, no further instruction to rectify defects for the works shall be issued by you), those cracks that re-occurred can’t consider as defects as the architect
did not issue the Final Schedule of 8
Defects. In addition, following the project structural engineer’s method of rectification, the contractor has proved that the hairline cracks were not due to the absence of proper exmet reinforcement. Therefore, the contractor is NOT liable to the re-occurred cracks.
7.0 (f) Was the contractor right to insist that the architect can no longer issue instructions to rectify works after the expiry of the DLP? The Contractor do not have the right to insist that the Architect can no longer issue an instructions to rectify the works which after the expiry of the Defect Liabilities Periods (DLP). It is because based on the PAM 2006 Clause 2.1, the Contractor should comply with all the Architect’s Instruction (AI) in regard to any matter in respect of which the Architect is expressly empowered by these Conditions. It is because, under the contract, the Contractor is liable for the defective works and has the rights and duty to return to the site to remedy the defects during defect liability Period. According to clause 15.3, the Contractor shall comply with all his undertaking to attend to the works and defects of a minor nature under Clause 15.1(a) within the specified time. In the event if the Contractor fails to comply with his undertaking, the Employer who may possess under the Contract without the prejudice to any other rights and remedies with any one of the following:
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15.3(a) The Employer grants with the Contractor for additional the ex-gratia time to be specified by the Architect to enable the Contractor to comply with his said undertaking. 15.3(b) The Employer may employ and pay third person to execute those works which may be necessary to give effect to the Contractor’s said undertaking. All the cost including in any loss or expenses shall be set-off by the Employer under Clause 30.4. 15.3(c) Accept the leave all or any such of works and defects of minor nature in the Works subject to an appropriate set-off under Clause 30.4. Other that, under Clause 15.6(b), if the Architect who opinion that the Defects works have not been made good, so the Architect shall written an AI notice to the Contractor to re-making good all the Defects, otherwise the Architect shall not issue the Certificate of Making Good Defects to the Contractor.
8.0 (g) Is the contractor liable to repair the re-appeared cracks after he had rectified them? Yes. If there were discovered the reappeared of hairline cracks in works, the Contractor is liable to repair the works. According the Clause 22.1, if the Contractor fail to complete the Works (the reappeared cracks) which in the Architect of the opinion, the Architect shall issue a Certificate of NonCompletion to the Contractor. So the Employer shall calculated a sum of the rate stated in the Appendix as Liquidated Damages and shall pay by the Contractor. It may recover such sum as a debt or may deduct from the monies due or to become due to the Contractor under the Contract, or the Employer 10
may recover such sum from the Performance Bond. No. The Contractor disagreed with the Engineer’s finding report which the Engineer said that the hairline cracks were not due to design problems but it was due to the absence of the exmet reinforcement. It is because the Contractor found that was a design’s failure, and all the works are accordance with the specification in the drawing. According to Clause 6.3, the Architect and Engineer shall inspection and testing of the samples of materials provided by the Contractor, so the Contractor said that were approved by Architect and Engineer for the standard of the Materials, and the Contractor disagreed with the Engineer that were the Contractor default. If they want the Contractor come and repair the re-appeared cracks, the Contractor may can apply an EOT from the Architect based on the clause 23.1. Thereafter, according the Clause 24.1, the Contractor may notice the Architect for his intention claim for such loss or/and expense. Such written notice shall be condition precedent to any entitlement to loss or/and expense that the Contractor may have under the Contract Sum.
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(h) Has the architect failed in his duty to issue the Schedule of Defects? Yes. Under Clause 15.4: The schedule of defects should deliver to the contractor within 14days after the expiration of defect liability period. If there is defect appear before the 14days, the architect shall issue the schedule of defect. If the architect have no issue the schedule of defect within the 14 days, then the contractor can refuse the rectify work because the architect was fail in his duty to issue the schedule of defect. No. If the defects are just appear after 14 days of the expiration of defect liability period but the contractor already end the liability of the contract, thus he has no right to rectify the defects, the architect have also no right to issue the schedule of defect to the contractor to fix the defects. Furthermore, Employer may hire other contractor to rectify the defects. However, the Architect is not fails on his duty in this situation, because the issuance of schedule of defect period was over, the Architect have no right to issue any instruction to contract to instruct contractor to rectify defects.
10.0 Conclusion Throughout this case study, there is no certain party is right. So, our answer and suggestion will be in yes or no, which is not necessary the contractor fault but also not fully correct by the design team. A contractor’s obligation is very important and is a must to carry out his work regularly and work in accordance with the contract. Contractor should make sure his quality workmanship and quality of the materials used. This is because, a contractor’s misunderstanding of the design, poor workmanship, the use of non-conforming materials, and failure to perform the work in accordance to the contract cause the defects. In addition, if architect found that he is not work in accordance with the contract, the architect can ask for open up or remove his whole work. Furthermore, contractor’s responsibility to 12
carried out defect when there any defects appear. An architect or an engineer is also very important to the construction site. The occurrence of this defect also may result from the design professional’s failure to produce an accurate and well-coordinated design that provides sufficient information to the contractor to construct the building. Due to the architect or engineer fault, they cause the delay of the project too. In addition, caused the contractor needed to pay the extra expenses on it. Finally, every single party is very important in the construction site. Different position of the parties in the construction will carry out the work regularly everyday. As a contractor, make sure his work is work in accordance with the contract. As a consultant QS, make sure they can help out the client in order to prevent the budget is not over budget. An architect, as a representative of the client, help client to make the contractor’s work is work in accordance and work regularly. In addition, issue every architect’s instruction within the reasonably period or day. As an engineer, make sure the design of the buildings is build in a correct and possible way. As a client, is very important too to make sure the payment is always claim to the different parties on time.
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