Defective or Incomplete? Why the distinction matters
The condition, workmanship and progress of construction and trade work can cause various issues during and even after a project or job.
Often there is a fine line between what is actually defective work and incomplete work. In some cases, the distinction may not be important, but in others, it may have legal and financial consequences.
The following is a brief overview of defective work and incomplete work, why the distinction between them matters, and how characterising work as either may impact a party’s position in a dispute or claim.
What is defective work?
Defective work is construction or trade work that does not comply or conform with the contract, and contractual documents such as plans, designs and specifications.
It is typically work that has been performed, but not properly or in a good or workmanlike manner, or in a way that departs from contract documents (such as plans, designs and specifications) or relevant technical standards and codes.
Defective residential work
In New South Wales, residential work may also be defective if it does not comply with one (1) or more of the statutory warranties implied by s 18B of the Home Building Act 1989 (NSW) (HB Act), or other terms implied by s 7E [1], including that residential work must be performed in accordance with applicable standards, and the law, relevant codes, specifications, and conditions of any relevant development consent or complying development certificate.
Claim for defective work
If work is determined to be not compliant or not conforming with the contract (or a statutory warranty if it is residential work) then it is likely defective, and the responsible contractor is in breach of the contract.
The principal / owner would usually be entitled to damages (compensation) for defective work, with the calculation of those damages including the cost of rectification work where it is reasonable and necessary, and other costs such as for alternative accommodation and vacating the property for the period of time that rectification work is to be performed. [2]
However, damages for defective work will usually not be awarded if: [3]
The contract is still on foot and not terminated;
The work has not been delivered to the owner;
The responsible contractor still has possession of the work;
Any applicable defects liability period has not expired;
In the context of a claim for defective residential work or specialist work [4] in New South Wales, rectification by the responsible contractor is determined to be the preferred outcome [5].
What is incomplete work?
Incomplete work generally refers to construction or trade work which a contractor was contracted to perform, but has not performed.
An example of incomplete work is not installing a major building element such as a roof or windows. [6]
Work is usually incomplete if not undertaken or completed by a contractor under a progress stage when the contractor ceased works on the site.
Before practical completion, and while the contract is on foot and not terminated, the contractor is entitled to perform and complete any incomplete work under the contract.
Claim for incomplete work
Where an owner has terminated the contract due to the contractor’s serious breach or repudiation, the owner would usually be entitled to damages (compensation) from the responsible contractor for the increased cost of completing the incomplete work [7], calculated as:
the amount the owner is required to pay to another (third party) contractor to complete the incomplete work;
less the amount the owner would have had to pay the responsible contractor to complete the incomplete work.
However, damages for the increased cost of completing the incomplete work will usually not be awarded if the contractor terminates the contract due to the owner’s serious breach or repudiation. This is because the owner could not claim for a future loss caused by their own breach and conduct.
Why the distinction matters
What is defective work and incomplete work can have an impact on:
liability;
available outcomes;
calculation of damages (compensation).
Incomplete work may also be defective
Identifying work as defective or incomplete can be complicated, with a degree of overlap, including in circumstances where a stage of work has been paid for but not complete at the time of termination of the contract.
For example:
under a contract where work is done and paid for in progress payment stages, a contractor agrees to complete a balcony with a railing (as identified and required by the approved plans) as part of the scope of work;
under that contract, the contractor has a right to issue, and be paid under, a progress payment claim when work identified in a progress payment stage is substantially complete;
the contractor issues a progress payment claim for the balcony stage, and the contracting owner pays the entire claim;
the balcony is constructed, but not the railing, and the contract is then terminated before the contractor can construct the railing.
In these circumstances, although the work is incomplete, the failure to construct the balcony railing may also be defective work in breach of the contract (and a statutory warranty if it is residential work).
The owner would usually be entitled to damages (compensation) from the responsible contractor for the costs of completing the incomplete work the contractor had already been paid for at the time of termination [8], and not only the increased cost of completing that incomplete work.
In summary
Understanding the difference, and how the condition, workmanship and progress of particular work is characterised may be crucial to a party’s position.
If you are facing a contract dispute regarding work performed (or not performed), or wondering how to prepare or defend a similar claim, it is important that you seek legal advice to clarify your rights, responsibilities, and appropriate next steps.
Sources
HB Act sch 2 pt 1 cl 2(1).
Bellgrove v Eldridge (1954) 90 CLR 613, [1954] HCA 36; Deacon v National Strategic Constructions Pty Ltd; National Strategic Constructions Pty Ltd v Deacon [2017] NSWCATAP 185.
Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248; An exception may be where a contractor has given possession of residential work to the owner and does not return to site to perform or rectify work, and that work is confirmed to have been delivered to the owner: Blessed Sydney Constructions Pty Ltd v Vasudevan [2018] NSWCATAP 98; GPM Constructions PL v Baker [2018] NSWCATAP; Integrity Homes Pty Ltd v Staniland [2015] NSWCATAP 284.
Including plumbing and drainage work (other than roof plumbing work), electrical wiring work, gasfitting work, and refrigeration work or air-conditioning work; HB Act sch 1.
HB Act s 48MA.
Clements v Murphy [2018] NSWCATAP 152.
DB Homes Australia Pty Ltd v Kes [2019] NSWCATAP 221.
Intelligent Building Pty Ltd v Ibrahim [2023] NSWCATAP 170.
Disclaimer
The above information is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the above information is accurate at the date it is received or that it will continue to be accurate in the future.
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