Watertight Warranties: Ensuring Quality in EPC Contracts
Warranties act as a safety net in Engineering, Procurement, and Construction (EPC) contracts, guaranteeing the project’s quality and performance. Here’s how to express warranty obligations effectively.
- Clearly Define the Scope: Leave no room for misinterpretation. Specify the products, services covered, and the required performance level.
- Make-Good Obligation: Establish the contractor’s responsibility to repair or replace any defective work at their own expense. This incentivizes high-quality work.
- Define the Warranty Period: Set a fixed warranty period from project acceptance, typically around 12 months.
- Final Cut-Off Date: Define a final cut-off date from delivery, usually 24 months after acceptance. This provides a clear timeline for addressing issues.
- Exclusive Remedies and Disclaimer: Specify that the outlined remedies are exclusive. Disclaim any implied warranties, such as merchantability or fitness for purpose.
- Latent Defect Liability: If excluding latent defect liability is impossible, clearly define the company’s obligations. Limit them to significant defects impacting plant performance.
- Defect Reporting Period: Set a fixed period for reporting defects after acceptance. Exclude liability for damages arising after the warranty period ends.
By incorporating these guidelines, EPC contracts establish clear expectations regarding warranty obligations. This protects the owner’s investment and ensures the contractor delivers a high-quality project.
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