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Subcontractor's right and duty to remedy

Kortversjonen

Lytt til artikkelen

‍

1. Introduction

Errors and deficiencies shall be corrected, and they shall be remedied within a reasonable time.

When deficiencies are discovered (and advertised) on the takeover, the system is for the parties to agree on a deadline for when the deficiencies should be rectified.

An alternative may also be that the parties have already agreed on remediation deadlines at the time of the conclusion of the agreement, and sometimes even covered them by day mulch.

Below are the rules governing the right and obligation of the subcontractor to repair, as well as the limitations arising from the standard contracts.

We also deal with the rules for what the total/general contractor can do if the subcontractor fails to rectify its obligation, or if it does not make use of its right to rectification (if you want to formulate it that way).

We remind you that the subcontractor's obligation to rectify may lapse if the total/general contractor does not advertise on time or because the defect claim is obsolete.

The rules on defects and complaints are dealt with in a separate article.

2. Overview of the rules

3. Subcontractor's duty and right to rectification

The starting point is that the subcontractor is obliged to correct deficiencies.

It follows from NS 8417 paragraph 42.3.1, second paragraph, that this also applies in cases where the subcontractor disputes the existence of a defect.

In such cases, the subcontractor may require the total/ general contractor to provide security for the remediation costs of remediation.

The subcontractor has not only a duty to repair, but also a right.

This, of course, has a significant side to the size of the remediation costs, which are normally kept at a lower level when the subcontractor rectifies deficiencies in his own works than where the remediation is left to others.

4. Disproportionately high remediation costs

In NS 8417 paragraph 42.3.1, first paragraph, a reservation is entered in that the subcontractor is not obliged to repair if the remediation costs become “disproportionately large in proportion to what is achieved”.

The same caveat follows from NS 8415 paragraph 36.2, first paragraph and NS 8416 paragraph 27.2, first paragraph.

If there is a situation where it may be appropriate to consider this question, we must first establish that several complex assessments must be made.

First, one must decide on the deficiency as such and how significant it is. If it concerns peripheral and/ or aesthetic defects, less will naturally be required before the threshold “disproportionate” is reached, than where there are very central core characteristics of the subject matter of the contract.

We have previously dealt with the importance of the builder's purpose by having the contract object listed has for the deficiency assessment. If it turns out that the purpose of the builder is not fulfilled or only to a limited extent, a great deal may be required before concluding that the repair costs are “disproportionately large in proportion to what is achieved”.

What is “disproportionate” and “relative to what is achieved” are distinctively discretionary terms that need to be considered very concretely, and these are assessments that will often necessitate a combination of legal and technical expertise.

We must also add that where the limit goes for what is “disproportionate” for total/general contractor vis a vis the builder, and what is “disproportionate” for subcontractor vis a vis total-/ general contractor, will not necessarily be the same.

In situations where the cost of remediation becomes too high compared to what is achieved, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

We deal with price reductions in clause 6.5 below.

5. Total/General Contractor Safety Valve

It is worth noting NS 8417 paragraph 42.3.1, last paragraph, last sentence, where it is stated that in very special cases the total/ general contractor does not have to wait for the subcontractor before outsourcing the remediation work to others.

If it is “urgently needed” to implement remediation before the contractor has the opportunity to do so himself, the total/general contractor may put the remediation away to others (possibly do it himself).

The same rule follows from NS 8515 paragraph 36.2, last paragraph.

The provision is a safety valve to prevent a defect from either developing and expanding, or by the defect inflicting other damage on other parts of the contract object or the surrounding environment.

In other words, we are talking about a form of emergency provision.

A guide to what is “strictly necessary” will typically be where a postponement could result in larger and more extensive deficiencies, damage to other parts of the contract object and/ or substantially greater remediation costs if remedial action is pending.

Typical examples of this would be holes in roofs or elsewhere in the siding of the contract object, leaks in the basement, water supply or drains that suddenly stop, the electricity supply is lost, etc.

With this said, an intermediary can also be envisaged where the acute situation is stopped by temporary measures by a third party, and then the more extensive remediation work is left to the subcontractor responsible and who also has the best conditions for remediation.

6. The cost of the remedy

The first paragraph of NS 8417 paragraph 42.3.2 states that the subcontractor shall cover all direct remediation costs, including access costs and expenses for the determination of the deficiency.

The latter will typically be the total expenses incurred by the main contractor for specialists who have assisted with the investigation of the conditions, and where typically a report has been prepared describing and documenting the deficiencies.

For example, it may be moisture and rot damage where one has had to engage e.g. Mycoteam — perhaps because a more general complaint has been rejected by the total/ subcontractor.

On the other hand, more general costs of experts assisting during, for example, a takeover transaction in general will not be eligible for coverage as we see this.

The assumption that such costs are eligible for coverage is nevertheless that they are an “direct and necessary consequence of the deficiency remediation”.

The corresponding provision is found in NS 8415 paragraph 36.2, first paragraph, while NS 8416 paragraph 27.2, first paragraph states only that the contractor shall repair “at their own expense”.

NS 8417 paragraph 42.3.2, second paragraph contains a provision on compensation for damages caused by the defect to other parts of the subject matter of the contract.

If the general contractor has taken out an insurance covering such damage, the general contractor is not obliged to repair these at his own expense.

In that case, the costs should be borne by the insurance company, and often the insurer will want to have a say in the team as to who rectifies, and how.

If, on the other hand, it turns out that the damage to other parts of the contract subject can be reversed to gross negligence or intent on the part of the general subcontractor, the contractor is nevertheless liable for the costs.

In order for this rule to apply, it is a prerequisite that the general contractor has taken out such insurance, which must mean that the general subcontractor becomes liable for the remediation costs in case of lack of such insurance.

These rules are also included in NS 8415 paragraph 36.2, second paragraph and NS 8416 paragraph 27.2, second paragraph.

7. The timing of the subcontractor's remediation

Deficiencies reported on the takeover shall normally be remedied by the subcontractor within a reasonable time.

Normally, the parties agree on such a deadline on the actual takeover for defects discovered thereon, or the parties have already agreed on this in connection with the conclusion of the contract.

For defects discovered after the takeover, it follows from NS 8417 paragraph 42.3.3, second paragraph, that the subcontractor may require that such deficiencies be remedied as a whole. “within one year of the takeover” unless this is for “clear disadvantage” for the total/general contractor.

From experience it is the case that deficiencies detected during the first year after the takeover are more trivial matters. At the same time, one also has experience that there are often minor conditions — call it trifles — that appear as a result of normal use. It can be loose hinges, boom under tiles, weak sentences or other conditions that do not prevent the normal use of the contract object.

Such deficiencies are often not so important to rectify quickly, it will require disproportionately high costs if a subcontractor has to initiate remedial works each time such conditions are discovered, and it would be rational for all parties to collect such deficiencies and carry out a comprehensive remediation of them after about one year from the takeover.

The standard contracts provide for such comprehensive remediation to be carried out before the first year has been completed and that a joint inspection is then carried out to verify that the deficiencies have been remedied “within one year”, see NS 8417 paragraph 42.3.3, second paragraph and NS 8415 paragraph 36.2, sixth paragraph.

For the record, it is clarified that the condition for such an overall remedy is that it is not “to clear disadvantage” for the total-/ general contractor to defer until the end of the first year with such aggregate remediation.

Secondly, it is specified that such a one-year examination is held only when one of the parties requires it.

Our experience is that many appointment parties have a one-year experience, and often a two- and three-year experience as well.

Moreover, it is often convenient to wait for an overall correction of deficiencies that have been advertised during the first year until after passing a joint one-year examination.

There is nothing in the way of agreeing such provisions that deviate from the standard, but the important thing here is to ensure that provisions of this in the total/general contractor's contract with the builder are reflected in the contract down to the subcontractor.

If it is for “clear disadvantage” for the total/general contractor to postpone the remediation as mentioned above, it follows from inter alia NS 8417 paragraph 42.3.3, first paragraph, that the subcontractor is entitled to a time limit which is “reasonable”.

In addition, we would like to point out that the claim “clear disadvantage” must be said to represent a fairly high threshold before one can claim that deficiencies discovered within the first year must be remedied by “reasonable” time so that it cannot wait for an overall remediation within the first year.

The same rule, incidentally, follows from NS 8415 paragraph 36.2, sixth paragraph.

Finally, it is mentioned that the total/general contractor is obliged to provide the subcontractor with the necessary access. At this stage, of course, the total/subcontractor no longer has any control over the subject matter of the contract. On the contrary, it is taken over by the builder, and the builder himself will be able to do without the resources that originally lay with the builder. It will be the situation when the object of the contract is sold, or leased. Consequently, it must be assumed that these circumstances have been considered in the context of the individual contracts which, in that case, are presumed to have been concluded.

In any case, it cannot be the subcontractor's risk if one does not obtain the necessary funds.

8. Compensation in case of failure to correct

It follows from NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2 that the total/general contractor has the right to have the remediation works carried out by others if the contractor does not rectify within the prescribed deadlines.

A condition for this to be done is that the prescribed deadline was “reasonable”.

This applies to deficiencies discovered and advertised on the takeover, and it applies to defects discovered and advertised after the takeover.

If the subcontractor has not remediated within the applicable deadlines and has also received notice that the remediation will be provided to others without assistance, the Total/General Contractor may engage others and claim the costs reimbursed by the subcontractor.

With that said, we want to stress that one is taking risks by putting the remedy out to others.

If the situation was that the subcontractor did not rectify within the given time limit, there may be a risk that a court will conclude that the remediation period was not reasonable.

Another option is that the subcontractor made a remediation offer which the total/general contractor declined. If he then engaged another to rectify as one himself thought was correct, one could also run the risk of the court concluding that the refusal was unjustified.

Neither NS 8415, NS 8416 nor NS 8417 contain rules that say anything about the consequence that the total/main contractor has deprived the subcontractor of the right of rectification on improper grounds.

The traditional starting point has been that the total/general contractor is only entitled to reimbursement of the savings that the subcontractor had by not having rectification.

However, as legal developments have been in recent years, there may be a lot of indications that the total contractor risks losing his claim for remediation costs completely.

Since the state of law cannot be said to be clear and because there may be considerable costs involved, the parties are encouraged to seek legal assistance (lawyer) should such a situation arise.

In conclusion, it is mentioned that the total/general contractor is entitled to reimbursement of his costs for repairing where the remediation was “urgently needed” and the subcontractor not able to rectify in time, cf. paragraph 5 of the article.

Finally, we clarify that the total/general contractor can only claim reimbursed costs for remediation that has been carried out on a “reasonable and prudent manner”, cf NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2, last paragraph.

This is a concrete assessment and we will not go into further detail here.

9. Price reduction

As pointed out in paragraph 4, the subcontractor is not obliged to make repairs if the cost of remediation becomes disproportionately high compared to what is achieved.

If this is the case, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

The price decline should then be set at the reduction in value that the defect imposes on the subject of the contract.

It can be hard to know what this might be.

One possibility is to obtain an estimate in which one assesses the value of the contract object without the defect, and then one must also assess what the value is with the defect in question.

In some cases, there may be grounds for quantifying this, while in other cases it will not be possible to determine any loss of value.

If it is not possible to determine a loss of value, the price reduction shall be set at the “savings” the subcontractor has had by not fulfilling the contract.

In this also lies several discretionary assessments since it is not given that the contractor has had any savings whatsoever. The work is just done incorrectly, but largely with the same effort factors as if the work had been done correctly.

In conclusion, we would like to add that what happens in the relationship between the total/general contractor and the subcontractor in such situations will probably have to be seen in the light of what happens in the relationship between the builder and the total/general contractor.

‍

Tilbake

Subcontractor's right and duty to remedy

Kortversjonen

Lytt til artikkelen

‍

1. Introduction

Errors and deficiencies shall be corrected, and they shall be remedied within a reasonable time.

When deficiencies are discovered (and advertised) on the takeover, the system is for the parties to agree on a deadline for when the deficiencies should be rectified.

An alternative may also be that the parties have already agreed on remediation deadlines at the time of the conclusion of the agreement, and sometimes even covered them by day mulch.

Below are the rules governing the right and obligation of the subcontractor to repair, as well as the limitations arising from the standard contracts.

We also deal with the rules for what the total/general contractor can do if the subcontractor fails to rectify its obligation, or if it does not make use of its right to rectification (if you want to formulate it that way).

We remind you that the subcontractor's obligation to rectify may lapse if the total/general contractor does not advertise on time or because the defect claim is obsolete.

The rules on defects and complaints are dealt with in a separate article.

2. Overview of the rules

3. Subcontractor's duty and right to rectification

The starting point is that the subcontractor is obliged to correct deficiencies.

It follows from NS 8417 paragraph 42.3.1, second paragraph, that this also applies in cases where the subcontractor disputes the existence of a defect.

In such cases, the subcontractor may require the total/ general contractor to provide security for the remediation costs of remediation.

The subcontractor has not only a duty to repair, but also a right.

This, of course, has a significant side to the size of the remediation costs, which are normally kept at a lower level when the subcontractor rectifies deficiencies in his own works than where the remediation is left to others.

4. Disproportionately high remediation costs

In NS 8417 paragraph 42.3.1, first paragraph, a reservation is entered in that the subcontractor is not obliged to repair if the remediation costs become “disproportionately large in proportion to what is achieved”.

The same caveat follows from NS 8415 paragraph 36.2, first paragraph and NS 8416 paragraph 27.2, first paragraph.

If there is a situation where it may be appropriate to consider this question, we must first establish that several complex assessments must be made.

First, one must decide on the deficiency as such and how significant it is. If it concerns peripheral and/ or aesthetic defects, less will naturally be required before the threshold “disproportionate” is reached, than where there are very central core characteristics of the subject matter of the contract.

We have previously dealt with the importance of the builder's purpose by having the contract object listed has for the deficiency assessment. If it turns out that the purpose of the builder is not fulfilled or only to a limited extent, a great deal may be required before concluding that the repair costs are “disproportionately large in proportion to what is achieved”.

What is “disproportionate” and “relative to what is achieved” are distinctively discretionary terms that need to be considered very concretely, and these are assessments that will often necessitate a combination of legal and technical expertise.

We must also add that where the limit goes for what is “disproportionate” for total/general contractor vis a vis the builder, and what is “disproportionate” for subcontractor vis a vis total-/ general contractor, will not necessarily be the same.

In situations where the cost of remediation becomes too high compared to what is achieved, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

We deal with price reductions in clause 6.5 below.

5. Total/General Contractor Safety Valve

It is worth noting NS 8417 paragraph 42.3.1, last paragraph, last sentence, where it is stated that in very special cases the total/ general contractor does not have to wait for the subcontractor before outsourcing the remediation work to others.

If it is “urgently needed” to implement remediation before the contractor has the opportunity to do so himself, the total/general contractor may put the remediation away to others (possibly do it himself).

The same rule follows from NS 8515 paragraph 36.2, last paragraph.

The provision is a safety valve to prevent a defect from either developing and expanding, or by the defect inflicting other damage on other parts of the contract object or the surrounding environment.

In other words, we are talking about a form of emergency provision.

A guide to what is “strictly necessary” will typically be where a postponement could result in larger and more extensive deficiencies, damage to other parts of the contract object and/ or substantially greater remediation costs if remedial action is pending.

Typical examples of this would be holes in roofs or elsewhere in the siding of the contract object, leaks in the basement, water supply or drains that suddenly stop, the electricity supply is lost, etc.

With this said, an intermediary can also be envisaged where the acute situation is stopped by temporary measures by a third party, and then the more extensive remediation work is left to the subcontractor responsible and who also has the best conditions for remediation.

6. The cost of the remedy

The first paragraph of NS 8417 paragraph 42.3.2 states that the subcontractor shall cover all direct remediation costs, including access costs and expenses for the determination of the deficiency.

The latter will typically be the total expenses incurred by the main contractor for specialists who have assisted with the investigation of the conditions, and where typically a report has been prepared describing and documenting the deficiencies.

For example, it may be moisture and rot damage where one has had to engage e.g. Mycoteam — perhaps because a more general complaint has been rejected by the total/ subcontractor.

On the other hand, more general costs of experts assisting during, for example, a takeover transaction in general will not be eligible for coverage as we see this.

The assumption that such costs are eligible for coverage is nevertheless that they are an “direct and necessary consequence of the deficiency remediation”.

The corresponding provision is found in NS 8415 paragraph 36.2, first paragraph, while NS 8416 paragraph 27.2, first paragraph states only that the contractor shall repair “at their own expense”.

NS 8417 paragraph 42.3.2, second paragraph contains a provision on compensation for damages caused by the defect to other parts of the subject matter of the contract.

If the general contractor has taken out an insurance covering such damage, the general contractor is not obliged to repair these at his own expense.

In that case, the costs should be borne by the insurance company, and often the insurer will want to have a say in the team as to who rectifies, and how.

If, on the other hand, it turns out that the damage to other parts of the contract subject can be reversed to gross negligence or intent on the part of the general subcontractor, the contractor is nevertheless liable for the costs.

In order for this rule to apply, it is a prerequisite that the general contractor has taken out such insurance, which must mean that the general subcontractor becomes liable for the remediation costs in case of lack of such insurance.

These rules are also included in NS 8415 paragraph 36.2, second paragraph and NS 8416 paragraph 27.2, second paragraph.

7. The timing of the subcontractor's remediation

Deficiencies reported on the takeover shall normally be remedied by the subcontractor within a reasonable time.

Normally, the parties agree on such a deadline on the actual takeover for defects discovered thereon, or the parties have already agreed on this in connection with the conclusion of the contract.

For defects discovered after the takeover, it follows from NS 8417 paragraph 42.3.3, second paragraph, that the subcontractor may require that such deficiencies be remedied as a whole. “within one year of the takeover” unless this is for “clear disadvantage” for the total/general contractor.

From experience it is the case that deficiencies detected during the first year after the takeover are more trivial matters. At the same time, one also has experience that there are often minor conditions — call it trifles — that appear as a result of normal use. It can be loose hinges, boom under tiles, weak sentences or other conditions that do not prevent the normal use of the contract object.

Such deficiencies are often not so important to rectify quickly, it will require disproportionately high costs if a subcontractor has to initiate remedial works each time such conditions are discovered, and it would be rational for all parties to collect such deficiencies and carry out a comprehensive remediation of them after about one year from the takeover.

The standard contracts provide for such comprehensive remediation to be carried out before the first year has been completed and that a joint inspection is then carried out to verify that the deficiencies have been remedied “within one year”, see NS 8417 paragraph 42.3.3, second paragraph and NS 8415 paragraph 36.2, sixth paragraph.

For the record, it is clarified that the condition for such an overall remedy is that it is not “to clear disadvantage” for the total-/ general contractor to defer until the end of the first year with such aggregate remediation.

Secondly, it is specified that such a one-year examination is held only when one of the parties requires it.

Our experience is that many appointment parties have a one-year experience, and often a two- and three-year experience as well.

Moreover, it is often convenient to wait for an overall correction of deficiencies that have been advertised during the first year until after passing a joint one-year examination.

There is nothing in the way of agreeing such provisions that deviate from the standard, but the important thing here is to ensure that provisions of this in the total/general contractor's contract with the builder are reflected in the contract down to the subcontractor.

If it is for “clear disadvantage” for the total/general contractor to postpone the remediation as mentioned above, it follows from inter alia NS 8417 paragraph 42.3.3, first paragraph, that the subcontractor is entitled to a time limit which is “reasonable”.

In addition, we would like to point out that the claim “clear disadvantage” must be said to represent a fairly high threshold before one can claim that deficiencies discovered within the first year must be remedied by “reasonable” time so that it cannot wait for an overall remediation within the first year.

The same rule, incidentally, follows from NS 8415 paragraph 36.2, sixth paragraph.

Finally, it is mentioned that the total/general contractor is obliged to provide the subcontractor with the necessary access. At this stage, of course, the total/subcontractor no longer has any control over the subject matter of the contract. On the contrary, it is taken over by the builder, and the builder himself will be able to do without the resources that originally lay with the builder. It will be the situation when the object of the contract is sold, or leased. Consequently, it must be assumed that these circumstances have been considered in the context of the individual contracts which, in that case, are presumed to have been concluded.

In any case, it cannot be the subcontractor's risk if one does not obtain the necessary funds.

8. Compensation in case of failure to correct

It follows from NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2 that the total/general contractor has the right to have the remediation works carried out by others if the contractor does not rectify within the prescribed deadlines.

A condition for this to be done is that the prescribed deadline was “reasonable”.

This applies to deficiencies discovered and advertised on the takeover, and it applies to defects discovered and advertised after the takeover.

If the subcontractor has not remediated within the applicable deadlines and has also received notice that the remediation will be provided to others without assistance, the Total/General Contractor may engage others and claim the costs reimbursed by the subcontractor.

With that said, we want to stress that one is taking risks by putting the remedy out to others.

If the situation was that the subcontractor did not rectify within the given time limit, there may be a risk that a court will conclude that the remediation period was not reasonable.

Another option is that the subcontractor made a remediation offer which the total/general contractor declined. If he then engaged another to rectify as one himself thought was correct, one could also run the risk of the court concluding that the refusal was unjustified.

Neither NS 8415, NS 8416 nor NS 8417 contain rules that say anything about the consequence that the total/main contractor has deprived the subcontractor of the right of rectification on improper grounds.

The traditional starting point has been that the total/general contractor is only entitled to reimbursement of the savings that the subcontractor had by not having rectification.

However, as legal developments have been in recent years, there may be a lot of indications that the total contractor risks losing his claim for remediation costs completely.

Since the state of law cannot be said to be clear and because there may be considerable costs involved, the parties are encouraged to seek legal assistance (lawyer) should such a situation arise.

In conclusion, it is mentioned that the total/general contractor is entitled to reimbursement of his costs for repairing where the remediation was “urgently needed” and the subcontractor not able to rectify in time, cf. paragraph 5 of the article.

Finally, we clarify that the total/general contractor can only claim reimbursed costs for remediation that has been carried out on a “reasonable and prudent manner”, cf NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2, last paragraph.

This is a concrete assessment and we will not go into further detail here.

9. Price reduction

As pointed out in paragraph 4, the subcontractor is not obliged to make repairs if the cost of remediation becomes disproportionately high compared to what is achieved.

If this is the case, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

The price decline should then be set at the reduction in value that the defect imposes on the subject of the contract.

It can be hard to know what this might be.

One possibility is to obtain an estimate in which one assesses the value of the contract object without the defect, and then one must also assess what the value is with the defect in question.

In some cases, there may be grounds for quantifying this, while in other cases it will not be possible to determine any loss of value.

If it is not possible to determine a loss of value, the price reduction shall be set at the “savings” the subcontractor has had by not fulfilling the contract.

In this also lies several discretionary assessments since it is not given that the contractor has had any savings whatsoever. The work is just done incorrectly, but largely with the same effort factors as if the work had been done correctly.

In conclusion, we would like to add that what happens in the relationship between the total/general contractor and the subcontractor in such situations will probably have to be seen in the light of what happens in the relationship between the builder and the total/general contractor.

‍

Tilbake

Subcontractor's right and duty to remedy

Kortversjonen

Lytt til artikkelen

‍

1. Introduction

Errors and deficiencies shall be corrected, and they shall be remedied within a reasonable time.

When deficiencies are discovered (and advertised) on the takeover, the system is for the parties to agree on a deadline for when the deficiencies should be rectified.

An alternative may also be that the parties have already agreed on remediation deadlines at the time of the conclusion of the agreement, and sometimes even covered them by day mulch.

Below are the rules governing the right and obligation of the subcontractor to repair, as well as the limitations arising from the standard contracts.

We also deal with the rules for what the total/general contractor can do if the subcontractor fails to rectify its obligation, or if it does not make use of its right to rectification (if you want to formulate it that way).

We remind you that the subcontractor's obligation to rectify may lapse if the total/general contractor does not advertise on time or because the defect claim is obsolete.

The rules on defects and complaints are dealt with in a separate article.

2. Overview of the rules

3. Subcontractor's duty and right to rectification

The starting point is that the subcontractor is obliged to correct deficiencies.

It follows from NS 8417 paragraph 42.3.1, second paragraph, that this also applies in cases where the subcontractor disputes the existence of a defect.

In such cases, the subcontractor may require the total/ general contractor to provide security for the remediation costs of remediation.

The subcontractor has not only a duty to repair, but also a right.

This, of course, has a significant side to the size of the remediation costs, which are normally kept at a lower level when the subcontractor rectifies deficiencies in his own works than where the remediation is left to others.

4. Disproportionately high remediation costs

In NS 8417 paragraph 42.3.1, first paragraph, a reservation is entered in that the subcontractor is not obliged to repair if the remediation costs become “disproportionately large in proportion to what is achieved”.

The same caveat follows from NS 8415 paragraph 36.2, first paragraph and NS 8416 paragraph 27.2, first paragraph.

If there is a situation where it may be appropriate to consider this question, we must first establish that several complex assessments must be made.

First, one must decide on the deficiency as such and how significant it is. If it concerns peripheral and/ or aesthetic defects, less will naturally be required before the threshold “disproportionate” is reached, than where there are very central core characteristics of the subject matter of the contract.

We have previously dealt with the importance of the builder's purpose by having the contract object listed has for the deficiency assessment. If it turns out that the purpose of the builder is not fulfilled or only to a limited extent, a great deal may be required before concluding that the repair costs are “disproportionately large in proportion to what is achieved”.

What is “disproportionate” and “relative to what is achieved” are distinctively discretionary terms that need to be considered very concretely, and these are assessments that will often necessitate a combination of legal and technical expertise.

We must also add that where the limit goes for what is “disproportionate” for total/general contractor vis a vis the builder, and what is “disproportionate” for subcontractor vis a vis total-/ general contractor, will not necessarily be the same.

In situations where the cost of remediation becomes too high compared to what is achieved, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

We deal with price reductions in clause 6.5 below.

5. Total/General Contractor Safety Valve

It is worth noting NS 8417 paragraph 42.3.1, last paragraph, last sentence, where it is stated that in very special cases the total/ general contractor does not have to wait for the subcontractor before outsourcing the remediation work to others.

If it is “urgently needed” to implement remediation before the contractor has the opportunity to do so himself, the total/general contractor may put the remediation away to others (possibly do it himself).

The same rule follows from NS 8515 paragraph 36.2, last paragraph.

The provision is a safety valve to prevent a defect from either developing and expanding, or by the defect inflicting other damage on other parts of the contract object or the surrounding environment.

In other words, we are talking about a form of emergency provision.

A guide to what is “strictly necessary” will typically be where a postponement could result in larger and more extensive deficiencies, damage to other parts of the contract object and/ or substantially greater remediation costs if remedial action is pending.

Typical examples of this would be holes in roofs or elsewhere in the siding of the contract object, leaks in the basement, water supply or drains that suddenly stop, the electricity supply is lost, etc.

With this said, an intermediary can also be envisaged where the acute situation is stopped by temporary measures by a third party, and then the more extensive remediation work is left to the subcontractor responsible and who also has the best conditions for remediation.

6. The cost of the remedy

The first paragraph of NS 8417 paragraph 42.3.2 states that the subcontractor shall cover all direct remediation costs, including access costs and expenses for the determination of the deficiency.

The latter will typically be the total expenses incurred by the main contractor for specialists who have assisted with the investigation of the conditions, and where typically a report has been prepared describing and documenting the deficiencies.

For example, it may be moisture and rot damage where one has had to engage e.g. Mycoteam — perhaps because a more general complaint has been rejected by the total/ subcontractor.

On the other hand, more general costs of experts assisting during, for example, a takeover transaction in general will not be eligible for coverage as we see this.

The assumption that such costs are eligible for coverage is nevertheless that they are an “direct and necessary consequence of the deficiency remediation”.

The corresponding provision is found in NS 8415 paragraph 36.2, first paragraph, while NS 8416 paragraph 27.2, first paragraph states only that the contractor shall repair “at their own expense”.

NS 8417 paragraph 42.3.2, second paragraph contains a provision on compensation for damages caused by the defect to other parts of the subject matter of the contract.

If the general contractor has taken out an insurance covering such damage, the general contractor is not obliged to repair these at his own expense.

In that case, the costs should be borne by the insurance company, and often the insurer will want to have a say in the team as to who rectifies, and how.

If, on the other hand, it turns out that the damage to other parts of the contract subject can be reversed to gross negligence or intent on the part of the general subcontractor, the contractor is nevertheless liable for the costs.

In order for this rule to apply, it is a prerequisite that the general contractor has taken out such insurance, which must mean that the general subcontractor becomes liable for the remediation costs in case of lack of such insurance.

These rules are also included in NS 8415 paragraph 36.2, second paragraph and NS 8416 paragraph 27.2, second paragraph.

7. The timing of the subcontractor's remediation

Deficiencies reported on the takeover shall normally be remedied by the subcontractor within a reasonable time.

Normally, the parties agree on such a deadline on the actual takeover for defects discovered thereon, or the parties have already agreed on this in connection with the conclusion of the contract.

For defects discovered after the takeover, it follows from NS 8417 paragraph 42.3.3, second paragraph, that the subcontractor may require that such deficiencies be remedied as a whole. “within one year of the takeover” unless this is for “clear disadvantage” for the total/general contractor.

From experience it is the case that deficiencies detected during the first year after the takeover are more trivial matters. At the same time, one also has experience that there are often minor conditions — call it trifles — that appear as a result of normal use. It can be loose hinges, boom under tiles, weak sentences or other conditions that do not prevent the normal use of the contract object.

Such deficiencies are often not so important to rectify quickly, it will require disproportionately high costs if a subcontractor has to initiate remedial works each time such conditions are discovered, and it would be rational for all parties to collect such deficiencies and carry out a comprehensive remediation of them after about one year from the takeover.

The standard contracts provide for such comprehensive remediation to be carried out before the first year has been completed and that a joint inspection is then carried out to verify that the deficiencies have been remedied “within one year”, see NS 8417 paragraph 42.3.3, second paragraph and NS 8415 paragraph 36.2, sixth paragraph.

For the record, it is clarified that the condition for such an overall remedy is that it is not “to clear disadvantage” for the total-/ general contractor to defer until the end of the first year with such aggregate remediation.

Secondly, it is specified that such a one-year examination is held only when one of the parties requires it.

Our experience is that many appointment parties have a one-year experience, and often a two- and three-year experience as well.

Moreover, it is often convenient to wait for an overall correction of deficiencies that have been advertised during the first year until after passing a joint one-year examination.

There is nothing in the way of agreeing such provisions that deviate from the standard, but the important thing here is to ensure that provisions of this in the total/general contractor's contract with the builder are reflected in the contract down to the subcontractor.

If it is for “clear disadvantage” for the total/general contractor to postpone the remediation as mentioned above, it follows from inter alia NS 8417 paragraph 42.3.3, first paragraph, that the subcontractor is entitled to a time limit which is “reasonable”.

In addition, we would like to point out that the claim “clear disadvantage” must be said to represent a fairly high threshold before one can claim that deficiencies discovered within the first year must be remedied by “reasonable” time so that it cannot wait for an overall remediation within the first year.

The same rule, incidentally, follows from NS 8415 paragraph 36.2, sixth paragraph.

Finally, it is mentioned that the total/general contractor is obliged to provide the subcontractor with the necessary access. At this stage, of course, the total/subcontractor no longer has any control over the subject matter of the contract. On the contrary, it is taken over by the builder, and the builder himself will be able to do without the resources that originally lay with the builder. It will be the situation when the object of the contract is sold, or leased. Consequently, it must be assumed that these circumstances have been considered in the context of the individual contracts which, in that case, are presumed to have been concluded.

In any case, it cannot be the subcontractor's risk if one does not obtain the necessary funds.

8. Compensation in case of failure to correct

It follows from NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2 that the total/general contractor has the right to have the remediation works carried out by others if the contractor does not rectify within the prescribed deadlines.

A condition for this to be done is that the prescribed deadline was “reasonable”.

This applies to deficiencies discovered and advertised on the takeover, and it applies to defects discovered and advertised after the takeover.

If the subcontractor has not remediated within the applicable deadlines and has also received notice that the remediation will be provided to others without assistance, the Total/General Contractor may engage others and claim the costs reimbursed by the subcontractor.

With that said, we want to stress that one is taking risks by putting the remedy out to others.

If the situation was that the subcontractor did not rectify within the given time limit, there may be a risk that a court will conclude that the remediation period was not reasonable.

Another option is that the subcontractor made a remediation offer which the total/general contractor declined. If he then engaged another to rectify as one himself thought was correct, one could also run the risk of the court concluding that the refusal was unjustified.

Neither NS 8415, NS 8416 nor NS 8417 contain rules that say anything about the consequence that the total/main contractor has deprived the subcontractor of the right of rectification on improper grounds.

The traditional starting point has been that the total/general contractor is only entitled to reimbursement of the savings that the subcontractor had by not having rectification.

However, as legal developments have been in recent years, there may be a lot of indications that the total contractor risks losing his claim for remediation costs completely.

Since the state of law cannot be said to be clear and because there may be considerable costs involved, the parties are encouraged to seek legal assistance (lawyer) should such a situation arise.

In conclusion, it is mentioned that the total/general contractor is entitled to reimbursement of his costs for repairing where the remediation was “urgently needed” and the subcontractor not able to rectify in time, cf. paragraph 5 of the article.

Finally, we clarify that the total/general contractor can only claim reimbursed costs for remediation that has been carried out on a “reasonable and prudent manner”, cf NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2, last paragraph.

This is a concrete assessment and we will not go into further detail here.

9. Price reduction

As pointed out in paragraph 4, the subcontractor is not obliged to make repairs if the cost of remediation becomes disproportionately high compared to what is achieved.

If this is the case, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

The price decline should then be set at the reduction in value that the defect imposes on the subject of the contract.

It can be hard to know what this might be.

One possibility is to obtain an estimate in which one assesses the value of the contract object without the defect, and then one must also assess what the value is with the defect in question.

In some cases, there may be grounds for quantifying this, while in other cases it will not be possible to determine any loss of value.

If it is not possible to determine a loss of value, the price reduction shall be set at the “savings” the subcontractor has had by not fulfilling the contract.

In this also lies several discretionary assessments since it is not given that the contractor has had any savings whatsoever. The work is just done incorrectly, but largely with the same effort factors as if the work had been done correctly.

In conclusion, we would like to add that what happens in the relationship between the total/general contractor and the subcontractor in such situations will probably have to be seen in the light of what happens in the relationship between the builder and the total/general contractor.

‍

Tilbake

Subcontractor's right and duty to remedy

Kortversjonen

Lytt til artikkelen

‍

1. Introduction

Errors and deficiencies shall be corrected, and they shall be remedied within a reasonable time.

When deficiencies are discovered (and advertised) on the takeover, the system is for the parties to agree on a deadline for when the deficiencies should be rectified.

An alternative may also be that the parties have already agreed on remediation deadlines at the time of the conclusion of the agreement, and sometimes even covered them by day mulch.

Below are the rules governing the right and obligation of the subcontractor to repair, as well as the limitations arising from the standard contracts.

We also deal with the rules for what the total/general contractor can do if the subcontractor fails to rectify its obligation, or if it does not make use of its right to rectification (if you want to formulate it that way).

We remind you that the subcontractor's obligation to rectify may lapse if the total/general contractor does not advertise on time or because the defect claim is obsolete.

The rules on defects and complaints are dealt with in a separate article.

2. Overview of the rules

3. Subcontractor's duty and right to rectification

The starting point is that the subcontractor is obliged to correct deficiencies.

It follows from NS 8417 paragraph 42.3.1, second paragraph, that this also applies in cases where the subcontractor disputes the existence of a defect.

In such cases, the subcontractor may require the total/ general contractor to provide security for the remediation costs of remediation.

The subcontractor has not only a duty to repair, but also a right.

This, of course, has a significant side to the size of the remediation costs, which are normally kept at a lower level when the subcontractor rectifies deficiencies in his own works than where the remediation is left to others.

4. Disproportionately high remediation costs

In NS 8417 paragraph 42.3.1, first paragraph, a reservation is entered in that the subcontractor is not obliged to repair if the remediation costs become “disproportionately large in proportion to what is achieved”.

The same caveat follows from NS 8415 paragraph 36.2, first paragraph and NS 8416 paragraph 27.2, first paragraph.

If there is a situation where it may be appropriate to consider this question, we must first establish that several complex assessments must be made.

First, one must decide on the deficiency as such and how significant it is. If it concerns peripheral and/ or aesthetic defects, less will naturally be required before the threshold “disproportionate” is reached, than where there are very central core characteristics of the subject matter of the contract.

We have previously dealt with the importance of the builder's purpose by having the contract object listed has for the deficiency assessment. If it turns out that the purpose of the builder is not fulfilled or only to a limited extent, a great deal may be required before concluding that the repair costs are “disproportionately large in proportion to what is achieved”.

What is “disproportionate” and “relative to what is achieved” are distinctively discretionary terms that need to be considered very concretely, and these are assessments that will often necessitate a combination of legal and technical expertise.

We must also add that where the limit goes for what is “disproportionate” for total/general contractor vis a vis the builder, and what is “disproportionate” for subcontractor vis a vis total-/ general contractor, will not necessarily be the same.

In situations where the cost of remediation becomes too high compared to what is achieved, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

We deal with price reductions in clause 6.5 below.

5. Total/General Contractor Safety Valve

It is worth noting NS 8417 paragraph 42.3.1, last paragraph, last sentence, where it is stated that in very special cases the total/ general contractor does not have to wait for the subcontractor before outsourcing the remediation work to others.

If it is “urgently needed” to implement remediation before the contractor has the opportunity to do so himself, the total/general contractor may put the remediation away to others (possibly do it himself).

The same rule follows from NS 8515 paragraph 36.2, last paragraph.

The provision is a safety valve to prevent a defect from either developing and expanding, or by the defect inflicting other damage on other parts of the contract object or the surrounding environment.

In other words, we are talking about a form of emergency provision.

A guide to what is “strictly necessary” will typically be where a postponement could result in larger and more extensive deficiencies, damage to other parts of the contract object and/ or substantially greater remediation costs if remedial action is pending.

Typical examples of this would be holes in roofs or elsewhere in the siding of the contract object, leaks in the basement, water supply or drains that suddenly stop, the electricity supply is lost, etc.

With this said, an intermediary can also be envisaged where the acute situation is stopped by temporary measures by a third party, and then the more extensive remediation work is left to the subcontractor responsible and who also has the best conditions for remediation.

6. The cost of the remedy

The first paragraph of NS 8417 paragraph 42.3.2 states that the subcontractor shall cover all direct remediation costs, including access costs and expenses for the determination of the deficiency.

The latter will typically be the total expenses incurred by the main contractor for specialists who have assisted with the investigation of the conditions, and where typically a report has been prepared describing and documenting the deficiencies.

For example, it may be moisture and rot damage where one has had to engage e.g. Mycoteam — perhaps because a more general complaint has been rejected by the total/ subcontractor.

On the other hand, more general costs of experts assisting during, for example, a takeover transaction in general will not be eligible for coverage as we see this.

The assumption that such costs are eligible for coverage is nevertheless that they are an “direct and necessary consequence of the deficiency remediation”.

The corresponding provision is found in NS 8415 paragraph 36.2, first paragraph, while NS 8416 paragraph 27.2, first paragraph states only that the contractor shall repair “at their own expense”.

NS 8417 paragraph 42.3.2, second paragraph contains a provision on compensation for damages caused by the defect to other parts of the subject matter of the contract.

If the general contractor has taken out an insurance covering such damage, the general contractor is not obliged to repair these at his own expense.

In that case, the costs should be borne by the insurance company, and often the insurer will want to have a say in the team as to who rectifies, and how.

If, on the other hand, it turns out that the damage to other parts of the contract subject can be reversed to gross negligence or intent on the part of the general subcontractor, the contractor is nevertheless liable for the costs.

In order for this rule to apply, it is a prerequisite that the general contractor has taken out such insurance, which must mean that the general subcontractor becomes liable for the remediation costs in case of lack of such insurance.

These rules are also included in NS 8415 paragraph 36.2, second paragraph and NS 8416 paragraph 27.2, second paragraph.

7. The timing of the subcontractor's remediation

Deficiencies reported on the takeover shall normally be remedied by the subcontractor within a reasonable time.

Normally, the parties agree on such a deadline on the actual takeover for defects discovered thereon, or the parties have already agreed on this in connection with the conclusion of the contract.

For defects discovered after the takeover, it follows from NS 8417 paragraph 42.3.3, second paragraph, that the subcontractor may require that such deficiencies be remedied as a whole. “within one year of the takeover” unless this is for “clear disadvantage” for the total/general contractor.

From experience it is the case that deficiencies detected during the first year after the takeover are more trivial matters. At the same time, one also has experience that there are often minor conditions — call it trifles — that appear as a result of normal use. It can be loose hinges, boom under tiles, weak sentences or other conditions that do not prevent the normal use of the contract object.

Such deficiencies are often not so important to rectify quickly, it will require disproportionately high costs if a subcontractor has to initiate remedial works each time such conditions are discovered, and it would be rational for all parties to collect such deficiencies and carry out a comprehensive remediation of them after about one year from the takeover.

The standard contracts provide for such comprehensive remediation to be carried out before the first year has been completed and that a joint inspection is then carried out to verify that the deficiencies have been remedied “within one year”, see NS 8417 paragraph 42.3.3, second paragraph and NS 8415 paragraph 36.2, sixth paragraph.

For the record, it is clarified that the condition for such an overall remedy is that it is not “to clear disadvantage” for the total-/ general contractor to defer until the end of the first year with such aggregate remediation.

Secondly, it is specified that such a one-year examination is held only when one of the parties requires it.

Our experience is that many appointment parties have a one-year experience, and often a two- and three-year experience as well.

Moreover, it is often convenient to wait for an overall correction of deficiencies that have been advertised during the first year until after passing a joint one-year examination.

There is nothing in the way of agreeing such provisions that deviate from the standard, but the important thing here is to ensure that provisions of this in the total/general contractor's contract with the builder are reflected in the contract down to the subcontractor.

If it is for “clear disadvantage” for the total/general contractor to postpone the remediation as mentioned above, it follows from inter alia NS 8417 paragraph 42.3.3, first paragraph, that the subcontractor is entitled to a time limit which is “reasonable”.

In addition, we would like to point out that the claim “clear disadvantage” must be said to represent a fairly high threshold before one can claim that deficiencies discovered within the first year must be remedied by “reasonable” time so that it cannot wait for an overall remediation within the first year.

The same rule, incidentally, follows from NS 8415 paragraph 36.2, sixth paragraph.

Finally, it is mentioned that the total/general contractor is obliged to provide the subcontractor with the necessary access. At this stage, of course, the total/subcontractor no longer has any control over the subject matter of the contract. On the contrary, it is taken over by the builder, and the builder himself will be able to do without the resources that originally lay with the builder. It will be the situation when the object of the contract is sold, or leased. Consequently, it must be assumed that these circumstances have been considered in the context of the individual contracts which, in that case, are presumed to have been concluded.

In any case, it cannot be the subcontractor's risk if one does not obtain the necessary funds.

8. Compensation in case of failure to correct

It follows from NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2 that the total/general contractor has the right to have the remediation works carried out by others if the contractor does not rectify within the prescribed deadlines.

A condition for this to be done is that the prescribed deadline was “reasonable”.

This applies to deficiencies discovered and advertised on the takeover, and it applies to defects discovered and advertised after the takeover.

If the subcontractor has not remediated within the applicable deadlines and has also received notice that the remediation will be provided to others without assistance, the Total/General Contractor may engage others and claim the costs reimbursed by the subcontractor.

With that said, we want to stress that one is taking risks by putting the remedy out to others.

If the situation was that the subcontractor did not rectify within the given time limit, there may be a risk that a court will conclude that the remediation period was not reasonable.

Another option is that the subcontractor made a remediation offer which the total/general contractor declined. If he then engaged another to rectify as one himself thought was correct, one could also run the risk of the court concluding that the refusal was unjustified.

Neither NS 8415, NS 8416 nor NS 8417 contain rules that say anything about the consequence that the total/main contractor has deprived the subcontractor of the right of rectification on improper grounds.

The traditional starting point has been that the total/general contractor is only entitled to reimbursement of the savings that the subcontractor had by not having rectification.

However, as legal developments have been in recent years, there may be a lot of indications that the total contractor risks losing his claim for remediation costs completely.

Since the state of law cannot be said to be clear and because there may be considerable costs involved, the parties are encouraged to seek legal assistance (lawyer) should such a situation arise.

In conclusion, it is mentioned that the total/general contractor is entitled to reimbursement of his costs for repairing where the remediation was “urgently needed” and the subcontractor not able to rectify in time, cf. paragraph 5 of the article.

Finally, we clarify that the total/general contractor can only claim reimbursed costs for remediation that has been carried out on a “reasonable and prudent manner”, cf NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2, last paragraph.

This is a concrete assessment and we will not go into further detail here.

9. Price reduction

As pointed out in paragraph 4, the subcontractor is not obliged to make repairs if the cost of remediation becomes disproportionately high compared to what is achieved.

If this is the case, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

The price decline should then be set at the reduction in value that the defect imposes on the subject of the contract.

It can be hard to know what this might be.

One possibility is to obtain an estimate in which one assesses the value of the contract object without the defect, and then one must also assess what the value is with the defect in question.

In some cases, there may be grounds for quantifying this, while in other cases it will not be possible to determine any loss of value.

If it is not possible to determine a loss of value, the price reduction shall be set at the “savings” the subcontractor has had by not fulfilling the contract.

In this also lies several discretionary assessments since it is not given that the contractor has had any savings whatsoever. The work is just done incorrectly, but largely with the same effort factors as if the work had been done correctly.

In conclusion, we would like to add that what happens in the relationship between the total/general contractor and the subcontractor in such situations will probably have to be seen in the light of what happens in the relationship between the builder and the total/general contractor.

‍

Subcontractor's right and duty to remedy

Kortversjonen

Lytt til artikkelen

‍

1. Introduction

Errors and deficiencies shall be corrected, and they shall be remedied within a reasonable time.

When deficiencies are discovered (and advertised) on the takeover, the system is for the parties to agree on a deadline for when the deficiencies should be rectified.

An alternative may also be that the parties have already agreed on remediation deadlines at the time of the conclusion of the agreement, and sometimes even covered them by day mulch.

Below are the rules governing the right and obligation of the subcontractor to repair, as well as the limitations arising from the standard contracts.

We also deal with the rules for what the total/general contractor can do if the subcontractor fails to rectify its obligation, or if it does not make use of its right to rectification (if you want to formulate it that way).

We remind you that the subcontractor's obligation to rectify may lapse if the total/general contractor does not advertise on time or because the defect claim is obsolete.

The rules on defects and complaints are dealt with in a separate article.

2. Overview of the rules

3. Subcontractor's duty and right to rectification

The starting point is that the subcontractor is obliged to correct deficiencies.

It follows from NS 8417 paragraph 42.3.1, second paragraph, that this also applies in cases where the subcontractor disputes the existence of a defect.

In such cases, the subcontractor may require the total/ general contractor to provide security for the remediation costs of remediation.

The subcontractor has not only a duty to repair, but also a right.

This, of course, has a significant side to the size of the remediation costs, which are normally kept at a lower level when the subcontractor rectifies deficiencies in his own works than where the remediation is left to others.

4. Disproportionately high remediation costs

In NS 8417 paragraph 42.3.1, first paragraph, a reservation is entered in that the subcontractor is not obliged to repair if the remediation costs become “disproportionately large in proportion to what is achieved”.

The same caveat follows from NS 8415 paragraph 36.2, first paragraph and NS 8416 paragraph 27.2, first paragraph.

If there is a situation where it may be appropriate to consider this question, we must first establish that several complex assessments must be made.

First, one must decide on the deficiency as such and how significant it is. If it concerns peripheral and/ or aesthetic defects, less will naturally be required before the threshold “disproportionate” is reached, than where there are very central core characteristics of the subject matter of the contract.

We have previously dealt with the importance of the builder's purpose by having the contract object listed has for the deficiency assessment. If it turns out that the purpose of the builder is not fulfilled or only to a limited extent, a great deal may be required before concluding that the repair costs are “disproportionately large in proportion to what is achieved”.

What is “disproportionate” and “relative to what is achieved” are distinctively discretionary terms that need to be considered very concretely, and these are assessments that will often necessitate a combination of legal and technical expertise.

We must also add that where the limit goes for what is “disproportionate” for total/general contractor vis a vis the builder, and what is “disproportionate” for subcontractor vis a vis total-/ general contractor, will not necessarily be the same.

In situations where the cost of remediation becomes too high compared to what is achieved, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

We deal with price reductions in clause 6.5 below.

5. Total/General Contractor Safety Valve

It is worth noting NS 8417 paragraph 42.3.1, last paragraph, last sentence, where it is stated that in very special cases the total/ general contractor does not have to wait for the subcontractor before outsourcing the remediation work to others.

If it is “urgently needed” to implement remediation before the contractor has the opportunity to do so himself, the total/general contractor may put the remediation away to others (possibly do it himself).

The same rule follows from NS 8515 paragraph 36.2, last paragraph.

The provision is a safety valve to prevent a defect from either developing and expanding, or by the defect inflicting other damage on other parts of the contract object or the surrounding environment.

In other words, we are talking about a form of emergency provision.

A guide to what is “strictly necessary” will typically be where a postponement could result in larger and more extensive deficiencies, damage to other parts of the contract object and/ or substantially greater remediation costs if remedial action is pending.

Typical examples of this would be holes in roofs or elsewhere in the siding of the contract object, leaks in the basement, water supply or drains that suddenly stop, the electricity supply is lost, etc.

With this said, an intermediary can also be envisaged where the acute situation is stopped by temporary measures by a third party, and then the more extensive remediation work is left to the subcontractor responsible and who also has the best conditions for remediation.

6. The cost of the remedy

The first paragraph of NS 8417 paragraph 42.3.2 states that the subcontractor shall cover all direct remediation costs, including access costs and expenses for the determination of the deficiency.

The latter will typically be the total expenses incurred by the main contractor for specialists who have assisted with the investigation of the conditions, and where typically a report has been prepared describing and documenting the deficiencies.

For example, it may be moisture and rot damage where one has had to engage e.g. Mycoteam — perhaps because a more general complaint has been rejected by the total/ subcontractor.

On the other hand, more general costs of experts assisting during, for example, a takeover transaction in general will not be eligible for coverage as we see this.

The assumption that such costs are eligible for coverage is nevertheless that they are an “direct and necessary consequence of the deficiency remediation”.

The corresponding provision is found in NS 8415 paragraph 36.2, first paragraph, while NS 8416 paragraph 27.2, first paragraph states only that the contractor shall repair “at their own expense”.

NS 8417 paragraph 42.3.2, second paragraph contains a provision on compensation for damages caused by the defect to other parts of the subject matter of the contract.

If the general contractor has taken out an insurance covering such damage, the general contractor is not obliged to repair these at his own expense.

In that case, the costs should be borne by the insurance company, and often the insurer will want to have a say in the team as to who rectifies, and how.

If, on the other hand, it turns out that the damage to other parts of the contract subject can be reversed to gross negligence or intent on the part of the general subcontractor, the contractor is nevertheless liable for the costs.

In order for this rule to apply, it is a prerequisite that the general contractor has taken out such insurance, which must mean that the general subcontractor becomes liable for the remediation costs in case of lack of such insurance.

These rules are also included in NS 8415 paragraph 36.2, second paragraph and NS 8416 paragraph 27.2, second paragraph.

7. The timing of the subcontractor's remediation

Deficiencies reported on the takeover shall normally be remedied by the subcontractor within a reasonable time.

Normally, the parties agree on such a deadline on the actual takeover for defects discovered thereon, or the parties have already agreed on this in connection with the conclusion of the contract.

For defects discovered after the takeover, it follows from NS 8417 paragraph 42.3.3, second paragraph, that the subcontractor may require that such deficiencies be remedied as a whole. “within one year of the takeover” unless this is for “clear disadvantage” for the total/general contractor.

From experience it is the case that deficiencies detected during the first year after the takeover are more trivial matters. At the same time, one also has experience that there are often minor conditions — call it trifles — that appear as a result of normal use. It can be loose hinges, boom under tiles, weak sentences or other conditions that do not prevent the normal use of the contract object.

Such deficiencies are often not so important to rectify quickly, it will require disproportionately high costs if a subcontractor has to initiate remedial works each time such conditions are discovered, and it would be rational for all parties to collect such deficiencies and carry out a comprehensive remediation of them after about one year from the takeover.

The standard contracts provide for such comprehensive remediation to be carried out before the first year has been completed and that a joint inspection is then carried out to verify that the deficiencies have been remedied “within one year”, see NS 8417 paragraph 42.3.3, second paragraph and NS 8415 paragraph 36.2, sixth paragraph.

For the record, it is clarified that the condition for such an overall remedy is that it is not “to clear disadvantage” for the total-/ general contractor to defer until the end of the first year with such aggregate remediation.

Secondly, it is specified that such a one-year examination is held only when one of the parties requires it.

Our experience is that many appointment parties have a one-year experience, and often a two- and three-year experience as well.

Moreover, it is often convenient to wait for an overall correction of deficiencies that have been advertised during the first year until after passing a joint one-year examination.

There is nothing in the way of agreeing such provisions that deviate from the standard, but the important thing here is to ensure that provisions of this in the total/general contractor's contract with the builder are reflected in the contract down to the subcontractor.

If it is for “clear disadvantage” for the total/general contractor to postpone the remediation as mentioned above, it follows from inter alia NS 8417 paragraph 42.3.3, first paragraph, that the subcontractor is entitled to a time limit which is “reasonable”.

In addition, we would like to point out that the claim “clear disadvantage” must be said to represent a fairly high threshold before one can claim that deficiencies discovered within the first year must be remedied by “reasonable” time so that it cannot wait for an overall remediation within the first year.

The same rule, incidentally, follows from NS 8415 paragraph 36.2, sixth paragraph.

Finally, it is mentioned that the total/general contractor is obliged to provide the subcontractor with the necessary access. At this stage, of course, the total/subcontractor no longer has any control over the subject matter of the contract. On the contrary, it is taken over by the builder, and the builder himself will be able to do without the resources that originally lay with the builder. It will be the situation when the object of the contract is sold, or leased. Consequently, it must be assumed that these circumstances have been considered in the context of the individual contracts which, in that case, are presumed to have been concluded.

In any case, it cannot be the subcontractor's risk if one does not obtain the necessary funds.

8. Compensation in case of failure to correct

It follows from NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2 that the total/general contractor has the right to have the remediation works carried out by others if the contractor does not rectify within the prescribed deadlines.

A condition for this to be done is that the prescribed deadline was “reasonable”.

This applies to deficiencies discovered and advertised on the takeover, and it applies to defects discovered and advertised after the takeover.

If the subcontractor has not remediated within the applicable deadlines and has also received notice that the remediation will be provided to others without assistance, the Total/General Contractor may engage others and claim the costs reimbursed by the subcontractor.

With that said, we want to stress that one is taking risks by putting the remedy out to others.

If the situation was that the subcontractor did not rectify within the given time limit, there may be a risk that a court will conclude that the remediation period was not reasonable.

Another option is that the subcontractor made a remediation offer which the total/general contractor declined. If he then engaged another to rectify as one himself thought was correct, one could also run the risk of the court concluding that the refusal was unjustified.

Neither NS 8415, NS 8416 nor NS 8417 contain rules that say anything about the consequence that the total/main contractor has deprived the subcontractor of the right of rectification on improper grounds.

The traditional starting point has been that the total/general contractor is only entitled to reimbursement of the savings that the subcontractor had by not having rectification.

However, as legal developments have been in recent years, there may be a lot of indications that the total contractor risks losing his claim for remediation costs completely.

Since the state of law cannot be said to be clear and because there may be considerable costs involved, the parties are encouraged to seek legal assistance (lawyer) should such a situation arise.

In conclusion, it is mentioned that the total/general contractor is entitled to reimbursement of his costs for repairing where the remediation was “urgently needed” and the subcontractor not able to rectify in time, cf. paragraph 5 of the article.

Finally, we clarify that the total/general contractor can only claim reimbursed costs for remediation that has been carried out on a “reasonable and prudent manner”, cf NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2, last paragraph.

This is a concrete assessment and we will not go into further detail here.

9. Price reduction

As pointed out in paragraph 4, the subcontractor is not obliged to make repairs if the cost of remediation becomes disproportionately high compared to what is achieved.

If this is the case, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

The price decline should then be set at the reduction in value that the defect imposes on the subject of the contract.

It can be hard to know what this might be.

One possibility is to obtain an estimate in which one assesses the value of the contract object without the defect, and then one must also assess what the value is with the defect in question.

In some cases, there may be grounds for quantifying this, while in other cases it will not be possible to determine any loss of value.

If it is not possible to determine a loss of value, the price reduction shall be set at the “savings” the subcontractor has had by not fulfilling the contract.

In this also lies several discretionary assessments since it is not given that the contractor has had any savings whatsoever. The work is just done incorrectly, but largely with the same effort factors as if the work had been done correctly.

In conclusion, we would like to add that what happens in the relationship between the total/general contractor and the subcontractor in such situations will probably have to be seen in the light of what happens in the relationship between the builder and the total/general contractor.

‍

Subcontractor's right and duty to remedy

Kortversjonen

‍

1. Introduction

Errors and deficiencies shall be corrected, and they shall be remedied within a reasonable time.

When deficiencies are discovered (and advertised) on the takeover, the system is for the parties to agree on a deadline for when the deficiencies should be rectified.

An alternative may also be that the parties have already agreed on remediation deadlines at the time of the conclusion of the agreement, and sometimes even covered them by day mulch.

Below are the rules governing the right and obligation of the subcontractor to repair, as well as the limitations arising from the standard contracts.

We also deal with the rules for what the total/general contractor can do if the subcontractor fails to rectify its obligation, or if it does not make use of its right to rectification (if you want to formulate it that way).

We remind you that the subcontractor's obligation to rectify may lapse if the total/general contractor does not advertise on time or because the defect claim is obsolete.

The rules on defects and complaints are dealt with in a separate article.

2. Overview of the rules

3. Subcontractor's duty and right to rectification

The starting point is that the subcontractor is obliged to correct deficiencies.

It follows from NS 8417 paragraph 42.3.1, second paragraph, that this also applies in cases where the subcontractor disputes the existence of a defect.

In such cases, the subcontractor may require the total/ general contractor to provide security for the remediation costs of remediation.

The subcontractor has not only a duty to repair, but also a right.

This, of course, has a significant side to the size of the remediation costs, which are normally kept at a lower level when the subcontractor rectifies deficiencies in his own works than where the remediation is left to others.

4. Disproportionately high remediation costs

In NS 8417 paragraph 42.3.1, first paragraph, a reservation is entered in that the subcontractor is not obliged to repair if the remediation costs become “disproportionately large in proportion to what is achieved”.

The same caveat follows from NS 8415 paragraph 36.2, first paragraph and NS 8416 paragraph 27.2, first paragraph.

If there is a situation where it may be appropriate to consider this question, we must first establish that several complex assessments must be made.

First, one must decide on the deficiency as such and how significant it is. If it concerns peripheral and/ or aesthetic defects, less will naturally be required before the threshold “disproportionate” is reached, than where there are very central core characteristics of the subject matter of the contract.

We have previously dealt with the importance of the builder's purpose by having the contract object listed has for the deficiency assessment. If it turns out that the purpose of the builder is not fulfilled or only to a limited extent, a great deal may be required before concluding that the repair costs are “disproportionately large in proportion to what is achieved”.

What is “disproportionate” and “relative to what is achieved” are distinctively discretionary terms that need to be considered very concretely, and these are assessments that will often necessitate a combination of legal and technical expertise.

We must also add that where the limit goes for what is “disproportionate” for total/general contractor vis a vis the builder, and what is “disproportionate” for subcontractor vis a vis total-/ general contractor, will not necessarily be the same.

In situations where the cost of remediation becomes too high compared to what is achieved, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

We deal with price reductions in clause 6.5 below.

5. Total/General Contractor Safety Valve

It is worth noting NS 8417 paragraph 42.3.1, last paragraph, last sentence, where it is stated that in very special cases the total/ general contractor does not have to wait for the subcontractor before outsourcing the remediation work to others.

If it is “urgently needed” to implement remediation before the contractor has the opportunity to do so himself, the total/general contractor may put the remediation away to others (possibly do it himself).

The same rule follows from NS 8515 paragraph 36.2, last paragraph.

The provision is a safety valve to prevent a defect from either developing and expanding, or by the defect inflicting other damage on other parts of the contract object or the surrounding environment.

In other words, we are talking about a form of emergency provision.

A guide to what is “strictly necessary” will typically be where a postponement could result in larger and more extensive deficiencies, damage to other parts of the contract object and/ or substantially greater remediation costs if remedial action is pending.

Typical examples of this would be holes in roofs or elsewhere in the siding of the contract object, leaks in the basement, water supply or drains that suddenly stop, the electricity supply is lost, etc.

With this said, an intermediary can also be envisaged where the acute situation is stopped by temporary measures by a third party, and then the more extensive remediation work is left to the subcontractor responsible and who also has the best conditions for remediation.

6. The cost of the remedy

The first paragraph of NS 8417 paragraph 42.3.2 states that the subcontractor shall cover all direct remediation costs, including access costs and expenses for the determination of the deficiency.

The latter will typically be the total expenses incurred by the main contractor for specialists who have assisted with the investigation of the conditions, and where typically a report has been prepared describing and documenting the deficiencies.

For example, it may be moisture and rot damage where one has had to engage e.g. Mycoteam — perhaps because a more general complaint has been rejected by the total/ subcontractor.

On the other hand, more general costs of experts assisting during, for example, a takeover transaction in general will not be eligible for coverage as we see this.

The assumption that such costs are eligible for coverage is nevertheless that they are an “direct and necessary consequence of the deficiency remediation”.

The corresponding provision is found in NS 8415 paragraph 36.2, first paragraph, while NS 8416 paragraph 27.2, first paragraph states only that the contractor shall repair “at their own expense”.

NS 8417 paragraph 42.3.2, second paragraph contains a provision on compensation for damages caused by the defect to other parts of the subject matter of the contract.

If the general contractor has taken out an insurance covering such damage, the general contractor is not obliged to repair these at his own expense.

In that case, the costs should be borne by the insurance company, and often the insurer will want to have a say in the team as to who rectifies, and how.

If, on the other hand, it turns out that the damage to other parts of the contract subject can be reversed to gross negligence or intent on the part of the general subcontractor, the contractor is nevertheless liable for the costs.

In order for this rule to apply, it is a prerequisite that the general contractor has taken out such insurance, which must mean that the general subcontractor becomes liable for the remediation costs in case of lack of such insurance.

These rules are also included in NS 8415 paragraph 36.2, second paragraph and NS 8416 paragraph 27.2, second paragraph.

7. The timing of the subcontractor's remediation

Deficiencies reported on the takeover shall normally be remedied by the subcontractor within a reasonable time.

Normally, the parties agree on such a deadline on the actual takeover for defects discovered thereon, or the parties have already agreed on this in connection with the conclusion of the contract.

For defects discovered after the takeover, it follows from NS 8417 paragraph 42.3.3, second paragraph, that the subcontractor may require that such deficiencies be remedied as a whole. “within one year of the takeover” unless this is for “clear disadvantage” for the total/general contractor.

From experience it is the case that deficiencies detected during the first year after the takeover are more trivial matters. At the same time, one also has experience that there are often minor conditions — call it trifles — that appear as a result of normal use. It can be loose hinges, boom under tiles, weak sentences or other conditions that do not prevent the normal use of the contract object.

Such deficiencies are often not so important to rectify quickly, it will require disproportionately high costs if a subcontractor has to initiate remedial works each time such conditions are discovered, and it would be rational for all parties to collect such deficiencies and carry out a comprehensive remediation of them after about one year from the takeover.

The standard contracts provide for such comprehensive remediation to be carried out before the first year has been completed and that a joint inspection is then carried out to verify that the deficiencies have been remedied “within one year”, see NS 8417 paragraph 42.3.3, second paragraph and NS 8415 paragraph 36.2, sixth paragraph.

For the record, it is clarified that the condition for such an overall remedy is that it is not “to clear disadvantage” for the total-/ general contractor to defer until the end of the first year with such aggregate remediation.

Secondly, it is specified that such a one-year examination is held only when one of the parties requires it.

Our experience is that many appointment parties have a one-year experience, and often a two- and three-year experience as well.

Moreover, it is often convenient to wait for an overall correction of deficiencies that have been advertised during the first year until after passing a joint one-year examination.

There is nothing in the way of agreeing such provisions that deviate from the standard, but the important thing here is to ensure that provisions of this in the total/general contractor's contract with the builder are reflected in the contract down to the subcontractor.

If it is for “clear disadvantage” for the total/general contractor to postpone the remediation as mentioned above, it follows from inter alia NS 8417 paragraph 42.3.3, first paragraph, that the subcontractor is entitled to a time limit which is “reasonable”.

In addition, we would like to point out that the claim “clear disadvantage” must be said to represent a fairly high threshold before one can claim that deficiencies discovered within the first year must be remedied by “reasonable” time so that it cannot wait for an overall remediation within the first year.

The same rule, incidentally, follows from NS 8415 paragraph 36.2, sixth paragraph.

Finally, it is mentioned that the total/general contractor is obliged to provide the subcontractor with the necessary access. At this stage, of course, the total/subcontractor no longer has any control over the subject matter of the contract. On the contrary, it is taken over by the builder, and the builder himself will be able to do without the resources that originally lay with the builder. It will be the situation when the object of the contract is sold, or leased. Consequently, it must be assumed that these circumstances have been considered in the context of the individual contracts which, in that case, are presumed to have been concluded.

In any case, it cannot be the subcontractor's risk if one does not obtain the necessary funds.

8. Compensation in case of failure to correct

It follows from NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2 that the total/general contractor has the right to have the remediation works carried out by others if the contractor does not rectify within the prescribed deadlines.

A condition for this to be done is that the prescribed deadline was “reasonable”.

This applies to deficiencies discovered and advertised on the takeover, and it applies to defects discovered and advertised after the takeover.

If the subcontractor has not remediated within the applicable deadlines and has also received notice that the remediation will be provided to others without assistance, the Total/General Contractor may engage others and claim the costs reimbursed by the subcontractor.

With that said, we want to stress that one is taking risks by putting the remedy out to others.

If the situation was that the subcontractor did not rectify within the given time limit, there may be a risk that a court will conclude that the remediation period was not reasonable.

Another option is that the subcontractor made a remediation offer which the total/general contractor declined. If he then engaged another to rectify as one himself thought was correct, one could also run the risk of the court concluding that the refusal was unjustified.

Neither NS 8415, NS 8416 nor NS 8417 contain rules that say anything about the consequence that the total/main contractor has deprived the subcontractor of the right of rectification on improper grounds.

The traditional starting point has been that the total/general contractor is only entitled to reimbursement of the savings that the subcontractor had by not having rectification.

However, as legal developments have been in recent years, there may be a lot of indications that the total contractor risks losing his claim for remediation costs completely.

Since the state of law cannot be said to be clear and because there may be considerable costs involved, the parties are encouraged to seek legal assistance (lawyer) should such a situation arise.

In conclusion, it is mentioned that the total/general contractor is entitled to reimbursement of his costs for repairing where the remediation was “urgently needed” and the subcontractor not able to rectify in time, cf. paragraph 5 of the article.

Finally, we clarify that the total/general contractor can only claim reimbursed costs for remediation that has been carried out on a “reasonable and prudent manner”, cf NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.3 and NS 8416 paragraph 27.2, last paragraph.

This is a concrete assessment and we will not go into further detail here.

9. Price reduction

As pointed out in paragraph 4, the subcontractor is not obliged to make repairs if the cost of remediation becomes disproportionately high compared to what is achieved.

If this is the case, the total/general contractor is entitled to a price reduction, cf. NS 8417 paragraph 42.3.4, NS 8415 paragraph 36.4 and NS 8416 paragraph 27.3.

The price decline should then be set at the reduction in value that the defect imposes on the subject of the contract.

It can be hard to know what this might be.

One possibility is to obtain an estimate in which one assesses the value of the contract object without the defect, and then one must also assess what the value is with the defect in question.

In some cases, there may be grounds for quantifying this, while in other cases it will not be possible to determine any loss of value.

If it is not possible to determine a loss of value, the price reduction shall be set at the “savings” the subcontractor has had by not fulfilling the contract.

In this also lies several discretionary assessments since it is not given that the contractor has had any savings whatsoever. The work is just done incorrectly, but largely with the same effort factors as if the work had been done correctly.

In conclusion, we would like to add that what happens in the relationship between the total/general contractor and the subcontractor in such situations will probably have to be seen in the light of what happens in the relationship between the builder and the total/general contractor.

‍

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