How to Remedy Defects after Taking Over under the 1999 FIDIC Silver Book

“Defects are one of the major causes of disputes. It is common to see disagreement of the parties while managing a defect-related process.”

It’s important to have the Works in the conditions required by the Contract.

But, in most of the projects it rarely happens, even after taking over.

Generally, defects appear and most of these defects are not rectified in accordance with the relevant procedures.

But, if the defects are remedied in accordance with the right procedure, both parties benefit from that.

In the existence of the Contractor’s responsibility for the defect;

➤ The Contractor will be entitled to carry out the rectification himself which may normally be expected to be less expensive than having to repay the cost to the Employer of having it done by others.

➤ The Employer will be entitled to have the defects remedied instead of having to pay another Contractor to execute the rectification.

And most importantly, probability of dispute will be minimized.

But, in some cases the cause of defects are not well understood and the responsible party for the rectification and its cost is not determined properly.

Additionally, the Employer does not comply with the Notice Requirements.

And, tests after the rectification phase are not carried out properly.

At the end, these circumstances limit the proper implementation of the procedure for remedying the defects.

In this document; you will find the key issues and the procedure to be followed while remedying defects after taking over under the 1999 FIDIC Silver Book.

1   Notifying the Contractor 

The Employer is to notify the Contractor;

➤ to remedy the defects and damage for the Works.

➤ on or before the expiry date of “Defects Notification Period”.

2   Defects Notification Period

Sub-Clause 1.1.3.7 defines and describes the “Defects Notification Period” which is;

1. Calculated from the date on which the Works are completed under Sub-Clause 10.1 [Taking Over of the Works and Sections].

2. Declared in the Particular Conditions (with any extension under Sub-Clause 11.3 [Extension of Defects Notification Period]).

3   Remedying the Defects 

3.1  Cost of Remedying Defects

Under Sub-Clause 11.2 [Cost of Remedying Defects] the Contractor will be responsible for the cost of the Work which is attributable to [1];

➤ Design of the Works.

➤ Plant, Materials or Workmanship not being in accordance with the Contract.

➤ Improper operation or maintenance which was attributable to matters for which the Contractor is responsible (under Sub-Clauses 5.5 to 5.7 or otherwise).

➤ Failure by the Contractor to comply with any other obligation.

If any defect or damage is attributable to another cause, Sub-Clause 13.3 [Variation Procedure] is to apply.

3.2  Access to the Site

The Contractor has a right to access the Work if it is not inconsistent with the Employer’s reasonable Security restrictions till the issuance of the Performance Certificate.

3.3  Remedy Out of the Site

In case of any defect or damage which cannot be remedied promptly on site, with;

➤ The Employer’s Consent.

➤ Increasing the Performance Security amount or providing other appropriate security.

the Contractor may remove such items of the Plant out of the Site.

3.4  Further Tests

If the Performance of the Works are affected after remedying a defect; the Employer may require repetition of any test;

➤ Within 28 days after remedying the defect.

➤ In accordance with the terms of the previous tests.

The Party liable for the remedial work is to bear the Cost of the further tests.

4 Failure to Remedy 

If the Contractor fails to remedy the defect within a notified date, the Employer may;

1. Carry out the Work himself or by others, the Contractor bears the cost without any responsibility.

2. Agree or determine a reduction in the Contract Price.

3. If the defect has significant effects on the contract or Works then the Employer is to be entitled to recover all sums paid for Work plus financing costs, clearing site and returning the Plant to the Contractor.

5   Extension of Defects Notification Period 

5.1 Notice to the Contractor

In accordance with Sub-Clause 2.5 [Employer’s Claims], if the Employer considers himself to be entitled to any extension of the “Defects Notification Period”, the Employer is to give notice to the Contractor before the expiry date of such period.

5.2 Entitlement for Extension

The Employer is to be entitled to extension if the Works, Section or a major item of Plant cannot be used due to a defect or a damage.

5.3 Determination Regarding the Extension

The Employer is to proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine the extension in accordance with Sub-Clause 11.3 [Extension of Defects Notification Period].

6   Issuing the Performance Certificate 

The Employer is to issue Performance Certificate within 28 days after the latest of the expiry dates of the Defects Notification Periods, or as soon as thereafter the Contractor has [2];

➤ Supplied all the Contractor’s Documents.

➤ Completed and tested all the Works, including remedying any defects.

In case of Employer’s failure to issue a “Performance Certificate” [3];

➤ The Performance Certificate shall be deemed to have been issued on the date 28 days after the date on which it should have been issued, as required by Sub-Clause 11.9 [Performance Certificate].

Unfulfilled Obligations;

➤ Each Party is to remain liable for the underperformed obligations after the “Issuance of the Performance Certificate”.

FOOTNOTES

1. The same Sub-Paragraph letters are used as in Sub-Clause 11.2 [Cost of Remedying Defects] of the 1999 FIDIC Silver Book.

2. The same Sub-Paragraph letters are used as in Sub-Clause 11.9 [Performance Certificate] of the 1999 FIDIC Silver Book.

3. The same Sub-Paragraph letters are used as in Sub-Clause 11.9 [Performance Certificate] of the 1999 FIDIC Silver Book.

This information is provided for your convenience and does not constitute any “Legal Advice”. This document is prepared for the general information of the interested persons. This should not be acted upon in any specific situation without appropriate legal advice.

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