What Is a Defects Liability Period (DLP)?

Defects Liability Period Definition and Examples
Explained: A Key Construction and Contract Risk Concept

Quick Answer

A Defects Liability Period (DLP) is a specific time after a construction project or service is completed during which the contractor is legally responsible for repairing defects that arise. It allows the client to hold the contractor accountable for poor workmanship or materials without additional cost, usually lasting 6 to 24 months.

Breaking Down the Definition

The Defects Liability Period is like a post-construction safety net for the client. It’s written into the contract and starts once the work is practically complete (also known as substantial completion).

Here’s what it typically includes:

• Start Date: Begins at the handover or final completion date.
• Duration: Most commonly 12 months, but can range from 6 to 24 months depending on the project.
• Scope: Covers faults in workmanship or materials, not new issues or unrelated damages.
• Obligation: The contractor must fix qualifying defects at their own cost.
• Retention: Sometimes, part of the payment is withheld (e.g., 5%) until the defects liability period ends.

The defects liability period is not an insurance policy or a warranty—it’s a contractual right to repair construction errors at no extra cost.

Why a Defects Liability Period Matters

The defects liability period is one of the most practical risk management tools in construction and infrastructure contracts. Here’s why it matters to project owners, consultants, and legal teams:

1. Protects Against Hidden Defects

Some problems don’t show up immediately. Cracks, leaks, or faulty finishes may appear weeks or months after handover. A defects liability period gives the client peace of mind knowing they’re still protected.

2. Improves Contractor Accountability

Knowing they’ll be held liable for defects, contractors have an incentive to do the work properly the first time and respond quickly to issues during the defects liability period.

3. Avoids Prolonged Disputes

Having a clearly defined defects liability period avoids arguments like “You broke it” vs. “It was already broken.” It sets out whose responsibility it is to repair what, and by when.

4. Retains Leverage

In many contracts, a small percentage of the final payment (known as a retention sum) is held until the defects liability period expires. This motivates the contractor to stay responsive throughout the defects liability period and complete any outstanding fixes.

Common Industries:

• Construction (buildings, roads, infrastructure)
• Renewable energy (solar and wind installations)
• Facility management (e.g., hospital handovers)
• Engineering procurement contracts (EPCs)

Legal and Practical Implications

1. Contract Drafting

A strong DLP clause must:

• Define the length of the period clearly.
• List what counts as a “defect.”
• Describe how defects should be reported and resolved.
• Set a timeline for the contractor to respond (e.g., within 7 days of notice).

Drafting tip: Tie the DLP to “practical completion” instead of a fixed date, since actual handover may shift during the project.

2. Risk Allocation

The DLP shifts post-completion risk from the client to the contractor, but it doesn’t absolve the client from maintenance obligations. The clause should specify whether normal wear and tear is excluded.

Also, in most contracts, the DLP does not pause the overall limitation period for bringing legal claims—so it must be carefully coordinated with warranties and statutory rights.

3. Negotiation Dynamics

Contractors often push for shorter DLPs and limited liability, while clients seek longer periods and tighter repair standards.

Balance can be achieved by:

• Adjusting the retention sum percentage.
• Setting repair obligations based on severity.
• Including a cap on the number of site visits or repair costs.

4. Jurisdictional Variations

• UK: DLPs are standard in JCT and NEC contracts; typically 12 months.
• UAE/KSA: Civil law contracts may run DLPs alongside decennial liability (10 years for major structural defects).
• USA: Often structured through punch lists and separate warranty terms.

Legal teams must adapt the DLP clause to both local law and sector-specific norms.

Example Clause: DLP in a Commercial Building Contract

Here’s a simplified clause from a commercial real estate construction contract:

“The Contractor shall remain liable for the rectification of any Defects that arise in the Works for a period of 12 months from the date of Practical Completion. Upon receipt of written notice, the Contractor shall, within 14 days, carry out the necessary remedial works at no cost to the Employer. The final 5% retention sum shall be released upon the successful completion of the Defects Liability Period.”

What this means:

• Timeline: 12 months from handover.
• Trigger: Written notice from the employer.
• Obligation: Fix it free, within 14 days.
• Incentive: Final payment withheld until DLP ends.

This setup is common in commercial real estate, infrastructure, and energy project contracts.

Call to Action

If you’re drafting or reviewing a construction or EPC contract, check the DLP clause carefully.

Download our DLP Clause Checklist for contractors and consultants
Or request a 1:1 review to ensure your retention, notice periods, and liabilities are clearly defined.

A well-written DLP clause saves money, reduces disputes, and keeps both sides protected long after handover.