Understanding Warranty & Guarantee Clauses in Contracting Agreements in Bahrain
In Bahrain’s contracting sector, warranty and guarantee clauses are essential tools for protecting the quality and durability of completed works. These clauses ensure that contractors remain responsible for correcting defects or performance failures after project handover, providing peace of mind for employers and helping maintain high industry standards.
While the terms “warranty” and “guarantee” are sometimes used interchangeably, they have distinct legal implications. This blog explains their differences, key features under Bahraini law, and best practices for drafting them into contracting agreements.
Warranty vs. Guarantee — What’s the Difference?
- Warranty
- A warranty is a contractual promise that the work will meet specified standards for a defined period after completion.
- It obliges the contractor to repair or replace defective work at no additional cost to the employer.
- Guarantee
- A guarantee is often a more specific or performance-related commitment — for example, ensuring that equipment achieves a certain output or that materials will last a minimum number of years.
- It can be backed by third parties, such as manufacturers, in addition to the contractor.
Key Legal Considerations in Bahrain
- Defects Liability Period (DLP)
- Most contracts in Bahrain include a DLP, usually 12 months, during which the contractor must remedy defects.
- Warranty obligations often run alongside or beyond this period.
- Scope of Coverage
- Clearly define which works, materials, and systems are covered by the warranty or guarantee.
- Exclude defects caused by misuse, lack of maintenance, or external damage.
- Remedy Process
- Specify how defects must be reported and the timeframe for contractor response.
- Include provisions for the employer to engage others to fix defects if the contractor fails to act.
- Third-Party Guarantees
- For equipment or materials, obtain manufacturer guarantees and ensure they are transferable to the employer.
- Legal Enforcement
- Ensure the warranty or guarantee clause is consistent with Bahrain’s contract and commercial laws to avoid unenforceable terms.
Risks of Poorly Drafted Clauses
- Ambiguity over what is covered, leading to disputes.
- Limited enforceability if obligations are not clearly defined.
- Unexpected costs for employers if defects fall outside unclear warranty terms.
- Reputational damage for contractors if quality issues go unresolved.
Example:
A contractor in Bahrain completed a luxury residential tower. Six months later, residents reported water leakage from balconies. The employer invoked the warranty clause, but the contract did not clearly define whether waterproofing defects were covered.
The contractor argued the problem was due to improper maintenance by residents, while the employer claimed it was a construction defect. A lawyer reviewing the case noted that the vague wording of the warranty clause made it difficult to determine liability, leading to a prolonged dispute.
Best Practices
For Employers:
- Define warranty coverage clearly, including all materials, workmanship, and systems.
- Obtain and document manufacturer guarantees.
- Align warranty terms with the DLP and any relevant statutory obligations.
For Contractors:
- Limit warranty coverage to factors within your control.
- Ensure warranty obligations are realistically achievable.
- Keep detailed records of construction quality and materials used to defend against unfounded claims.