Plain English Explanation
This CE arises in a specific post-Completion scenario. Under NEC, at the Defects Date (the end of the defect correction period), if the Client has not notified a Defect that existed at Completion, the Contractor is no longer obliged to correct it. If the Client does notify such a Defect and the Contractor corrects it, this is treated as a CE.
In other words: Defects that were present at Completion but not identified during the defects correction period become a CE if the Client subsequently requires correction. This provides an incentive for the Client (and their team) to identify Defects promptly rather than deferring them.
In practice this CE is rare and complex — it requires demonstrating that a Defect existed at Completion (not that it developed post-Completion) and that the Client failed to notify it within the correct period.
Key Takeaway
Carry out a thorough photographic record at handover — if a Defect appears post-Completion and you need to argue it did not exist at Completion, your snagging evidence is all you have.
What This Means for Subcontractors
Subcontractors should ensure careful snagging records at practical completion. If a Defect appears post-handover and there is a question about when it originated, this CE might be relevant. The main contractor will likely resist this CE entitlement, so your evidence of the site condition at handover is critical.
Common Risks & Disputes
- 1Proving a Defect 'existed at Completion' — this requires contemporaneous records of the site condition at handover
- 2The Client arguing the Defect developed after Completion (i.e. it is a latent defect or a maintenance issue)
- 3Contractors accepting this obligation without questioning whether it is a genuine pre-Completion Defect
- 4The timing complexity of identifying when the Defects Date passes and what obligations remain
- 5Poor snagging documentation making it impossible to demonstrate the site condition at Completion
Sources
Related Clauses
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