Latent Defects in Products:
A latent defect is a flaw, weakness or imperfection in a product or good that the buyer cannot discover by reasonable inspection. The buyer’s rights for a latent defect will depend upon the circumstances. If the supplier had knowledge of the defect and failed to disclose that to the the buyer, the buyer should be entitled to rescind the deal and get their money back as it failed to meet the implied warranty that the product be of merchantable quality. If the supplier did not know about it, and the buyer had “accepted” delivery of the product or service it still would not have been of merchantable quality and the buyer should be able to have the product repaired or replaced by the supplier at no cost. If it was sold “as is” and the supplier knew of the defect but did not disclose, it the buyer should be entitled to rescind the deal and get their money back. If the product was sold “as is” and the supplier identified the defect, the buyer would not be able to get their money back.
The length of the warranty term you negotiate is your primary protection against latent defects in a product. Terms like epidemic defects are used to help recover a larger share of the buyer’s costs for latent defects when there are a significant number of defects in the product of the same cause. The term, and the supplier’s responsibilities and cost liability you agree upon for epidemic defects liability is a major protection against latent defects in a product. For example I once encountered a situation where a number of a supplier’s components were failing in the field. We determined that the root cause of the problem was material they used for insulation.
The material, when exposed to humidity over a period of time would deteriorate and would cause the product to fail. It was clearly not something that was capable of identification when it was inspected.
Latent Defects In Software
Latent defects may also occur in software. The most common way of finding them is through software test programs that would be used as part of any acceptance testing of the product where if you find them you can refuse to accept the software, return it and seek a full refund of the price paid. Once you have accepted it the terms of your license agreement will identify want the developer’s responsibility is for correcting the problem. Few software developers would warrant that their product is error free, as it simply may not have been tested under all possible uses and conditions. This means that your primary protection against latent defects in the software is your software warranty that will require them to correct the error or provide a work around to correct the defects. The secondary protection is the purchase of maintenance and support that requires them to do the same thing. In fact most software warranties are deliberately short terms in order to force you to purchase maintenance to correct latent defects found after the warranty has expired.
Latent Defects in Firmware and Programmable Logic.
Firmware is software code embedded in a semiconductor chip that cannot be changed. This is different from programmable logic semiconductors that may be changed. A latent defect in the firmware should be treated in the same manner as a latent defect to a product as it cannot be changed, it must be replaced. A latent defect in programmable logic can be changed and should be treated like software. It simply needs to have the code updated and replaced to correct the defect. A good example of a latent defect in firmware occurred in an early version of one of Microsoft’s Pentium chips. When used for certain mathematical equations, there results would be in error. Since it was in firmware they could not simply provide a software fix, It required correction in the design of the chip. As most people didn’t use the functionality it didn’t impact them and they had no desire to return their system. For the individuals that used that functionality, it required correction of the latent defect and replacement of the chip.
Friday, September 21, 2012
Latent or Changed Conditions
In construction contracts a bid or negotiated price is based upon both the information provided about the location or site itself and what is visible. After work commences, the contractor may uncover prior work or in site work to prepare the site for the desired construction and find a different conditions than the information or visual inspection would have indicated. These latent conditions can add significantly to the cost of the work. For example sample borings done at the site in different locations could show soil or a quality that may be used, whereas a latent condition could involve uncovering huge boulders that need to be removed or large areas of soil of a quality that must be removed from the site. It could also involve uncovering of soil that is contaminated and must be disposed of in a costly manner. In a renovation to a building a contractor could uncover a significant amount of electrical wiring that does not meet the current building codes and must be replaced.
Most construction contracts will include a latent of changed conditions provision. In those the additional cost of dealing with the latent condition and additional time required to correct the latent condition is determined between the parties. While traditionally it is the owner that bears the cost, the specific term that gets negotiated in the contract may change that so it’s important for the parties to understand exactly what they are agreeing to. I read about a case in Australia where the latent defect clause specifically excluded contaminated soil. In agreeing to that the contractor gave up their right to make claims for latent conditions involving contaminated soil. Contaminated soil was found on site and that one error cost the contractor over two million dollars to correct it which they were not able to claim as a latent condition.
Once the work is completed, the work itself may have latent defect that the owner could not discover by reasonable inspection. Most warranties are intended to cover the contractor’s responsibility to correct latent defects in the construction as you can’t return the work to the contractor and expect a refund. There may also be latent defect in the design that while not discovered during the construction of the work arise at a later point in time. A great example of that was the John Hancock office building in Boston, Massachusetts. The Hancock building was a sixty-story office tower in which the large window wall windows kept blowing out and crashing to the ground. That required a different design and a complete replacement of the windows to correct the problem. It was a combination of contractor warranties and Architect’s errors and omissions insurance that is used to protect against these forms of latent defects.
Most construction contracts will include a latent of changed conditions provision. In those the additional cost of dealing with the latent condition and additional time required to correct the latent condition is determined between the parties. While traditionally it is the owner that bears the cost, the specific term that gets negotiated in the contract may change that so it’s important for the parties to understand exactly what they are agreeing to. I read about a case in Australia where the latent defect clause specifically excluded contaminated soil. In agreeing to that the contractor gave up their right to make claims for latent conditions involving contaminated soil. Contaminated soil was found on site and that one error cost the contractor over two million dollars to correct it which they were not able to claim as a latent condition.
Once the work is completed, the work itself may have latent defect that the owner could not discover by reasonable inspection. Most warranties are intended to cover the contractor’s responsibility to correct latent defects in the construction as you can’t return the work to the contractor and expect a refund. There may also be latent defect in the design that while not discovered during the construction of the work arise at a later point in time. A great example of that was the John Hancock office building in Boston, Massachusetts. The Hancock building was a sixty-story office tower in which the large window wall windows kept blowing out and crashing to the ground. That required a different design and a complete replacement of the windows to correct the problem. It was a combination of contractor warranties and Architect’s errors and omissions insurance that is used to protect against these forms of latent defects.
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