I assume that you are responsible for the design of the fan impellers and that by defect you mean a Defect as defined by the subcontract.
It is not clear from your question if the proposed correction is a “like for like” replacement or if you have proposed a different impeller.
If a “like for like” then the testing requirements should be as the original WI. If the Contractor is requiring additional testing then that is a change to the WI and a CE under clause 60.1(1).
If it is a different impeller then the Contractor can stipulate the additional testing to satisfy himself that the proposed impeller is acceptable.
In respect of the agreement reached to settle the account, the implications will depend upon the wording of the agreement and what was agreed presumably under clause 12.3.
It is not clear from your question if the proposed correction is a “like for like” replacement or if you have proposed a different impeller.
If a “like for like” then the testing requirements should be as the original WI. If the Contractor is requiring additional testing then that is a change to the WI and a CE under clause 60.1(1).
If it is a different impeller then the Contractor can stipulate the additional testing to satisfy himself that the proposed impeller is acceptable.
In respect of the agreement reached to settle the account, the implications will depend upon the wording of the agreement and what was agreed presumably under clause 12.3.