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Understanding the Difference Between “Defects Liability Period” and “Warranty” in Solar EPCC Contracts
In the course of advising on solar Engineering, Procurement, Construction and Commissioning (“EPCC”) contracts, I observed a common area of confusion among stakeholders, namely the difference between the Defects Liability Period (“DLP”) and Warranty. Both terms are integral to the contractual framework of solar projects but serve different purposes.
Understanding these differences is crucial for effective risk management. As such, this article seeks to clarify the respective roles of DLP and Warranty, particularly within the context of solar EPCC contracts in Malaysia, to help stakeholders better appreciate their contractual obligations.
What is DLP?
DLP is a fixed contractual period typically 12 to 36 months from the date of commercial operation or practical completion in which the EPCC contractor is obliged to rectify any defects in workmanship or materials at their own cost. These are usually construction-related defects that arise due to non-conformance with the contract / technical specifications.
What is a Warranty?
Warranty is a longer-term assurance that specific components (eg: PV modules, inverters, mounting structures) will perform as promised over their expected lifespan. Warranties are typically issued by manufacturers, not the EPCC contractor although the contractor often facilitates the warranty process.
Unlike the DLP, a warranty usually requires the owner to initiate claims directly with the manufacturer and may involve logistical costs (e.g., shipping and reinstallation), which are not always covered.
What are the Key Distinctions between DLP and Warranty?
To better illustrate the key distinctions between DLP and Warranty, the following table sets out a side-by-side comparison highlighting their respective features, obligations, and limitations within the context of a typical solar EPCC contract.
| Description | DLP | WARRANTY |
|---|---|---|
| Party Providing | EPCC contractor | Equipment manufacturer |
| Scope of Coverage | Defects in workmanship, installation, and materials | Manufacturing defects or underperformance of specific components |
| Duration | Typically, 12–36 months from commercial operation date or practical completion | Common warranty period: 1. PV modules: 12-15 years product warranty; 30 years power output warranty 2. Inverter: 5 – 10 years (extendable to 25 years) warranty 3. Mounting structure: 10 years warranty |
| Remedy | Contractor must rectify defects at its own cost | Limited to repair, replacement, or refund |
| Application | Applies to entire installed system (as-built by contractor) | Applies to individual components |
| Procedure for Claim | Owner notifies contractor during DLP and contractor arranges rectification within a reasonable time | Contractor facilitates the claim process during DLP. Upon expiry of DLP, owner usually claims directly with manufacturer or O&M contractor facilities the claim process |
| Transferability | Not typically transferable | May be transferable (subject to manufacturer policy) |
Why the Distinction Matters?
From both a legal and commercial perspective, it is crucial for stakeholders to ensure that DLP provisions are clearly set out in the EPCC contract including mechanisms for defect notification, timelines for rectification, and recourse available if the contractor fails to remedy the issue.
At the same time, it is equally important to understand the limitations of warranties, particularly on aspects such as assignability, responsibility for initiating claims, and whether costs related to logistics or reinstallation are covered.
Crucially, stakeholders should also recognise that the expiry of the DLP does not mark the end of protection as certain system components may remain under warranty, though the rights, procedures, and responsible parties differ from those under the DLP framework.
Conclusion
For solar project owners, EPC contractors, and even financiers, a clear understanding of the DLP vs warranty framework can help manage expectations, allocate risk appropriately, and avoid unnecessary disputes during the post-completion phase.
As lawyers involved in drafting and negotiating solar EPCC contracts in Malaysia, we often assist clients to structure these clauses to ensure clarity and alignment with industry practice. If you are involved in a solar project and want to ensure your contract reflects the right risk allocation, please feel free to get in touch.
This Article is written by Yeo Shu Pin (Partner) of Messrs. Shu Pin & Associates.
Disclaimer: Every attempt to ensure the accuracy and reliability of the information provided in this publication has been made. This publication does not constitute legal advice and is not intended to be used as a substitute for specific legal advice or opinions. Please contact the author(s) for a specific technical or legal advice on the information provided and related topics.