C is for copyright, D is for defects

C is for ‘copyright’

It seems no contract is complete without a copyright clause or, more accurately, without protracted negotiations over the terms of the copyright clause. The irony is that there is every chance that it has been lifted from someone else’s document in flagrant breach of copyright. So, how does copyright really work?

If an architect has a bright idea for the design of a building, they have just that – a bright idea. However, the moment the bright idea is recorded by, say, drawing it, it is automatically protected by copyright laws, without needing any official registration.

If the architect is a budding junior in the practice, the employer is the first owner of the copyright (unless there’s a contrary agreement) and the protection lasts for 70 years from the end of the calendar year in which the author dies.

As copyright owner, the architect’s practice will have certain exclusive rights, including the right to copy the drawing, although where the practice has been paid to prepare a drawing, the person footing the bill will usually have an implied licence to copy it.

Rather than rely on an implied licence, it makes sense to agree an express licence and set that out in the contract. The person getting the benefit needs it for any use in connection with the building it was drawn for. The copyright owner likes to make the licence conditional on the payment of fees, although most construction contracts already have other mechanisms for dealing with late or non-payment (such as the rights to suspend performance, terminate the engagement and add interest onto the late payment.

Copyright must not be confused with design rights, which are governed by a separate regime, that is often overlooked.

And before you copy this article to send around the office, remember that it’s protected by copyright.

D is for ‘defects’

Zero defects may be the goal, but most construction works do not attain it, so the parties to a contract should consider how to deal with mistakes in the most efficient manner.

During the course of the construction works any visible defects should be identified and dealt with as set out in the contract. Obvious or “patent” defects may stop the issue of the practical completion certificate, but these certificates will often be issued subject to the patent defects as the employer needs the building (either for its own use or to meet the obligations it has to, say, incoming tenants).

Defects that come to light after the issue of the PC certificate, but before the end of the defects liability period (sometimes known as the defects rectification period), are “latent”. Most contracts have provisions for latent defects to be put right by the contractor if so requested by the employer. Whether the contractor is asked to return often depends on the continuing commercial relationship between the employer and the contractor.

Once the defects liability period has ended, the contractor will still be liable for any latent defects that subsequently appear during the limitation period (usually 12 years from when the defective work was done), but will not have a contractual obligation to put them right; it will only be liable for damages.

Once the contractual mechanism for dealing with defects has ended, any dealings between employer and contractor about them will, ultimately, be governed by the litigation system and subject to the uncertainty of going down that route.

Increasingly, employers decide that a latent defects insurance policy (such as the ones offered by NHBC, Zurich and Premier) is needed to try and make sure that any latent defects that become patent are dealt with in a non-adversarial way. If the parties agree to deal with defects by way of an insurance policy, it may be that they have agreed to limit liability between them to what is covered under the policy.

Although construction defects will largely be a matter for the employer and the contractor to resolve in the construction contract, it is important to remember that professionals may have a duty to raise the alarm them if they spot them.