NEC4 Defect Management Explained

What happens when the client discovers a defect on your project? It might not be something you’ve thought about before. If so, you may be unaware what your contract says about defects. In this article we’re going to look at how the NEC4 deals with defects and what you can do to ensure you’re prepared when the situation arises.

NEC4 Engineering and Construction Contract (ECC) defines a defect in clause 11.2 (6) “a part of the works which is not in accordance with the scope” and further clarifies in Clause 41.4 that “if a test or inspection shows that any work has a Defect, the Contractor corrects the Defect and the test or inspection is repeated”.

Let’s look into the defect process and timeline under the NEC. Under the ECC a defects date is defined in the contract data as being a period in weeks (usually 52 weeks) “after Completion of the whole of the works”. Until the defects date, the Supervisor and Contractor each notify the other of Defects as soon as they find them. In short, the client usually has up to a year after works are completed to notify a Defect.

We also have the defect correction period. This is also defined in the contract data (usually 3 weeks). Unlike the defect date the defect correction period identifies how long the contractor has to rectify a Defect which has been notified to them.

Debates often arise about who is responsible for the defect. The NEC states that one issue which often arises, is where design is not the contractor’s responsibility. This results in a assessment whether a particular defect is a result of design or workmanship. This is a cause for many disputes and there have been court cases aiming to establish this. One example is Imperial Chemical Industries Ltd (ICI) v. Merit Merrell Technology Ltd (MMT), [2017] EWHC 1763 (TCC). In this case, a number of issues arose in this case over the quality of the welding, was this a design issue, or workmanship issue though? The courts decided this was a design issue. The reason being is that it was found within the minutes of a post-tender meeting that the testing regime for the works was to be visual inspection and 10% dye penetration, rather than radiology. This method, was established before works started and approved by the client and PM before welding commenced. The client was trying to hold the contractor to a higher standard in terms of quality of work. However, declined to contractor the means (radiology) to ensure this standard was met. The judge therefore, sided with the contractor.

Debates like above highlight the importance of record keeping. It may seem like minor inconvenience at the time. However, you can appreciate how important every detail is when assessing disputes or cases.

Why not watch our video on this topic?

One Response

  1. Hi i am a university student studying contracts and the NEC4 document, i have this scenario that i have to comment on with reference to the NEC4 clauses which i just cant seem to work out:

    1. Further inspection of ongoing work indicated that there were a number of defects which the PM noted and issued a certificate for.
    2. In week 10, the contractor requested that the PM certify a payment request they had submitted two weeks earlier but the PM insisted that the defects must be addressed before any further payments can be made to the contractor.
    3. Addressing these defects implies that the completion date could be delayed by another two weeks. The contractor proposes to the PM that they can only avoid this delay if they work overtime (24 hours) which may result in significant cost-related variations.
    4. The PM has approved the quotation and instructed the contractor to arrange for subcontractors to make up for the overtime on the condition that the contractor bears the extra cost to be incurred.

    Any help on this would be greatly appreciated

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