When you are a subcontractor, you are often on the receiving end of bespoke subcontracts, under which the contractor is trying to pass all its risk (and more) to your company. I recommend getting these contracts checked as they can hide some seriously unusual terms. Deep in a subcontract this week I came across a fairly usual defects clause:
The Contractor shall notify the Subcontractor of any defects that appear in the Subcontract Works during the defects liability period under the Main Contract and the Subcontractor shall, at its expense, make good such defects within a reasonable time from notification
Nothing really wrong there, except that the contractor has subtly adopted the defects liability period from the main contract. We haven’t yet been provided with that contract (its not been entered into) and have no control over it so we have no idea how long this obligation will last…
The real shock came in the next clause:
The Subcontractor undertakes and warrants to the Contractor to maintain the Subcontract Works in good repair and condition during the progress of the Subcontract Works and until the expiry of the defects liability period under the Main Contract
The purpose of a defects period is to provide a short period of time (6-12 months after completion) for defects to be rectified by the same company rather than having to bring a claim for breach of contract. It suits both parties as it reduces the cost to the client and ensures continuity.
A maintenance period is more common under process plant or engineering contracts. The purpose of a maintenance period is to allow the client to operate the plant in a specific state of repair or a specific condition, to carry out performance tests and check that the works do meet the requirements of the specification.
This type of obligation would require the subcontractor to maintain the works in a good repair and condition during a ‘maintenance period’ BUT with two caveats:
- fair wear and tear is excepted – the subcontractor does not have to ensure that the works stay pristine
- costs are split between the client and subcontractor – if a repair is required which does not arise from a defect then the subcontractor is entitled to be paid for that repair work (it’s not a defects liability but a maintenance obligation)
The clause highlighted above contains neither of those caveats. I don’t know if this is copy & paste nonsense, deliberate underhandedness or reckless indifference. A mere skim of the conditions would not have revealed this potentially expensive and wholly unexpected obligation – I had to read the contract twice before it leapt out at me!
My advice: you really need to review every word carefully and not assume that any clause is ‘standard’.