Defects and Events Giving Rise to Decennial Liability in Building and Construction Contracts

DEFECTS AND EVENTS GIVING RISE TO DECENNIAL LIABILITY IN BUILDING AND CONSTRUCTION CONTRACTS

Under The Kuwaiti Civil Code

Dr. Mashael A. Alhajeri Private Law Department Kuwait University School of Law - KUSL

Abstract

The public perception of building ‘defects’ is not necessarily compatible with that of the law. In many instances, problems attributable to the natural ageing of the building and its components or to a lack or proper maintenance are referred to as ‘defects’, whereas, in fact, they would not represent defects for which producers will be liable. ‘Defects’, for the purpose of producers’ post-construction liability, are those representing a blemish in design, materials or workmanship. Kinsella gives the example of flaking asbestos coating on steelwork that is sometimes viewed as a ‘defect’, but when first applied and sealed, the asbestos performed an important safety function. He perceives that, in this example, dangerous flaking may have arisen not from faulty design or workmanship but because vibration and the passage of time now necessitates removal or resealing.1

This paper is an attempt to investigate the present position of the Kuwait Civil Code with regard to this problem, with all the risk that such a difficult area of law is really incapable of being so contained. Therefore, the paper necessarily must have a limited objective – to identify the fundamental features of construction defects that are subjected to the code's decennial liability provisions.

Kuwait is an evident example for a civil law country, and can be taken as an indicator to other Arab countries of which the legal systems are based on the French civil law and its legal doctrine, both in the Middle East (Syria, Lebanon, Iraq and Yemen) and North Africa (Egypt, Libya, Algeria, Tunisia and Morocco). Therefore, the findings in this paper are hoped to prove applicable to these legal systems.

1. What Constitutes a ‘Defect’?

1.1 Etymology

1 Paul Kinsella, 'Defective Buildings beyond the Collateral Warranty', Estates Gazette, no. 9229 (1992), 112.

Oxford English Reference Dictionary defines the word ‘defect’ as “'di:fekt, dI'fekt/ 1 lack of something essential or required; imperfection. 2 a shortcoming or failing. 3 a blemish 4 the amount by which a thing falls short”.2 The word ‘defective’ is defined as “/dI'fektIV/ 1 having a defect or defects; incomplete, imperfect, faulty … 3 (usu. foll. by in) lacking, deficient …”.3 In the construction context, the term ‘defect’ is generally used to refer to construction faults that exceed ordinary imperfections, affecting a basic structural element of the building works, and turning the building, installation, or structure into a state of functional ruin. Defects, as such, normally result from departure from, or disconformity with, the requirements as to quality imposed by either contract or regulation.4 However, defects do not become an issue unless they are major or excessive. The term is not limited to total or partial collapse of the construction only.

For the purpose of this study, a working definition of a construction defect is that it is a failure of the structure or any of its components to be erected in a reasonably workmanlike manner or to perform in the manner intended by the manufacturer or reasonably expected by the client, which proximately causes damage to the structure.

1.2 Aetiology – The Assignment of Causes of Defects The unravelling of the chain of factors or events leading to damage in construction works is called ‘aetiology’. The term refers to the assignment of a cause or reason, or the philosophy of causation.5 Building failure aetiology is often complicated. Matsumoto enumerates the following characteristics of buildings as making the task of assignment of causes of defects - aetiology - particularly difficult (a) individuality; (b) unstable condition of production; (c) ambiguous functions; (d) difficulty of measuring functions; (e) unique role of drawing and specifications; (f) long period of use; and (g) high price. Matsumoto points out that

2 Oxford English Reference Dictionary, p. 372.

3 Ibid, p. 373.

4 Case Studies in Post-Construction Liability and Insurance, ed. by Anthony Lavers, (London: E& FN Spon, 1999), p. 312.

5 Oxford English Reference Dictionary, p. 21.

characteristics (c) and (d) are major cause of long disputes.6 In terms of legal uses, aetiology serves in facilitating risk allocation and identifying the producers liable for failures.

2. Defects under the Kuwaiti Civil Code

2.1 Origin – The Egyptian Civil Code The new Egyptian Civil Code of 1949 (hereinafter 'the ECC'), after which the Kuwaiti Civil Code no. 67/1980 ('the KCC') was modelled, expresses awareness of the producers’ superior knowledge and expertise, together with the importance attached to public safety, and therefore places on them the highest standard of care. Hence, the liability was expanded from liability for mere collapse in the old ECC to include inherent defects affecting the stability of the structure as well.7 Collapse, now, whether total or partial, is not necessary to give rise to liability under Art. 651 ECC. Even other defects may render producers liable if they are to threaten the structure’s solidity and security. This is a matter of fact that is to be determined by experts at the appropriate time.8 According to Art. 651 ECC, the producers are liable now with regard to buildings, establishments, and other fixed installations erected by them, in terms of (a) damages caused by the whole or partial collapse of these constructions. Total or partial collapse of the structure would appear to be self-evident, ie the dissolution of the link fastening its portions together; or (b) defects threatening the solidity and security of the structure, eg failing of the foundations. Thus, while the French loi du 3 janvier 1967 spoke of a ‘defect’ in the construction (“si l’edifice perit …”), in Art. 1792 CCF, this limitation was not felt in the Egyptian text of Art. 651, which speak about ‘collapse’ (tahadoum). Therefore, some jurists perceive that under the ECC the liability stands in respect of the overall soundness of the structure, and not merely a liability against defects in the strict sense.9 The KCC followed ECC’s position. Article 692 KCC states,

6 Kouhei Matsumoto, 'The New Home Warranty System in Japan', Habitat International, 10, no. 4 (1986).

7 Art. 651.2 ECC.

8 Abdulrazaq Ahmad Al-Sanhuri, Al-Waseet Fi Sharh Al-Kanoon Al-Madani Aljadeed [Intermediate Treatise on the New Civil Code], 3rd edn, 10 vols (Beirut: Manhurat Al-Halabi, 1998), VII(1), 115.

9 Abdulrasoul Abdulridah, Liability For Hidden Defects, 2nd edn (Kuwait: Dar Al-Kutoub, 1998), p. 398.

(1) The contractor and architect warrant for any total or partial collapse or crack in building erected and fixed installations made by them for 10 years to run from the time of completion of the building or installation in accordance with the following articles. (2) If, however, it is established that the contracting parties’ intention was for the buildings or installations to remain for less than 10 years the warranty shall be for the period intended by the parties. (3) The warranty includes the collapse which results from a defect in the land itself or where the employer had allowed the erection of the faulty building or installations as well as any defects revealed in the building or installations which threaten their solidity or safety.

The KCC thus provides that producers warrant “total or partial collapse or crack” in buildings and fixed installations. This position of the ECC and KCC is more advantageous to the client than that of their French counterpart, because it stipulates that the warranty also covers “any defects revealed in the building or installations which threaten their strength or safety”. So in this case, the mere discovery of such a threatening defect suffices to establish the decennial liability, even if no collapse actually takes place, eg a serious crack. It is noticeable that there is no such provision under French law.10

2.2 What Constitutes a Defect? The KCC does not define defects giving rise to decennial liability in construction contracts. It seems that the nature of defect required here does not differ from that under other contracts where warranty is an issue. Egyptian case law defines such a defect as “total and partial collapse, including other defects that threaten the [building’s] solidity and safety, even if they did not lead to its immediate collapse”.11 The Explanatory Memorandum for the KCC states “the warranty also covers defects revealed in installations, threatening their solidity and safety, whether the defect was due to materials used, workmanship, or to soil above or under which the installation was built, as in the case where the soil is insecure and the necessary measures to support it or to strengthen its foundations were not taken”.12 It is noteworthy that while Art. 1792 CCF (loi de 1967) used the term ‘to perish’, Art. 651 ECC and Art. 692 KCC use the term ‘collapse’ (tahaddum). Under the three systems, it does not

10 Ibid, p. 259.

11 Appeal no 1847 for the judicial year 59, Court of Cassation. Reproduced in: Mu'awadh Abdultawab, The Annotated Reference to Civil Code's Articles, 4th edn (Alexandria: Munsha'at Al-Ma'arif, 1998), III, p. 699.

12 KCC Explanatory Memorandum, commentary on Art. 692 p. 506.

make a difference whether this ruining was total or partial. Thus, any of the following causes may give rise to decennial liability under KCC13 (a) a defect in engineering or construction practice, ie workmanship (malfaçon), eg deficiency in foundations; (b) a defect in the soil on which the construction is erected, eg if the soil is soggy and the necessary measures to remedy this defect have not been taken;14 (c) defects in the materials used in construction, eg bad quality or departure from specifications. If the contractor supplied the materials, he would also be bound with the guarantee of the thing sold, as regulated by Art. 663.2 KCC.

The aforementioned causes give rise to decennial liability if they lead to one of the following results (a) total or partial collapse or ruin in building of the fixed installation – the defect here involves the obvious danger of immediate collapse or ruin, in the sense that the structure turns into a state of actual ruin, whether wholly or partly (b) threat to the solidity or the safety of the building or the fixed installation – this case differs from that of collapse as stated in the first category. It addresses what could be perceived as ‘progressive collapse’, as in the case in which defects do not lead to immediate collapse of the structure, but rather to a gradual collapse that materialises at a later stage, the result of which is the increasing risk of the structure becoming useless. As regards the position under the standard forms used in Kuwait, Turner, while admitting the lack of official English translations of middle eastern laws and public sector standard forms, reports that unofficial translations in general employ expressions like liability for the safety of the building; liability in relation to basic parts of the building; liability for total or partial ruin or collapse in buildings and instillations, and liability for total or partial collapse of the building or installation or for defects which threaten its stability or safety.15

13 Al-Sanhuri, Al-Waseet, VII(1), p. 113; Ali El Shalakany, 'The Application of the FIDIC Civil Engineering Conditions of Contract in a Civil Law System Country: A Comparison of Legal Concepts and Solutions', International construction Law Review, 6, no. 3 (July 1989), 279.

14 Mashael A Alhajeri, Allocation of Risk for Defects Associated with Sub-Surface Ground Conditions (unpublished research paper), passim.

15 Richard Horsfall Turner, 'Liability and Limitation under Construction Contracts (With Certain Particular Reference to the Middle East)', International construction Law Review, 13, no. 1 (January 1996), p. 12.

2.3 Qualifications (Conditions) of Defects Initiating Decennial Liability Under the KCC, certain conditions must be met in order for a defect to give rise to decennial liability. The general rules of defect qualifications are those applied in the contract of sale, with some adaptation. Accordingly, the following conditions must be established:

2.3.1 Latency In their discussion of Art. 651 ECC, Egyptian jurists advocate that the defect must be of a hidden nature and does not manifest itself by the time of handover. It must be concealed and unknown to the client, and have gone undiscovered at the time of handover. Unlike latent defects, patent or manifest defects are such as can be ascertained by mere inspection. If the defects were known or apparent and could have been detected by ordinary inspection, and in either case the client accepted the final delivery without reservations, this would be construed as a waiver of the decennial guarantee, and thus he cannot take any action against the producer.16 This is also the position of Egyptian courts, which normally require that the defect be a latent one,17 although it is not clear from their position what criterion is to be applied to determine the latent status of the defect. However, jurisprudential analysis of case law shows a tendency to follow a subjective approach through investigating the client’s own personal capability to discover the defect at the time of handover. The courts’ rather lenient standing towards the client is to be contrasted with the situation in the contract of sale, under which an objective criterion is adopted, based on the buyer’s ability to detect the defect, had he inspected the goods sold with a reasonable man’s diligence.18

The Explanatory Memorandum for the KCC clearly renounces the condition of latency, stating that “the defect need not be necessarily latent. If it was patent in that it could be detected by means of normal inspection, and the owner took over the works without reservation, the warranty still stands”.19 Therefore, it is not generally a requirement that the

16 Muhammad Labib Shanab, Commentary on the Muqawala Contract (Cairo: Dar Al-Nahda Al-Arabiya, 1962), p. 128; Al-Sanhuri, Al-Waseet, VII(1), p. 115; Attia, 'Decennial Liability', 508; Shalakany, 'The Application of the FIDIC Civil Engineering Conditions of Contract', 279; Nael Bunni, ‘Liability of Contractors for Design and Construction', ICLR (1993), p. 443.

17 Appeal no 245, judicial year no 38. Court of Cassation.

18 Art. 447/2 ECC; Art. 491 KCC.

19 The Explanatory Memorandum, commentary on Art. 692 p. 506.

defect must be hidden in order to give rise to the decennial liability; defects may be readily apparent. However, the Memorandum’s interpretation is questionable, in that it proves to be contradictory to the wording of Art. 692.3 KCC that refers to any defect that “manifests itself” (yadhar) in the structure. Usage of the term ‘manifest’ suggests that a prior state of latency at the time of handover is a prerequisite in order for a defect to be covered by the warranty. Unfortunately, there appears to be no Kuwaiti case law on this point to indicate whether national courts require a defect to be necessarily latent.

2.3.2 Gravity The primary element that constitutes a defect giving rise to decennial liability is that it must be a latent defect of certain gravity.20 A distinction should be therefore made between major and minor defects.

(1) Major Defects – Only major defects are covered by the decennial liability. These are defects which represent a significant threat to the structure. A major defect, by definition, is one that falls under one of the following categories (a) defects leading to total or partial ruin or collapse; or (b) defects threatening the solidity or security of the construction. Al-Sanhuri emphasises the importance of gravity; a defect has to be ‘effective’ in that it has to actually lead to one of the aforementioned results.21 The liability stands even if the client had allowed the erection of the faulty structure, eg approved the usage of certain construction methods that led to defects.22

(2) Minor Defects – These affect trivial parts of the structure but do not threaten its solidity or security, eg paint, decoration, windows. Although not covered by the decennial warranty, these defects are subject to the standard rules of liability, where risk is passed with the handover, unless the defect is latent where the producer remains liable for a period determined by the custom of the trade.23

It would seem that the word ‘ruin’ in Art. 692 KCC is used here to denote something that is less serious than a “collapse” but which is nevertheless threatening to the safety and integrity of the structure.24 Courts in Kuwait are particularly strict in construing what constitutes a defect and tends to adopt a narrow interpretation of defects that are subject to dhaman. It has been decided that normal construction defects that do not affect the structure of the building

20 Shanab, Commentary, p. 126; Al-Sanhuri, Al-Waseet, VII(1), p. 114.

21 Al-Sanhuri, Al-Waseet, VII(1), p. 114.

22 Art. 962.3 KCC.

23 Al-Sanhuri, Al-Waseet, VII(1), p. 114.

24 Richard Horsfall Turner, 'FIDIC Works Programme - Arabian Gulf Region' paper presented at the 10th Biennial Conference of the Section on Business Law, International Bar Association (1991), p. 31.

nor jeopardise its solidity are not covered by the decennial liability.25 The liability attaches even if the ruin or collapse results from a defect in the land itself or even if the client had allowed the erection of the faulty structure. Accordingly, decennial liability in no sense depends on fault on the part of the contractor.

It is remarkable that Art. 651.2 ECC finds its origin in Art. 409 of the old ECC of 1883 which referred to ‘faults of construction’ (khalal fi al-bina’a) whereas in France, this provision was not known until the reform of the law of 4 January 1978 (Loi Spitetta). Thus, the Egyptian legislator antedated its French cognate towards broadening the scope of defects included in the warranty, so that it does not only cover total or partial collapse alone, but also extends this to cover “any defect revealed in the building or installation which threaten their strength or safety”,26 However, it has to be recalled here that even before the law reform of 1978, French courts have not been deterred by the wording of Art. 1792, and have always opted for a wider and pragmatic interpretation, thus assimilating to it serious defects that threaten the solidity of the structure as well.

Determining whether a defect is effective and threatening to the structure’s safety is a question of fact that is to be decided by lower courts. In this matter, guidance could be sought from the notion of ‘essential repairs’ that are required to maintain the building (al- tarmeemat al-lazima lihifth al-mabna) as known in the contract of lease (aqd al-ijar), which was introduced by Egyptian jurists. The essence of this notion is that all defects causing repairs to be necessary, or intensifying such need, are considered to be threatening to structure’s safety.27 It seems questionable, however, whether this criterion is applicable under the KCC with regard to the contract of lease.28 Article 574.1 KCC states “the lessor may carry out all urgent repairs which are necessary to safekeep the leased property even where the lessee has objected, provided the lessor serves notice on the lessee of his intention

25 Commercial appeal no 564/1983 (unreported). CA, p. 5.

26 Art 651.2 ECC; Art. 692.1 KCC.

27 See: Abdulnassir Tawfik Al-Attar, 'An Investigation of the Nature of a Defect and its Conditions of Dhaman in the Egyptian Law', MUKK, no. 2 (July 1971), 51.

28 The contract of lease is particularly regulated by Decree Law no. 35 of 1978 pertaining to Property Lease as amended, but the Civil Code is the body of general rules for this law.

to carry them out within a suitable period prior to commencing the repairs”. Thus, defects referred to here are qualified by two conditions (a) needing ‘essential’ repairs; and (b) being of an ‘urgent’ nature only. Analysis of these conditions revels that they are difficult to reconcile with the notion of defect as covered by decennial liability rules. First, requiring the necessity of repair in order for the defect to be considered effective is questionable, as it is imaginable that a structure would be defective and beyond repair, to the extent that demolition could be the only option. Secondly, even if necessity of repair was imaginable as a criterion for ‘effectiveness’ of defects as covered by decennial liability rules, the same could not be said for urgency of need for repair. This is inferred from the very credo of decennial liability, which necessitates a long lapse of time during which this liability is meant to extend, which means that it covers all defects that manifest themselves during this period –provided they threaten the structure’s safety– and not urgent ones only.

It is noteworthy that whereas the French law of 1978 extends producers’ liability to cover defects rendering the work unfit for its purpose (impropre à sa destination), neither Art. 651 ECC nor Art. 692 KCC adopt this position; such defects are not covered under these two systems. On a different note, breach of urban regulations, ie erecting the structure out of the limits of the land plot stated in the license, is considered to invoke the decennial liability if the administrative penalty for such breach was demolition of the structure, as this means it is inevitable that the structure will be a ruin in the future.29

29 Al-Sanhuri, Al-Waseet, VII(1), p. 114, note 165.

2.3.3 Antiquity – Occurrence of Defect during Liability Period Under the KCC, if the defect does not manifest itself within ten years counting from time of completion of works,30 then producers are exonerated from liability, and the client ceases to have a right of action based on the decennial liability against any of them, even if serious defects should appear later on. It is also submitted that defects manifesting themselves before completion are not subject to this liability. The question about whether the defect has to be old, ie its reason was inherent in the structure when it was handed over, has stirred a debate in Arab legal writings. Al-Attar advocates that the structure does not have to be defective ab initio, on account of the abstract wording of Art. 651 ECC (corresponding to Art. 692 KCC), which does not associate the existence of the defect to a specific point of time. Thus, it makes no difference whether the defect -or its causing reason- existed after or before handover of works.31 Al-Sanhuri supports this view, he perceives that this condition is not required, so it is the same whether the defect -or its causing factor- existed before handover, or took place after this event. The owner always has right of recourse against the constructor.32 Shanab, on the other hand, holds that defects have to be existent at the time of inspection, or at least its causing factor has to be there, so if a defect occurs after acceptance then the contractor would not be liable.33

30 This is to be compared with other laws, which count from time of reception of works, eg French, Egyptian and Lebanese civil codes.

31 Al-Attar, 'An Investigation of the Nature of a Defect', 52. Compare this to Shanab, Commentary, p. 119.

32 Al-Sanhuri, Al-Waseet, VII(1), p. 116.

33 Shanab, Commentary, p. 119.

3. Epilogue The preceding discussion has been directed towards post-construction risk realisation under the Kuwaiti Civil Code. Investigation of risk realisation requires identification of two elements; (a) the vessel or environment in which this risk materialises (structures); and (b) the material manifestation of this risk (defects).

With regard to the second element, defects, it is evident that the Kuwaiti Civil Code has set out a strict scheme to what could be qualified as post-construction defects that would be covered by its decennial liability provisions. It appears that judicial determination is rather inclined to strictly adhere to the said criteria.

This approach is to be contrasted with that of the Common Law, which attributes a wider concept of defects, in that it incorporates all defects in the wide, physical sense, in addition to non-physical defects, such as fitness for purpose,

Defects and Events Giving Rise to Decennial Liability in Construction Contracts under the Civil Codes of France and Kuwait Dr. Mashael A. Alhajeri (Private Law Dept., Kuwait University School of Law - KUSL (2008)

REFERENCES

Al-Attar, Abdulnassir Tawfik, 'An Investigation of the Nature of a Defect and its Conditions of Dhaman in the Egyptian Law', MUKK, no. 2 (July 1971).

Abdulridah, Abdulrasoul, Liability for Hidden Defects [Dhaman Al-Uyoub Al- Khafiyah], 2nd edn (Kuwait: Dar Al-Kutoub, 1998).

Al-Attar, Abdulnassir Tawfik, 'An Invistigation of the Nature of a Defect and its Conditions of Dhaman in the Egyptian Law [Istika'a Limahiyat Al-Aib Wa Shorut Dhamanaho Fi Al-Kanoon Al-Masri]', MUKK, no. 2 (July 1971).

Alhajeri, Mashael A, Allocation of Risk for Defects Associated with Sub-Surface Ground Conditions (unpublished research paper).

Al-Sanhuri, Intermediate Treatise on the New Civil Code [Al-Waseet Fi Sharh Al- Kanoon Al-Madani Al-Jadeed], 3rd edn, 10 vols (Beirut: Manhurat Al-Halabi, 1998).

Attia, Naim G, 'Decennial Liability and Insurance under Egyptian Law', ALQ, (November 1986).

Kinsella, Paul, 'Defective Buildings beyond the Collateral Warranty', Estates Gazette, no. 9229 (1992).

Lavers, Anthony, Case Studies in Post-Construction Liability and Insurance, ed., (London: E& FN Spon, 1999).

Matsumoto, Kouhei, 'The New Home Warranty System in Japan', Habitat International, 10, no. 4 (1986), 71-92.

Shalakany, Ali El, 'The Application of the FIDIC Civil Engineering Conditions of Contract in a Civil Law System Country: A Comparison of Legal Concepts and Solutions', International Construction Law Review, 6, no. 3 (July 1989).

Shanab, Muhammad Labib, Commentary on the Muqawala Contract [Sharh Ahkam Aqd al-Muqawala] (Cairo: Dar Al-Nahda Al-Arabiya, 1962).

Turner, Richard Horsfall, 'FIDIC Works Programme - Arabian Gulf Region', paper presented at the 10th Biennial Conference of the Section on Business Law, International Bar Association, (Hong Kong, 1991).