The defects liability period is a form of warranty that is guaranteed either by the retention of the contractor’s performance security and corresponding bank guarantee, at the end of the period of performance of the contract. The defects liability period can also be covered by retentions made from payments to the contractor over the life of the contract. These retentions are usually no more that 10% of the contract value.
The defects liability security is kept to cover any repairs or defects found in the infrastructure built by the contractor. If a defect in the infrastructure is detected during the defects liability period, the contractor is notified and given the opportunity to repair the defect. If the contractor is unable or unwilling to repair the defect, the purchaser has the right to use the funds retained for such purposes from the contractor.
Once the defects liability period passes, if no defects were discovered or those discovered were satisfactorily repaired by the contractor, the retention money is returned to the contractor or the defects liability guarantee released as stipulated in the contract.
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