FIDIC advises users of the FIDIC Suite of contracts, 1999 edition, but no longer under the 2017 edition, that under some Civil Law jurisdictions the Contractor will be liable absolutely (without evidence for fault) for hidden or latent defects during a period of ten years from completion (which is called the decennal liability). This is true and not true at the same time.
Meaning and Spreading
The decennial liability (or in French: “responsabilité decénnale” or “garantie décennale”) has its sources in French legislation (see art. 1792 et seq. French Code Civil). Other jurisdictions have adopted the feature. For example the Louisiana Civil Code articles 2762 and 3500 and their predecessors are derived from the French Civil Code. In particular countries in the Middle East, North Africa, South East Asia and South Amercia have followed.
Thus, it is true that the decennal liability derives from a civil law jurisdiction. However the decennal liability is not limited to liability for “hidden defects” and it does not really start from completion. Also, it is not limited to some countries. Rather, the decennial liablity means strict liability imposed by law on construction contractors and design professionals for the total or partial collapse of buildings they designed and/or built, or for the occurrence of latent structural defects which imperil the safety or stability of such buildings, for a period of ten years after their approved completion and handover.
Art. 1792 French Code Civil provides that any builder of a work is liable as of right, towards the building owner or purchaser, for damages, even resulting from a defect of the ground, which imperil the strength of the building or which, affecting it in one of its constituent parts or one of its elements of equipment, render it unsuitable for its purposes. The presumption of liability established by Article 1792 also extends to damages affecting the strength of the elements of equipment of a building, but only where the latter are an indissociable and integral part of the works of development, foundation, ossature, close or cover (art. 1792-2 Code Civil). Are by the way deemed builders of the work any architect, contractor, technician or other person bound to the building owner by a contract of hire of work (art. 1792-1 Code Civil). Such liability does not take place where the builder proves that the damages were caused by an extraneous event. It is therefore true that the decennal liability is strict and that there is no escape unless the contractor proves an extraneous event. It is however necessary to note that the French liability system is much more complete than that. Under French law the contractor also warrants a “garantie de bon fonctionnement” of two years and a warranty of perfected completion, to which a contractor is held during a period of one year.
Though initially a French feature, these days the decennal liability is a well known and worldwide adopted form of construction liability which exists e.g. in the legislations of Angola, Belgium, Bolivia, Brasil, Cameroon, Chile, Egypt (Article 651 Civil Code), Indonesia (Article 1609 Civil Code), Italy (ruina liability), Iraq, Kuwait, Libanon (Article 668 Civil Code), Louisiana (USA), Malta, Morocco (Article 769 Civil Code), Paraguay, Peru, Philippines, Qatar (Articles 711 et seq. Civil Code (Law No. 22 of 2004), Québec, Romania (Law n° 10/1995 as amended by Law no. 163/2016 for amending and supplementing Law no. 10/1995 on construction quality – Official Gazette no. 561 dated 25 July 2016 and Law no. 7/2020 regarding the amendment and supplement of Law no. 10/1995 on the quality of construction works and of Law no. 50/1991 on the authorization of construction works (“Law no. 7/2020”)), Saudi Arabia, Spain (partially), Syria, Sweden, Tunisia, United Arab Emirates (UAE: Art. 880 Civil Code) etc. Notwithstanding the fact that the legal wording differs from country to country (frequently due to translation in other legal language than French) and sometimes by deliberate modifications (e.g. concerning the duration of the liability, which is three years in Bolivia, five years in Chili, Libanon and Tunisia, and fifteen years in the Philippines but in most countries, including Algeria, Belgium, France, Morocco, Qatar and UAE ten years) in general terms the scope of the “decennial liability” is almost the same.
Decennial Liability in connection with FIDIC Contracts
As the decennial liability concerns “apparent” and “hidden” defects, it is not limited to hidden defects to the contrary of FIDIC´s annotation in the FIDIC Guidance. Furthermore FIDIC contracts do not follow the civil law concept of reception or acceptance of the works. (Substantial) Completion will be certified by the Taking-Over Certificate followed by the Defects Notification Period, which is a supplementary contractual remedy. After expiry of the Defects Notification Period, the Performance Certificate will be issued, thus certifying that all defects which appeared up to that date have been remedied. That date will be the date of reception or approval of the Works under Civil Law, thus starting the decennial liability.
The practical scope and extent of the decennial liability is difficult to ascertain as in most countries having adopted the decennial liability very little case law exists. For example 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” (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). Unfortunately the trigger events for liability as “partial or structural collapse” and “defects threatening the stability or safety of a structure” as referred to in the Qatari Civil Code or “manifest danger of falling to ruin” as referred to in article 1638 Maltese Civil Code are not defined in the Codes. However under French law there is a sophisticated set of case law which may serve as a authority under other legal systems.
Acoording to article 711 of the Qatari Civil Code, Law n° 22/2004 main contractors and design consultants are jointly liable, without fault, for the cost of rectifying structural defects that appear in a building or structure within ten years of handover.
According to article 769 of the Moroccan Obligation Act the architect, engineer and the contractor having been put in charge by the employer directly become liable during a period of ten years for any collapse or becomes likely to collapse due to a defect in the materials, the manner of construction or a defect in the gound.
Full French wording: L’architecte ou ingénieur et l’entrepreneur chargés directement par le maître sont responsables lorsque, dans les dix années à partir de l’achèvement de l’édifice ou autre ouvrage dont ils ont dirigé ou exécuté les travaux, l’ouvrage s’écroule, en tout ou en partie, ou présente un danger évident de s’écrouler, par défaut des matériaux, par le vice de la construction ou par le vice du sol. L’architecte qui n’a pas dirigé les travaux ne répond que des défauts de son plan. Le délai de dix ans commence à courir du jour de la réception des travaux. L’action doit être intentée dans les trente jours à partir du jour où s’est vérifié le fait qui donne lieu à la garantie ; elle n’est pas recevable après ce délai.
As a rule decennial liability falls outside the scope of the standard cover provided by Contractors’ All Risks (CAR) and Professional Indemnity (PI) Insurance and, therefore, is generally uninsured unless particular cover has been obtained. In some countries (e.g. Algeria, France, Egypt) a decennial insurance is mandatory, being a high cost insurance. Insurance coverage available for decennial liability in the Middle East is limited and also expensive and hence not generally attractive to the majority of developers although the long term risk is considerable. During the time of which insurance cover is granted a specialised engineering firm will control the construction, thus producing additional cost.
For the avoidance of doubt, in most countries having adopted the French decennial liability, it derives from the original version of the French Civil Code which has come in force 1804. The current French decennial liablity is much more sophistcated than the former one.
The current one is complemented by two other contractual guarantees called warranty of good running (two years) and waranty of perfect completion (one year). All three types of warranties (decennial lliability, warranty of good running and perfect completion apply to Contractors, architects and other involved persons being involved in the construction process. However subcontractors do not fall under the warranties as all three of the warranties are contractual remedies presupposing a construction contract with the owner. On the other hand even owners who wish to sell a French real estate may fall under the decennial liablity if they have carried out additional work during their ownership. However, this extended form of liablity currently remains -as far as we can see- a French particularity.
Foreign contractors have to be aware of scope and Content of the decennial liability even if the proper law of the contract as referred to in Sub-Clause 1.4 FIDIC is not the Law of the Country [where the site is situated]. As a rule the decennial liability stipulations overrule choice of law clauses and is applicable by law in the country where the site is located if and when the laws of this country provide the decennal liability. Thus even under a FIDIC contract contractors and designers will be (typically jointyl and serverally) liable most often during ten years (or more years) after the performance certificate has been issued (compare Art. 651 Egypt Cvil Code).
Under FIDIC the defects liability period after taking-over (frequently erroneously referred to as Defects Notification Period) which is under FIDIC the period after the issuance of the Taking-Over Certificate until the date of the issuance of the performance certificate is an additional contractual remedy which does not replace the legal “decennial liability” nor other forms of defects liability given under the proper law of the contract, which has to be determined in default of a choice-of-law-clause by the concerned conflicts of law rules. Those rules may differ from country to country.
Again for the avoidance of doubt and misunderstandings it is worthwhile to note that under a FIDIC contract the decennial liability starts to run not earlier than after the issue of the so called Performance Certificate which shall be issued after the expiration of the so called Defects Notification Period. In some civil law countries it is a common misunderstanding that the Defects Notification Period replaces the legal liability under the proper law of the contract. This is wrong. Thus the decennial liability establishes a supplemental period of liability for defects which may last even longer than ten years because the decennial liability is considered being a guarantee period and claims arising from the decennial liability fall under additional limitation periods meaning that the risk arising from it may last for more than 13 years or even longer.
Until 2017 FIDIC did not deal with the legal liability for defects at all. Traditionally, FIDIC forms of contract provide for special remedies, like the Engineer´s authority and right to instruct the removal of work, the Employer´s entitlement to remedy work by its own and/or at Contractor´s cost. Under the 2nd edition (2017) Sub-Clause 11.10 provides
However in relation to Plant, the Contractor shall not be liable for any defects or damage occurring more than two years after expiry of the DNP for the Plant except if prohibited by law or in any case of fraud, gross negligence, deliberate default or reckless misconduct.
This wording suggests a limitation of liability which may arise from the law.