Deductions for Defects Must Be Appropriate

When work done by a contractor is deficient, the standard JCT form of contract allows an ‘appropriate deduction’ to be made from payment where the work is not to be made good by the contractor.

Arguments over deductions made in these circumstances are common, especially where the contractor asserts that the defective work could have been rectified for less than the sum deducted.

In a recent case heard by the Technology and Construction Court (TCC), a contracting company took issue over the sum deducted from the retention over allegedly defective work when the property owner declined to let the contractor carry out the rectification work.

The contractor had been engaged to build an extension to a country house and carry out other building work. When the contract was completed, there was an extensive list of defects attached to the certificate of practical completion.

The homeowner arranged for the defects to be rectified by other contractors and also issued legal proceedings against the contracting company.

Although the facts were complex, the nub of the issue was that the contractor argued that the deduction that was calculated was excessive. It also argued that the cost of any remedial work should be calculated at the rates included in the original contract and that it could have arranged for some of the work to be carried out for nothing by the subcontractors it had used.

The TCC affirmed that the appropriate deduction depends on all the circumstances and that all factors have to be taken into account. In this case, the judgment gave weight to the argument that the contractor had not been allowed to arrange the rectification of the defective work, the TCC finding that it had established its right to have the deductions limited. The precise amount will be determined at a later hearing.

The TCC is not normally the best place to resolve issues such as this: sensible negotiation often leads to a better outcome. If you are in dispute over a building or construction contract, contact us for advice.