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Mike Christensen December 10, 2009 CM 385: Section 1 Final Paper How Can A Contractor Avoid Liability for Defective Work? Every contract created produces a margin of risk and a platform for success. Depending on how one manages the risk assumed, one may either excel and shine in the glory of success or drown and disappear in the raging waters of error. Nevertheless, to become great one must take that step of faith into the flailing wind. As said by Leo F. Buscalglia, “The person who risks nothing – does nothing, has nothing, is nothing, and becomes nothing.

He may avoid suffering and sorrow, but he simply cannot learn… and grow… and live. ” (Buscalglia, 2009) The contractor who is bound to the owner must understand the risk assumed regarding defective work. This understanding will create a critical eye for the contractor that will help mitigate risk. To begin, the contractor must recognize what a defect is and the different categories that a defect may be classified as; the various categories will provide opportunities for the contractor to have future claims barred after acceptance.

The two main classifications for defective work are known as: patent defects and latent defects.

According to the Steven H. Gifis, the author of Law Dictionary, a patent defect is a “defect that could be recognized upon reasonably careful inspection or through the use of ordinary diligence and care. ” To assist in avoiding claims against the contractor due to patent defects, a contractor will create a punch-list, which list will include specific items that need to be checked; and if needed, corrected, prior to the sale of the project.

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Usually the contractor will walk through the project with the owner to identify any corrections needed.

Upon acceptance of the work by the owner, which can be manifest by payment or taking possession of the project (i. e. substantial completion), any future patent defect claims cannot be brought against the contractor. The defect should have been recognized upon a reasonably careful inspection, completed by filling out the punch list. A prime example where a contractor and owner are protected by a future claim of defective work is found in the case, Inman v. Binghamton Housing Authority. It was six years after the completion of the Saratoga Terrace apartment complex when a child ell off the back porch stoop and received severe injuries. The parents of the child claimed that the contractor and owner were responsible due to their negligence in constructing the stoop without a protective railing. The court referenced back to the Campo v. Schofield case, which states, “We have not yet reached the state where a manufacturer is under the duty of making a machine accident proof or foolproof. ” The court also noted that the complex had been used without accident for six years and that it did not conceal any dangers or defective work that would not have been found by a reasonable inspection.

The outcome of the case proved that the pleading did not contain any allegation of a defect, and that the liability rested upon the parents of the child. Consequently, the phrase Caveat Emptor (Buyer Beware) protects the contractor from future claims as long as the defective work existed at the time of inspection and could have reasonably been identified. Nevertheless, a contractor must also understand that if the defective work is classified as a latent defect, the risk and liability associated with this defect may be transferred back to the contractor.

Therefore, a contractor must understand what a latent defect is and how risk might be lessened. The Law Dictionary defines a latent defect as a “flaw that is discovered after delivery; usually, latent defects are inherent weaknesses which normally are not detected by examination or routine tests, but which are present at the time of manufacture or are aggravated by use. ” (2003) Consequently, this flaw may not be found until the structure or member fails, which rapidly increases the liability of the project.

The most identifiers for these failures are unsatisfactory material, workmanship, or design; all of these produce results that do not comply with the contract requirements. In reference to the three common identifiers mentioned above, the most difficult to resolve is the case where the material is defective – who is responsible – the owner, architect, manufacturer, or contractor? The variety of materials is so vast and the testing so limited, that the various personnel mentioned above try to cut costs without assuming the liability. In the case, Wood-Hopkins Contracting Co. v. Masonry Contractors Inc. , Masonry Contractors Inc. ontracted to install and clean the masonry for an apartment complex in Atlanta, Georgia. Upon substantial completion, water was found leaking into the apartment due to the recently constructed masonry wall. Wood-Hopkins immediately accused Masonry Contractors Inc. for the defective work and requested that they waterproof the entire structure (a cost of $12,255. 00). Masonry Contractors Inc. recognized that the leak came from the wall constructed by their crew, but affirmed that the contract had specifically called out the means and method of installation and material to be used, and that the material was defective, not their work.

In the end, the material was found to be defective, which defect caused a failure in the bond. Thus, if the contractor follows the specifications of the owner, which specifications are found in the contract documents, the contractor is able to transfer the liability back to the owner and proceed with minimal risk. In regards to minimizing the risk associated with latent defects, a contractor should obtain the greatest amount of training to increase his workmanship, and then follow the specifications of the contract.

If any questions arise during construction, he should consult the owner and designer so that liability and risk will be transferred. . In the case, Southwest Welding v. The United States, the contractor, Southwest Welding, contracted with the government to build several sections of penstock. Upon completion of each section, the government’s Contracting Officer would approve the section and installation of the section would commence and final payment would be made.

The contract clearly stated that welds would be radiographically examined and that the Contracting Officer was the only person authorized to accept the work. After installing 15 sections of penstock, the Contracting Officer requested a different test be performed on the welds, which test required that the contractor remove and replace 348,000 inches of welding, equaling an additional cost of $543,343. 76. The Contractor sent letters of clarification, stating that the work previously performed met the contracted requirements and that the work requested would be additional work and would require extra compensation.

After traveling the courts, the appellate court sided with the contractor due to the communication which clearly identified the requested work as extra work, because the contractor met the requirements of the contract. In conclusion, a contractor has the opportunity to take the precautions and steps necessary to bar future patent defect claims by creating a punch-list and walking through the project with the owner. The owner’s power of acceptance enforces the contractual phrase Caveat Emptor. Nevertheless, if the defects are considered to be a latent efect, the owner can still trace liability back to the owner. Because of this, the contractor must provide excellent workmanship and follow the specific language of the contract documents. By so doing, the responsibility and liability of the project flows back to the owner who initially took the risk to live, to learn, and invest in his project.