IOPSA Tech Talk: The legal doctrine of ‘prescription’ as it applies in construction contracts Part 2

By Eamonn Ryan, based on an IOPSA Tech Talk presentation hosted by Brad Boertje BSc QS F A Arb

This is Part 2 of a three-part series.

“I am an adjudicator and arbitrator servicing the needs of the construction industry. I’m not an attorney, and my content does not constitute legal advice. It’s my interpretation of the subject matter only.

“I’m often asked the question, what is the difference between a patent and a latent defect in a construction job. This occurs in my business when people come to me, with disputes on snag lists, and items on a building/plumbing project, where there’s a difference of opinion, and more,” says Boertje.

 This discussion is on the difference between:

• vicarious liability, which is a big word, but it’s a simple principle
• the legal doctrine of prescription
• and something on ‘two rights don’t make a wrong’ in law, which basically means that when one party is a default, it’s not a good idea to go into default yourself in order to address that default

“For those who are familiar with the JBCC (Joint Building Contracts Committee), it is the most common building contract in South Africa, especially for larger contracts. The JBCC describes a defect as ‘any aspects of materials and workmanship, forming part of the works, that does not conform to the agreement and/or construction information’. The contractor or subcontractor has the obligation to deliver a product meeting a certain quality standard. Now, the JBCC definition is generally the definition that applies on any contract. The first thing that comes to mind is that you often don’t design the work. Somebody else does the design – wet services or a civil engineer, etc.

Prescription

“’Prescription’ is a common law principle, which is fairly familiar to many contractors. In the common law, various periods of prescription are defined but the most common one is three years. Most commercial transactions carry a three-year prescription period which means – if you have to take action against somebody or business to rectify something, or to demand something that arose from a contract, including and most commonly the payment of a sum of money – you have three years to initiate that action from the date the debt arose. That debt can be a money debt or a performance debt.

“The law goes on to say if a latent defect arises in your works, the person who is demanding you to rectify it has three years – and it’s exactly three years – to notify you to attend to the rectification of that. Even if you have a five-year latent defect period, and your defect arises in year one or two, and you only get notified more than 36 months after that, notwithstanding that you are still within the period, you won’t have an obligation to attend to it because it wasn’t notified timeously.

“As with all things in law, it’s open to subjective interpretation. It’s common for differences of opinion to arise. The only thing that interrupts prescription is the launching of litigation, arbitration or adjudication proceedings. If you find yourself in a situation where you may have to demand some money or performance from somebody else, you can’t just make phone calls and write letters and let more than three years pass. At some point you have to step it up, and actually take formal action, especially if they’re owing money,” says Boertje.