In my experience, extension of time claims is unsuccessful because the contractor fails to adequately demonstrate its case through its submission of detailed particulars. When drafting an extension of time claim, in my view, there are eight essential elements that must be addressed: The event
Identify the event: the circumstance whic h gives rise to change causing ca using delay. Liability for the event
Once an event has been identified the next step is to determine liability for the event. If responsibility rests with the employer or it is a neutral event, such as force majeure or exceptionally adverse climatic conditions, the contractor may be entitled t o an extension of time. However, this is dependent upon the terms and conditions of the particular contract. In circumstances where the contractor is responsible for the event t hen the consequences remain with the contractor. Contractual Contractual entitlement
Typically, construction contracts contain provisions entitling the contractor to an extension of time on the occurrence of a particular partic ular event provided the progress of the works or time for completion is delayed as a consequence. For example FIDIC 1987 provides provides for an entitlement for extension of ti me in the event of: late drawings (Clause 6.4); adverse physical obstructions or conditions (Clause 12.2); discovery of fossils or antiquities (Clause 27.1); additional tests not provided for (Clause 36.5) suspension of the works (Clause 40.2); failure to give possession of site (Clause 42.2); additional or extra work (Clause 44.1(a)); 44.1(a)); exceptionally adverse climatic conditions (Clause 44.1(c)), any delay, impediment or prevention by the employer employer (Clause 44.1(d)); any special circumstances, other than through the default of the c ontractor (Clause 44.1(e)); and, contractor's suspension of the works (Clause 69.4). Contractual compliance
Generally within an extension of time clause, the contractor will be obligated to submit notice(s) and detailed particulars within a specified time frame. For example, Clause 44.2 of FIDIC87 provides: "Provided that the engineer is not bound to make any determination unless the contractor has (a) within 28 days after such an event has first arisen, notified the engineer with a copy to the employer, and (b) within 28 days, or such other reasonable time as may be agreed by the engineer, after such notification submitted submitted to the engineer detailed particulars of any extension of time to which he may consider himself entitled in order that such submission may be investigated at the time." Occasionally the submission of notice and/or detailed particulars will be expressed to be a condition precedent. The contractor's failure to comply waives its entitlement to claim an extension of time and owner's liability ceases. For t his reason it is important to take
cognisance and comply with the notice and detailed particular provisions expressed in the contract. Familiarity with the contract from the start of the project at all levels is therefore critical. In addition, further submissions may be required for particular events, for instance: Clause 6.3 of FIDIC 87 (disruption of progress) r equires the contractor to ".... give notice to the engineer, with a copy to the employer, whenever planning or execution of the works is likely to be delayed or disrupted unless any further drawing or instruction is issued by the engineer within a reasonable time. The notice shall include details of the drawi ng or instruction required and of why and by when it is required and of any delay or disruption likely to be suffered if it is late." Cause and effect
A common mistake made by many contractors when attempting to demonstrate the cause and effect of an event is that they merely list in chronological order the pertinent exchanges of correspondence between the parties. From my experience this is usually insufficient to satisfy the burden of proof. To demonstrate cause and effect, a story should be prepared based on the facts describing the effect(s) of the event upon the works. This should include details of the planned works affected, referring to the planned sequence, durations, and methodology; the status of the works in relation to that planned at the time of the event; and, description of the changes to that plan as a consequence of the event. Delay analysis
Conduct a delay analysis to demonstrate the effect of t he event on the contractor's programme. There are a number of internationally recognised delay analysis methods. Ultimately, the choice of delay analysis methodology will be dependent upon such matters as level of records available; the robustness of the baseline programme and any updates; ti me available; degree of accuracy; and, level of proof required. Statement of claim
Every extension of time claim must contain a succinct statement of what the contractor is claiming. Substantiation
Extract and provide documentary evi dence (letters, method statements, instructions, progress reports and photos, minutes of meetings, programmes and schedules), statements of fact and expert witness statements (if required) in support of the assertions made within the claim submission. Adopting these eight elements as a c heck list will give a good starting point for drafting any extension of time claim, in spite of each construction project being unique.
Engineers should be given deadlines to assess claims Posted By Samer H Skaik On September 10, 2008 @ 8:38 am In Contract Administration | No Comments by Jeffrey Badman Generally, most modern standard forms of c ontract conditions contain clauses which provide for contractual remedies in the event of certain circumstances or breaches arising. Possibly the best known of these is the provision for claiming extension of time; thus on the occurrence of a prescribed event, resulting in a delay, the contractor may be entitled to an extension of time. Some forms of contract compel the c ontractor to submit both notice and detailed particulars to the engineer within stipulated time periods in order to enforce those rights; others go further and are expressed as conditions precedent requiring the contractor¶s strict compliance. Given that the contractor is bound to such procedural timetables in order to maintain and enforce his rights, then surely the engineer in performing his duty in determining an extension of time entitlement should be bound by a similarly prescribed time frame? Whatever the reason, at the end of the day, the engineer is duty bound under the contract to make a determination. Once the contractor has made his claim submission ± what happens next? In the ideal world, the engineer should assess the claim, determine and award an extension of time within six to eight weeks, depending on the complexity of the claim. However, more often than not this does not happen, but why? Some possibilities have been considered below: The engineer may be directly responsible for some of the delays, an admission of which may damage his position with the employer; The engineer does not fully understand his duties under the contract; The engineer does not consider it to be a priority; The engineer lacks the experience to assess the claim and make a determination; The engineer may consider that with an award of extension of time there would be no need for the contractor to mitigate the delays; The engineer does not want to make a determination for fear of being seen to be siding with the contractor, which may jeopardise future work with the same employer; Interference from the employer; or The engineer wants to wait to see how much time the contractor actually needs at the end of the project. Whatever the reason, at the end of the day the engineer is duty bound under the contract to make a determination and his failure or procrastination promotes uncertainty of the contract completion date and ultimately abuses the contractor¶s rights under the contract.
Without an award, the contractor appears to have two choices: work towards the completion date he considers he is entitled to at the risk of the employer imposing liquidated damages or penalties, or alternatively take it upon himself to accelerate the work in an endeavour to achieve the original completion date, with the hope of trying to recover his costs at a later date. Currently, very few standard conditions of contract provide for a fixed p eriod in which the engineer has to make his determination; and some make no provision at all. From an examination of the pertinent provisions within the International Federation of Consulting Engineers (FIDIC) Fourth Edition, dated March 1987, as amended in 1988 and 1992, it is observed that there is little assistance provided to the contractor to insist t he engineer makes a determination within an ascertainable time frame. Sub-clause 1.5 provides, inter alia: ³Wherever in the contract provision is made for the giving or issue of any«determination by any person«Any such«determination shall not unreasonably be withheld or delayed´; and Sub-clause 44.3 provides, inter alia, in respect to ongoing delays where the effects of an event have not ceased: ³On receipt of such int erim particulars, the engineer shall, after due consultation with the employer and the contractor, without undue delay, make an interim determination of extension of time and, on receipt of the final particulars, the engineer shall review all the circumstances and shall, after due c onsultation with the employer and the contractor, determine an overall extension of time in regard to the event.´ It is suggested that this imbalance may be redressed by the incorporation of a provision similar to that below, within the extension of time clause, and may be included as a tender qualification. ³«the engineer shall, after due consultation with the employer and the contractor, determine the amount of such extension of time without undue delay and in any event within 56 days of receipt of detailed particulars in acc ordance with sub-clause«´ Source: Construction Week
by Sarah Thomas Question:
I am a project manager for the employer on a power plant project based in Europe. We have been on quite good terms with the contractor up until now. Last week the contractor sent us a claim for 12 weeks¶ delay to the programme a nd for compensation costs (we are using the FIDIC Yellow Book (Plant and Design Build) 1999 form and English governing law). They are saying that dealing with contamination in the ground discovered in the last few weeks will cause a delay. We had a couple of site meetings with the contractor and sub-contractor
about the programme and the potential delays, prior to t he contractor sending the claim. I have two issues with the claim: firstly, we do not believe that the ground conditions will cause 12 weeks¶ delay; our estimate would be closer to about 6 weeks. Sec ondly, the contractor¶s written notice of claim is just a couple of lines in an email to me and I am not sure this counts as proper ³notice´. I do not want to jeopardise our relationship with the contractor, but obviously I am concerned to limit our exposure to any delay costs. I would appreciate any advice about how we can deal with this claim from our contractor.
Answer:
Let¶s start by considering whether or not the contractor has given valid notice of the claim. In fact, even before we come onto that, I should just touch on whether or not the contractor has a claim in the first place. You do not say that you are disputing the existence of the pollution nor that it was ³Unforeseeable´ for the purposes of the contract (for the benefit of others reading this, ³Unforeseeable´ and ³physical conditions´ are defined in the FIDIC Yellow Book as not reasonably foreseeable by an experienced contractor by the date for submission of the tender and ³physical conditions´ means ³natural physical conditions and man-made and other physical obstructions a nd pollutants which the contractor encounters at the Site when executing the Works´). Therefore as ground pollutants are expressly covered, I assume that you accept that the contractor has encountered unforeseeable physical conditions at the site which in principle give it the right to claim an extension of time and payment of costs under Sub Clause 4.12.4 of the contract.
But Sub-Clause 4.12.4 makes that right to claim expressly subject to Sub Clause 20.1. Sub-Clause 20.1 sets out strict time-limits for giving notice. Again, you do not say that the contractor¶s notice was given late so I am assuming that you accept that it was given on time but I suggest that you check this carefully anyway. As a reminder, 20.1 requires the notice to be given as soon as practicable, and not later than 28 days after the contractor became aware, or should have become aware, of the event or circumstance giving rise to the delay. Note that this is days, not business days. You say that the pollution was discovered in the last few weeks so timing could be pretty tight. However, it is worth bearing in mind whether the Contractor has in fact given valid notice before the email. 20.1 talks about the notice needing to make a claim for extension of time and costs under Sub-Clause 20.1 and describe the event or circumstance giving rise to the claim. So the contractor can potentially fulfil this requirement in just a couple of lines and it is also not clear that he even has to issue this in a separate notice (i.e. separate from communicat ions on other matters such as Programme, progress of Works, etc). Could any previous correspondence/documentation issued to the Engineer conceivably satisfy this requirement?
Also, significantly, I note that the email was sent to you. Was the Engineer copied in as well? Clause 20.1 actually requires the notice to be sent to the Engineer. You need to find out when, if at all, the Engineer received the notice and whether or not this was before the 28 day deadline. It is also worth checking whether your particular contract provides for notice formalities and whether this precludes email. FIDIC unamended simply says that notices shall be in writing and delivered by hand, mail or courier ³or transmitted using any agreed system of electronic transmission as stated in the Appendix to Tender´. So you need to check this to see if email is allowed.
Sub-Clause 20.1.2 sets out quite clearly what is the effect of a failure to comply with this timescale: the contractor will not be entitled to any extension of time or costs and the employer will be discharged from all liability in connection with the claim.
In addition to the initial notice, the contractor must send to the Engineer a fully detailed claim which includes full supporting particulars of the basis of the claim and of the extension of time and/or additional payment claimed, in accordance with Sub-Clause 20.1.5. This must be sent within 42 days after the contractor became aware/should have been aware of the event or circumstances giving rise to the claim, unless any other period has been agreed between the contractor and the Engineer. The contractor is also obliged to keep such contemporary records as may be necessary to substantiate any claim (Sub -Clause 20.1.4). You will need to check whether or not these further obligations have been complied with in time.
Turning to your other issue with this claim ± the length of the delay claimed by the contractor. As you know, the Engineer can respond with ³disapproval´ or with ³detailed comments´ if he considers that the delay claimed is too long. He can also request any necessary further information to help him assess the claim, but note that he must respond on the principles of the claim within the time limit set out in Sub-Clause 20.1.6, namely 42 days after receiving the claim or any other period he has agreed with the contractor. For that reason I am hoping that the
Engineer¶s assessment is well underway and even though there are queries about the validity of the claim, you need to make sure that this is the case. Of course, he will also need to comply with Sub -Clause 3.5 (Determinations) which means he has to consult with both employer and contractor firstly to try and reach an agreement. This will be your opportunity to put forward your case for any notice non compliances and regarding the length of delay impact. If the parties don¶t agree he makes a ³fair determination´. If at this point, you don¶t agree with this determination it is always open to you to invoke the dispute resolution procedure and seek the decision of the Dispute Adjudication Board if there is one in your Contract. To sum up, the contractor has to overcome several hurdles relating to the form, content and timing of the notice in order to benefit from its entitlements resulting from delays due to unforeseeable physical conditions. You will need to review the notice carefully against the contractual requirements referred to above and consider whether all the information has been provided in time, in the right format, to the right people. Given the cle ar language of Sub-Clause 20.1 it would be hard for the contractor to argue that compliance with clause 20.1.1 is not a condition precedent ± i.e. if it does not comply, it cannot benefit from the relief . This strict approach was in fact adopted in a recent Scottish case. You may find that the contractor has not submitted a valid claim at all. Concurrently, the Engineer will need to continue his assessment of the claim and preparation of his response in relation to the length of delay.
Contractor woes Posted By Samer H Skaik On October 28, 2009 @ 8:25 am In Contract Administration | No Comments by Jeffrey Badman Hill International director Jeffrey Badman.The contractor has submitted his extension of time claim, some months have passed but no award or response has been forthcoming from the engineer ± an all too familiar scenario experienced by most contractors at one time or another.
So what can the contractor do next? There are some initial practical avenues that can be taken in an attempt to secure an award: After a reasonable time following the submission of final detailed particulars (6-8 weeks depending on the complexity of the claim) the contractor may wish to write to the engineer asking if he has had the opportunity to assess the claims. Whilst the contractor may be tempted to ask the engineer if he needs any further particulars in order to assess the claim, this should be resisted as it gives the engineer a reason for delaying his determination. Try to arrange a consultation with the engineer to discuss the claim.
Having attempted to obtain a response from the engineer, the contractor may wish to write directly to the employer requesting that he instructs his engineer to determine the claim. This course of action may have greater effect where the conditions of contract stipulate a timeframe for the engineer¶s determination, such as contained in Fidic 99. In the absence of an award the contractor faces a dilemma; on the one hand he wants to avoid liquidated damages and penalties, but on the other he does not want to spend substantial extra sums of his own money accelerating the works to finish on time. It¶s about this time that you hear cries of ³time at large´ from those who have experience of working in certain common law jurisdictions. For those who are not familiar with this principle, time is said to have become ³at large´ when the obligation to complete within the specified time for completion is lost; t hat obligation then becomes to complete within a reasonable time. However, the law in the UAE is entirely different and this principle is unlikely to have any application. So what options are available to the contractor? The contractor may: Choose to continue in the hope that in the future he will be awarded the full extension of time claimed and decide not to implement any measures to mitigate the delays. Consider pursuing his claim through t he contractual dispute resolution mechanism: arbitration or litigation. However, the decision or judgment will take some time, during which the resources will be tied up in the dispute resolution process rather tha n focusing on the progress of the project. As a first step if the contractor elects to follow this course of action, consideration needs to be given to whether a dispute has crystallised allowing the dispute resolution mechanism in t he contract to be initiated. Implement measures to recover the delays in part or whole.
The option selected will depend on how confident the contractor is about the success of his claim. If the third option is chosen, another cry is likely to arise from those from common law jurisdictions ± constructive acceleration. The Society of Construction Law¶s delay and disruption protocol defines constructive acceleration as ³acceleration following failure by the employer to recognise that the contractor has encountered employer delay for which it is entitled to an EoT (extension of time) and which failure required the contractor to acc elerate its progress in order to complete the works by the prevailing contract completion date. This situation may be brought about by the employer¶s denial of a valid request for an EoT or by the employer¶s late granting of an EoT.´ Even in common law jurisdictions there have been very few successful constructive acceleration cases. Again, the law in the UAE is completely different a nd this principle is unlikely to have any application. In the event that a contractor considers he needs to take action to reduce his exposure to damages being imposed by the employer for delays to the project, despite having submitted a claim for extension of time, we suggest that the contractor: Arranges for an independent review of the contractor¶s claim to objectively assess its strengths and weakness, and likely magnitude of the award. Updates the works programme to include the effects of all identified delays; employer¶s as well as the contractor¶s own delays. Identifies activities along the critical path to completion. It is false economy to just throw additional resources at works, especially those which are not critical. To maximise the effect of any acceleration measures and minimise the contractor¶s expenditure, the contractor should look at re-sequencing and/or reducing the durations of the activities on the critical path. Before implementing any acceleration measures the contractor should first attempt to obtain the employer¶s written agreement. This applies both to requested acc eleration and constructive acceleration, as most forms of contract do not empower the engineer to instruct t he contractor to accelerate the Works. This agreement should include, inter alia, the associated costs and an a llowance for any additional risks connected with the acceleration measures. For example, a contractor had intended assemble a steelwork frames on site section-by-section. To accelerate the works the contractor proposed to pre-assemble the frames in the fabrication yard off-site, transport them to site on low loaders, and lift them into place using a tandem lift with two cranes. The proposed method is significantly riskier than the original method and the contractor should be allowed to include for this in his price.
In this example, the magnitude of this risk will diminish as the works proceed. If there is no agreement and the contractor implements his acceleration measures, the employer will receive the benefit of the contractor¶s increas ed risk, however, once the works are completed it is almost certain that employer will not recognise and pay for that increase in risk. It is essential that the contractor keeps the employer fully informed at each step, advising him of the proposed and implemented measures, the related costs and their effects on the programme delay. The contractor should maintain, where possible, separate records for the acceleration measures. It should also be remembered that as the delays are recovered by implementing acceleration measures, the actual delay reduces and so does the contractor¶s entitlement to rec over extension of time.
EOT claim- Cost impact procedure QUESTION: I am a PM at a project governed by FIDIC99 1st edition. I have made a determination for an extension of time to the Contractor. The contractor mentioned in his initial claim, that he will claim for prolongation cost.Can i grant him an EOT without knowing the cost impact? what is the procedure to follow for explicitely granting him EOT and at the same time waiving any cost implication? ANSWER: Hi Ramadan, EoT are given in accordance with clause 8.4 and 20.1. Clause 8.4 is purely time with no commitment to money, so if you receive a claim based on 8.4 you can approve it for time only. The Contractor then has to submit a separate claim for money, based on the relevant clause plus 20.1. The allowance for money varies with the basis for the claim, cost, cost plus overheads, or cost plus overheads plus profit. If he has the right to prolongation costs, then it is difficult to exclude these contractually, without his agreement. You can find a list of the possible reasons for claims in the FIDIC guide to 1999, and then see what each allows in terms of money. I hope that the above is useful and you can mark me 10. ---------- FOLLOW-UP ---------QUESTION: I thank you for your time and concise and clear reply. Indeed the contractor refer to 8.4 and 20.1, however the claim is entitled "request for determination
of EOT in accordance to clauses 5.1, 8.4 & 20.1 of the COC and reimbursement of associated prolongation cost". However, in his claim in the section "cost impact" he request determination of EOT and request me also to certify the additional cost, and in a following paragraph he quotes:"this document shall not contain cost summaries. The contractor hereby advise that these costs shall be submitted at a later stage, and consequently reserve his rights for submittal of the same" Could i grant him an EOT in this case disregarding the cost implication? and wait till he submit a related cost claim? does he has a time limit to submit this cost claim? kindly advise in detail on the procedure to follow. If any additional clarifications are required, pls advise. Answer
Hi Ramadan, I do not see a basis for claims under clause 5.1, either under the red book (nominated subcontractors) or the yellow book (general design obligations). Perhaps there is an incorrect reference. Yes, you can grant an EoT, if it is justified, disregarding the cost implication; Yes, you can wait until he submits his related cost claim; Yes, there is a time limit in accordance with 20.1; I suggest that you study the SCL Protocol on Delay and Disruption www.eotprotocol.com It is a good general guide to the requirements for a successful claim for an EoT. You should check your agreement with the Employer to see if you need his approval before issuing an EoT. I hope that the above is useful and you can mark me 10.
Documentation For EOT Claim Question
Hi!!!! Can you please tell me what are the documents required for claiming an EOT? Also is there any prescribed format for claiming EOT? Is there any website where I can get the required details. Please reply from a FIDIC 1987 or 1999 point of view. Waiting for your early reply & thanks in advance. Answer
Hi, The Engineer normally need following details from the contractor to determine EOT claim unless otherwise mentioned in contract
1)copy of approved program showing both as-built and as-planned activities upto the stage EOT is being requested with analysis of delay and disruption of activities to determine impact on Employer risk events. 2)Record of notice(s)served and contemporary correspondence etc. to substantiate the facts of the case. Hope this is helpful Regards-liaqat hayat
Hi all has anyone got any advice on exstension of time claims?? Dear James, It depends on the Conditions of Contract that you have. If it is under FIDIC, then you need to apply clause (20/1). The following will apply: 1. Event Giving Rise to Claim Action needed: with 28 days 2. Notice of Intention to Claim. If not notice is given within the period specified, then no entitlement to time extension or aditional payment can be considered. Action needed: With 14 days and on a Monthly basis every 28 days. If the Contractor fails to comply with these submittal periods, then his entitlements shall be affected by the extent to which such failure has prevented or prejudiced proper investigation or the claim. 3. Interim/ Final Account. Action: with 42 days the client has to reply and settle the account. 4. Partial or complete Payment as substantiated as part of Interim Payment Certificates. If your Conditions of Contract are under FIDIC, you can review this chapter for complete details, in addition to any other specific conditions within the Contract. With kind regards, Samer
Question
I am in the preparation of a determination report on the Contractor's EOT claim of the following situation. -Contractor's baseline program was approved was as per FIDIC cl:14.1 -As the work progress, engineer felt that contractor is not going to achieve as per his program and asked for a recovery program. -contractor submitted a recovery program with a completion date as per the contract.Along with the
cl:14.2 program, contractor added a sentence in covering letter, this program do not drop their right to ask for an EOT mentioned in previous correspondences. -Engineer several times ask contractor to substantiate and submit the EOT program as per cl:44 -even after the recovery program, the contractor submitted a monthly report including a program has got the completion date as per the contract. -after couple of months, contractor submitted an EOT program with insufficient substantiation documents. Please note all the delay events mentioned in his claim was occurred before his recovery program, however his recovery program commit that completion date will be as per the contract. My question is; Can I reject their claim with a determination, in recovery and the monthly reports submitted after the recovery program all commit to complete as per the contract. In addition, contractor failed to submit the detailed particulars within 28 days of the event.Please note all the delay evens are occurred before the recovery program.Please advise about the determination. Answer
Hi Noornawas, I presume that you are using FIDIC 4th Edition. This form has at least a couple of problems with it. Firstly, it is not a condition precedent that the Contractor submit his claim within 28 days, nor is there a requirement that the Engineer respond with a decision within a specific time. So his claim cannot be rejected if it is submitted later than 28 days. Both defects have been remedied in the 1999 version. Secondly, the Engineer cannot approve a works programme which shows a completion date after the expiry of the Time for Completion. In fact most engineers refuse to review a programme which does not comply with the Time for Completion. This refusal is not conducive to good relations on site, especially if the Contractor has submitted a request for an EoT. It has a further problem in that if the Engineer insists on completion within the Time for Completion and later the Contractor is awarded an EoT, then the Contractor could have a claim for acceleration and the associated costs. I would suggest that you review their claim on the basis of the facts and the Contract. If the Contractor has a valid claim, even if he has not submitted the sufficient documentation, recommend an award or return it stating the reasons why the information is inadequate (this claim might have been approved if the following information had been provided .. However, due to the absence of this information the claim is not approved) then the Contractor knows what he must provide or alternatively what will be said if he goes to Arbitration. If the claim is not valid, then do not. If you reject it due to late submission, then you run the risk of being over ruled by an arbitrator with all the consequences. There is more information on the procedures for EoT on the website http://www.eotprotocol.com/ and a review of relevant cases on the site http://www.atkinson-law.com/. Further there is a Powerdoc version of the Conditions of Contract and Edward Corbett's book on FIDIC 4th edition available from www.fidic.org. It is worth the money. If I have misunderstood anything please send a follow up question.
Hi Noorawas, The site records, which are outside my control, show that the question was answered within 3 hours, but was not read until I sent a reminder on 25.02.08, 6 weeks later. I will be writing to the webmaster to check my statement and see if there was a problem. You could do the same, but, in the meantime, I would appreciate it if you would reconsider your comments and marks. My apologies for any inconvenience. Peter
Dealing with EOT and LD Claims in Nutshell Read more: http://www.articlesbase.com/law-articles/dealing-with-eot-and-ld-claims-in-nutshell1378144.html#ixzz124hPCDCm Under Creative Commons License: Attribution
The common belief is that time extension (EOT) provisions are for the benefit of t he contractor and liquidated damages (LD) for the benefit of the client. However, a closer look at these provisions suggests that this belief is not only wrong but promotes the reverse of true intensions. LD is an early calculation of the expected loss under the contract whereas penal damages are to treat the contractor in a punitive sense beyond the actual loss. Even if two parties genuinely and without coercion wish to consent to a contract which includes a penal clause, they are unable to, in strict l egal terms, subject to however that in some cas es, courts uphold the application of contractual provisions. LD should be a genuine estimate of t he likely loss provided the true intension is t o persuade timely completion. If the intention is to counter slow progress, then there is a separate provision in the contract where the engineer calls for recovery plan that is technically feasible, because it is not that easy to reverse penalty.
The primary idea of including an EOT provision is to preserve the contractor¶s obligation to complete within a specified time and in doing so to prevent the cli ent¶s right to LD when by his acts, the client has delayed the contractor and is r esponsible in part for late completion. The fact that the contractor is the obvious recipient of benefit in gaining relief from LD is a secondary outcome. In fact, in the absence of EOT provisions, a contractor would be able t o successfully contest the LD provisions when the client contributes to delays. All what client gets out of LD provisions is the relief on the burden of proving his loss and the right to deduct LD from sums due to the contractor. To the extent that the clients¶ true losses may be greater than the stipulated level for LD the client is disadvantaged by agreeing to a restrictive remedy. On the other hand, LD provisions are beneficial to contractors for they not only limit their liability for late completion to the sums stipulated, but they know in advance the extent
of risk in late completion. If such provisions are not in place, the contractor would be able to claim µtime at large¶ and the contractor¶s obligation would be to complete within a µreasonable time¶ presumably that the clause 14 program is the basis in order to be consistent with the bargain which both parties entered i nto. Accordingly if the employer carries out some act that prevents the contractor completing the works by the date for completion, for example failing to give possession of the site on due date, then he can no longer insist that the contractor finishes his works by the stipulated date for completion. This principle has been established in the case of Holme vs Guppy far back in 1838.
It was also noted in Biltoin vs GLC (1982) that the main contractor is bound to complete the work by the date for completion stated in the contract if he fails to do so; he will be liable for LD to the client, subject to exception that the client is not entitled to LD if by his acts or omissions he has prevented the main contractor from completing his work by the completion date. On the other hand, if the contractor intends to a void LD by showing his entitlement for EOT, he must produce evidence to prove that; his program at the time was realistic and he could have achieved targets, he was achi eving the preplanned rate of progress, a delaying event occurred, cause of the delay gives a EOT entitlement under the contract, delaying event affected the rate of progress of releva nt activities, and the effect to such activities has affect ed the completion date ± indeed a chain in the burden of proof for any typical claim.
On the other hand, the Employer does not need to prove actual damages but LD¶s are not usually enforceable if imposed as a penalty. Two cases, Dunlop Pneumatic Tyre Co. Ltd v New Garage and Motor Co. Ltd (1914-15) and Philips HK Ltd v The Attorney General of HK (1993), provide some guidelines for distinguishing between LD and a penalty. In short, it is a penalty if t he sum is excessive in amount in comparison with the greatest loss conceivably followed from the breach¶. Accordingly, a party can challenge the validity of a LD¶s sum after the contract has been signed. However, McAlphine vs Tilebox emphasis that a court will be slow to interfere with a LD clause negotiated at arm¶s length between commercial parties. In particular, the court will not be impressed by arguments that the actual loss suffered is less than the estimated damages, unless the discrepancy is so large that it demonstrates that the sum could not have been a genuine pre-estimate of the likely loss. LD based on sensible criteria is unlikely to be unenforesseable as a penalty, therefore.
However, Penalty and LD has no difference in some countries where clients impose penalty subject to a ceiling limit, without fear of being contested in courts. Although the contractor¶s exposure to penalty starts only when he fails to achieve scheduled completion, there are notable exceptions. Levying penalty starts according to a schedule of eventualities qualified already in the contract. These may be for instance in a road project when the contractor delayed in commencing some designated trench work or even a section of asphalt work. There are cases where penalty is applicable in delay in either commencement or in completion of almost all the individual activities, shown in t he bar schedule. A delay due t o submission of a traffic management plan would even be a case for penalty in addition to usual delay in completion of whole of works, to the extent where the engineer has been given discretion to consider further penalty if he deems required. However this discretion has no
legal effect, so is a µdummy¶ clause that is non-enforceable when t he other eventualities meet the ceiling limit. Contracts with full of penalty events keep the contractor in a very inflexible setting that restricts him in managing the project, definitely upsets the contractor¶s technical movements freely within the project and tilts the even risk apportionment in the contract.
Any subsequent improvement in the progress to catch up delays is not a matter to waive off penalty, and in fact is a contractor¶s obligation under the clause, Rate of Progress. However, a request to reverse penalty already imposed on the contract can not be based on µgood conduct¶ which is immeasurable and is a pure subjective opinion as the Engineer on what truly happened on the project. But t hey are not reasons valid enough to reverse penalty as such. In fact, there is no discretion conferred on the Engineer under the contract to reconsider penalty even in cases where the engineer deems desirable. There is no mechanism for penalty reversal, expressly or impliedly, given in the contract also.
Where the engineer issues a variation after the contract completion date but before pra ctical completion, it is appropriate where resultant delays occur for an EOT to be granted. Such EOT will be calculated by extending the completion date by the net period of delay. In Balfour Beatty Building Ltd. v Chestermount Properties Ltd., it was held t hat gross period up to the time when the varied work had been completed was not the correct measure of the EOT but the period of delay is to be added to the contract period or the extended contract period as the case may be while a variation issued during a period of culpable delay would not render time at large. This is fair by one way because it avoids excusing the contractor from his own delays during the period under LD or penalty. However, where the contract stipulates that time is of essence, failure to meet the particular date is a fundamental breach of contract entitling the other party to treat the contract as repudiated and claim damages. Time is rarely of the essence in a construction contract because the effect of such a provision is that if the building is not completed on a certain date then the employer does not want the building at all and will treat the contract as repudiated, which is not the reality.
It is always upto the contractor to justify his basis and quantum of entitlement with the contemporary records in support so that t he Consultant shall revisit the entire issue and establish his verified final opinion on the net r esultant impact on the scheduled completion in line with the contract principles after taking all t he circumstances into detail consideration. It is illogical to consider payment on time-relate d preliminary items as it would not realistically give a µfair entitlement¶ since the basis of reimbursement might change from case to case depending on the causes of delay and their impact. For instance, an initial delay in the commencement itself due to employer¶s fault or his request would shift the whole schedule towards a definitive period so that the contractor shall be compensated on pro rata basis on time related preliminary activities.
Any assessment shall be based on the details made available in submissions subject to an extra opportunity to justify his claim for the cost on prolongation if any with the
µcontemporary records¶ in support so that t he engineer is able to r eview and confirm the eligibility and quantum of claim. Also, when a milestone completion is absent under the contract, (being a patent defect) a nd the contractor becomes eligible for extension, the engineer has no option but to grant the contractor a period of extension to the contract as a whole. This is no longer sensible as it undul y benefits the contractor for ti me extension for the entire contract even on an excusable delay at any single location and penalizes him on delay in completion of work at any single location despite of timely completion in other locations. The contract should specifically provide for µmilestones¶ and such a requirement shall be stated under conditions. If the intention of the contract is to complete in milestones, it is essential that t he contract document expressly provides for it, as it is entirely a different contractual machinery, where the certificates of completion by milestones are issued in respect of works that have been taken over by the employer for his beneficial use and accordingly the insurance, defects liability, penalty etc will take effect. Retrieved from "http://www.articlesbase.com/law-articles/dealing-with-eot-and-ld-claims-innutshell-1378144.html"
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