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Building a home is a great Australian dream, but it would be unrealistic to assume that the home once constructed will be perfect and free of defects.

It is at this point where the dream can turn into a nightmare and it is most often the case that where there are defects there is an angry home owner who will look to find someone responsible.

The problem however is that it is not always easy to identify the defect nor is it easy to determine its likely cause or the most appropriate action to rectify the defect.

What is a defect?

The test of what constitutes 'a defect' is very much based upon common sense,industry practice and the standard required by the Contract.

The Building Code of Australia defines a defect to include:

  1. any faulty workmanship not strictly complying with the requirements of the agreement; and
  2. a failure to supply satisfactory and sufficient plant and materials for the performance of the work under the Agreement

This general rule however is qualified in that not only must the work undertaken be 'necessary' to produce conformity with the plans and specifications under the Contract, the work must be a 'reasonable' course to adopt.

Whether the remedial work is both 'necessary' and 'reasonable' is a question of fact in each particular case. Where the remedial works is neither necessary or reasonable, the Court will not award the costs of rectification.

In such a case, the measure of damages will generally be the difference between the value of the home as constructed and the value which it would have had if the home had been constructed in accordance with the Contract. Where the builder is in breach of contract in failing to complete the works, the general rule is that the measure of damages will be the difference between the Contract price and the actual cost to complete the works.

If the defective works are hidden and not discovered for some time and not rectified until sometime after discovery, it may be difficult to determine the time when the damages should be assessed, especially if the owner has delayed taking action to rectify the defects.

Resolution of defects disputes

Where a dispute arises between owner and builder in respect of defects to a residential house, an owner may refer the dispute to the Department of Fair Trading. This may result in a rectification order being made against the Builder.

Building and Construction Law

Hudson's Building and Engineering Contracts suggests that a defect (when used in the context if a contractual defect clause) includes 'any breach of contract affecting the quality of the work, whether structural on the one hand or merely decorative on the other, and whether due to faulty material or workmanship, or even design, if the latter is part of the contractor's obligations.'

In the decision of Chalmers Leask Underwriting Agencies 'v' Mayne Nickless Ltd (1982) 2 ANZIns Cas the Court stated that the word 'defective' simply denotes that 'the subject matter whether it be workmanship, design or material,is ineffective for the purposes for which it was intended. The epithet is neutral on the question whether the defective condition is or is not due to negligence'

Often expert evidence is required to determine whether a defect exists.

Damages for Defects

As a general rule, an owner is entitled to building work which conforms with the contract plans and specifications.

Where the works are defective, the appropriate measure is the cost to make the works conform with the Contract.

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