The rule of abatement is a valuable tool

Construction News - 01/07/2009

Understanding the rule of abatement

The rule of abatement has been the subject of reported case law dating back to about 1932. Over the last 15 or so years this rule has been the subject of debate as the construction industry and the courts attempt to define the rule’s application in today’s industry.

Essentially abatement is a defence to a claim for payment by a contractor or sub-contractor. It applies in circumstances where a defendant argues that they are not liable to pay the amount claimed because there are defects in the work for which the payment is sought. If a defendant is able to prove that the alleged defects do exist and that the defects have caused a reduction in the value of the thing constructed, the defendant will only be liable to pay an amount that accounts for this reduction in value.

Importantly, the rule of abatement is a right that exists in common law. This means it is something a defendant can argue even if the contract with the contractor or sub-contractor does not deal with abatement. As abatement is only a defence to a claim, it could be equally argued as part of a counterclaim under the contract i.e. that the contractor has breached a contractual obligation by producing defective works.

The notice obligations under the section 111 of the Housing Grants, Construction and Regeneration Act 1996 are well understood. The consequences of not providing the right notice on time means the party concerned then has a very restricted ability to argue before a tribunal that they are not liable to pay the full amount claimed – however, abatement is an exception. An employer’s right to defend a claim for full payment on the basis that defects have reduced the value of the construction project will override the failure to provide, or properly provide, a Section 111 notice.

There has been confusion over whether or not abatement applies only to claims for payment of labour and material work or if it also applies to contracts for the provision of professional services. In the most prominent recent court judgment dealing with this, the Wembley Stadium litigation, the judge was clear in expressing the view that abatement does not apply to contracts for professional services. Further, abatement cannot feature where the defendant is arguing for recovery of loss arising from delay or disruption.

While abatement has been the subject of debate in the modern construction industry for some time now, it is an important clause to be aware of as it still remains a valuable tool in the armoury of a party who has suffered loss as a result of defective works.

Greg Brownlee is managing director of commercial and contract management consultancy Blake Newport

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