Business and Legal Measures for Managing Defects in Contractor Contracts: A Case Study Approach to Public Building Construction Practices in Ethiopia

Abstract

This study critically examines the business and legal measures for managing construction defects in public building projects in Ethiopia, using the Supreme Court building project as a case study. Despite the prevalence of defects, limited research has investigated the effectiveness of contractual, legal, and financial mechanisms in addressing these challenges. The study surveyed 15 key stakeholders, including project managers, contractors, subcontractors, legal experts, and client representatives. Findings indicate that construction defects are widespread, primarily caused by poor workmanship, inadequate supervision, design flaws, low-quality materials, and contractor negligence. Both patent (visible) and latent (hidden) defects are common, highlighting persistent quality management issues. While contractual tools such as Defects Liability Periods (DLPs) and retention payments are frequently included, their effectiveness is constrained by weak enforcement and unclear liability allocation. Legal remedies, including damages and indemnities, face procedural delays that reduce their practical impact. Dispute resolution predominantly relies on litigation, although stakeholder preferences are increasingly shifting toward faster, collaborative approaches such as mediation and adjudication. The study concludes that improving defect management requires an integrated approach combining clear contractual frameworks, strengthened enforcement mechanisms, alternative dispute resolution, financial risk instruments, and capacity building for stakeholders. Implementing these measures is expected to enhance contractor accountability, reduce disputes, and improve the quality and sustainability of Ethiopia’s public building projects.