a building with defects

Latent Defects, the Dark Horse in the JBCC Principal Building Agreement (Edition 6.2, May 2018)

An almost inevitability in any construction contract or project is the fact that somewhere in the course of performing the works, defects will arise. No matter how small or seemingly insignificant a defect may be, generally snags, or whether the defects are so material that it affects fitness for purpose, human error cannot be eliminated. It is for this reason that construction contracts cater for the identification and rectification of defects, which is what the latest edition of the JBCC Principal Building Agreement, edition 6.2 (May 20218) does.  

In the aforementioned latest edition of the JBCC Principal Building Agreement, Defects are defined as “Any aspect of materials and workmanship forming part of the works that does not conform to the agreement and/or construction information”.[1] What has also developed over time is the premise that a distinction should be made between patent defects and latent defects, with the simplest sense to distinguish them being that patent defects are those discernible on inspection and “visible” or ascertainable on a proper inspection whilst latent defects are those not easily discernible or “hidden”. Latent defects are in fact defined in the latest edition of the JBCC Principal Building Agreement as “A defect that an inspection of the works by the principal agent and/or agents would not reasonably have revealed.”[2]

The definition of latent defects referred to above arises from the judgment of the Supreme Court of Appeal (formerly “Appellate Division”) in the matter of Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd[3] in which the learned judges held “Broadly speaking in this context a defect may be described as an abnormal quality or attribute which destroys or substantially impairs the utility or effectiveness of the res vendita (“the thing being sold”), for the purpose for which it has been sold or for which it is commonly used … Such a defect is latent when it is one which is not visible or discoverable upon an inspection of the res vendita. I refrain, however, from entering into the question as to whether to be latent the defect must be not “easily visible” … or whether the test is rather that it should not be reasonably discoverable or discernible by the ordinary purchaser …)”.[4] (own translation)

The question then arises as to what is the contractor’s liability for latent defects towards the employer. Navigating this question has long been the frustration of many a contractor. In terms of the provisions of the latest edition of the JBCC Principal Building Agreement, “the latent defects liability period for the works shall commence at the start of the construction period and end five (5) years from the certified date of final completion[5] or “ Where termination of this agreement occurs before the date of final completion, the latent defects liability period shall end: Five (5) years from the date of termination [29.1] for the completed portion of the works only…)”.[6]

It has been considered by many that although the agreement provides that the contractor is liable for latent defects for five (5) years after the date of certification of final completion, this does not end the time period for the contractor’s liability for latent defects. This has long been premised on the position confirmed in the judgment of Electricity Supply Commission v Stewarts & Lloyds of SA (PtyLtd[7] in which the court held that in terms of the Prescription Act No 68 of 1969 (as amended), prescription of a debt only begins to run after the period of “maintenance” (both patent and latent defects). It was such the contemplated position that in terms of Section 10 (a) read with 11(d) of the Prescription Act No 68 of 1969 (as amended) the contractor’s liability for a latent defect would in terms of the common law be for another three years from the first day after the lapse of the latent defects liability period, this being the dark horse of the contractor’s liability towards the employer.

Simply looking at Sub-clause [22.2] of the latest edition of the JBCC Principal Building Agreement it provides that the contractor shall “make good” all latent defects that appear up to the date of expiry of the latent defects liability period. In Sub-clause [3.3] it is provided that the agreement shall come into force on the date of acceptance by the employer and shall continue to be of force and effect until the end of the latent defects liability period.

If the employer thus becomes aware of a latent defect within the latent defects liability period of five (5) years from the certified date of final completion, and this “latent defect” is in fact a latent defect not only in consideration of the definition thereof but also in reference to what the Courts have considered it as, the contractor shall be liable to rectify such defects. Contrary to the position in Electricity Supply Commission, having regard to the provisions of the JBCC Principal Building Agreement, it  is writer’s opinion that it is the enforcement of the contractor’s liability to “make good” latent defects that appear that is subjected to application of the Prescription Act, No. 68 of 19696 (as amended) rather than all latent defects. The employer would then be obligated to enforce his “debt” for the contractor to make good the latent defect that appeared within the five (5) year time period, for three (3) years after such latent defect came to the employer’s attention, not three (3) years after the lapse of the latent defects liability period.

It is writer’s opinion that if any latent defect appears after the lapse of the latent defects liability period, the agreement between the employer and the contractor has already come to an end, there is no further contractual right of the employer for the rectification of such latent defect and therefore a “debt” as provided for the in Prescription Act, No 68 of 1969 (as amended) cannot arise nor is there any immediately claimable right that the employer can enforce on the contractor.

Ultimately, a lot of the convolution relating to latent defects that might have arisen in previous versions of the JBCC Principal Building Agreement has been resolved by the wording of the latest edition in Sub-clause [22.0], and essentially the employer has any enforceable rights against the contractor if the latent defect appeared within the latent defects liability period.

[1] JBCC Principal Building Agreement, edition 6.2 (May 2018): Sub-clause [1.1];
[1] JBCC Principal Building Agreement, edition 6.2 (May 2018): Sub-clause [1.1]
[1] [1977] 4 All SA 94 (A);
[1] Page 683, 684 of 1977 (3) SA 670 (A);
[1] JBCC Principal Building Agreement, edition 6.2 (May 2018): Sub-clause [22.1];
[1] JBCC Principal Building Agreement, edition 6.2 (May 2018): Sub-clause [22.3], [22.3.1];
[1] 1981 3 SA 340 (A);

The contents of this article are for information purposes only and should not and does not constitute any legal advice. Every case is different and should be determined based on its own merits with proper legal advice.

By Benfred Cilliers – September 2024